Stephen Lendman March 25 2013
The Wall Street Journal said “Cyprus braces for a long weekend.” It’s not over ’till it’s over. What’s ahead bodes ill for Cypriots.
Predatory bankers assure it. So do Eurocrats. Corrupt politicians go along. Financial tyranny is policy. All Western societies are affected.
An unnamed Cypriot official said “We are waiting for a messiah to come and save us, and of course, there is none.”
On March 17, Pimco’s Mohamed El-Erian headlined “A Muddled and risky approach to Cyprus,” saying:
Implementation challenges are huge. They’ll “undermine (rescue efforts) and may lead to negative side-effects.”
Eurocrats exceeded the Greek precedent. Doing so “extended burden-sharing further.”
Cyprus “r(an) out of easy options.” Irresponsible bankers bears full responsibility. Taxing depositors is “highly regressive. (It) undermines the traditional construct of deposit insurance schemes around the world.”
Ideas proposed “risk becoming part of the problem than a solution for Cyprus.”
“Private liquidity implosion and more acute credit rationing” may follow. So may “disruptive political backlash and social unrest.”
Global investor faith will be tested. Political surprises aren’t welcome. Troubled Cyprus heads from bad to worse.
Events are fast-moving. On Friday, the Financial Times headlined “Cyprus and EU locked in bailout talks.” Another rescue plan was rejected.
QE3, the Federal Reserve’s third round of quantitative easing, is so open-ended that it is being called QE Infinity.
Doubts about its effectiveness are surfacing even on Wall Street. The Financial Times reports:
Among the trading rooms and floors of Connecticut and Mayfair [in London], supposedly sophisticated money managers are raising big questions about QE3 — and whether, this time around, the Fed is not risking more than it can deliver.
Which raises the question, what is it intended to deliver? As suggested in an earlier article here, QE3 is not likely to reduce unemployment, put money in the pockets of consumers, reflate the money supply, or significantly lower interest rates for homeowners, as alleged. It will not achieve those things because it consists of no more than an asset swap on bank balance sheets. It will not get dollars to businesses or consumers on Main Street.
So what is the real purpose of this exercise? Catherine Austin Fitts recently posted a revealing article on that enigma. She says the true goal of QE Infinity is to unwind the toxic mortgage debacle, in a way that won’t bankrupt pensioners or start another war:
The challenge for Ben Bernanke and the Fed governors since the 2008 bailouts has been how to deal with the backlog of fraud – not just fraudulent mortgages and fraudulent mortgage securities but the derivatives piled on top and the politics of who owns them, such as sovereign nations with nuclear arsenals, and how they feel about taking massive losses on AAA paper purchased in good faith.
On one hand, you could let them all default. The problem is the criminal liabilities would drive the global and national leadership into factionalism that could turn violent, not to mention what such defaults would do to liquidity in the financial system. Then there is the fact that a great deal of the fraudulent paper has been purchased by pension funds. So the mark down would hit the retirement savings of the people who have now also lost their homes or equity in their homes. The politics of this in an election year are terrifying for the Administration to contemplate.
How can the Fed make the investors whole without wreaking havoc on the economy? Using its QE tool, it can quietly buy up toxic mortgage-backed securities (MBS) with money created on a computer screen.
Anti-austerity protests continued for a second consecutive night in Madrid on Wednesday. Thousands of protesters filled the streets throughout the day on Wednesday, some facing off with police who had beaten protesters with batons and fired rubber bullets into the crowds the night before. Prime Minister Rajoy still plans on announcing a new round of drastic austerity measures on Thursday, despite national outrage, including public sector pay cuts, privatization of public assets, tax increases, and a raise in retirement age by two years.
The Bank of Spain said Wednesday that the country is entering an extreme depression, but protesters argue that more cuts to public budgets are not the answer and will be devastating to the county’s struggling middle and working classes. Currently Spain continues to suffer a 26% unemployment rate as 22% of Spanish households now live below the poverty line. Today, as thousands continued to gather outside of barricades, which were set up to blockade Spain’s Parliament building, many chanted “government, resign” and held signs simply saying “No” as a sign of refusal to the ongoing austerity program. Katharine Ainger writes for the Guardian today:
The attempt by the Spanish “Occupy” movement, the indignados, to surround the Congress in Madrid has been compared by the secretary general of the ruling rightwing People’s party (PP) to an attempted coup.
Lots of news out this week about the silver manipulation case being dropped by the Commodity Futures Trading Commission (CFTC) with zero action. The first of several stories was put out by the Financial Times on Monday. FT.com reported,
“A four-year investigation into the possible manipulation of the silver market looks increasingly likely to be dropped after US regulators failed to find enough evidence to support a legal case, according to three people familiar with the situation. The Commodity Futures Trading Commission first announced that it was investigating “complaints of misconduct in the silver market” in September 2008, following a barrage of allegations of manipulation from a group of precious metals investors. In 2010, Bart Chilton, a CFTC commissioner, said that he believed there had been “fraudulent efforts” to “deviously control” the silver price. But after taking advice from two external consultancies, the first of which found irregularities on certain trading dates that it believed deserved more analysis, CFTC staff do not have sufficient evidence to bring a case, according to the people familiar with the situation. The agency’s five commissioners have not yet formally determined the outcome of the investigation, leaving the possibility that staff could be instructed to dig deeper. A CFTC spokesman said: “The investigation has not reached its conclusion.” He declined further comment.” (Click here for the complete FT.com story.)
BREAKING ~ When we first learned Sunday night that the FT was reporting that the CFTC was dropping their 4 year silver investigation, The Doc contacted CFTC Commissioner Bart Chilton for his take and role in the decision.
Just like Usain Bolt at the 2011 World Championships, it appears that the FT has jumped the gun. Commissioner Chilton has informed us that ‘The Financial Times report related to silver is not only premature, but inaccurate in several respects‘.
As to whether Chilton believes the silver market has been manipulated the Commissioner informed us:
“I continue to believe, consistent with my previous statements to which you referred, and based upon information from the public, that there have been devious efforts related to moving the price of silver. Incidentally, I also believe there have been silver and gold market anomalies outside of the silver investigate window that have raised, and continue to raise, market concerns.”
Buying gasoline these days has turned into a horror show. I filled up my car and handed the attendant a $50 bill to turn the pump on. I had a little more than a quarter of a tank. So, I thought that would do the trick and peg the needle past full with change to spare. I was wrong. I stood in shock as the pump rolled right past $40 and up to $50. The car (which is a Buick Lacrosse) was still not quite full. I thought, $50 is not enough to fill up a standard size car with already more than a quarter of a tank? You could say fuel has gotten expensive, but in reality, the dollar is losing its buying power. Money printing and monster deficits in America are the big problems for the buck. The more dollars we produce, the less each one is worth. The rest of the world has been noticing and moving away from the dollar.
Oil and almost everything else is traded mostly in U.S. dollars globally, but that is changing. There has been a definite move by some of the biggest economies in the world in the last few years to not trade in dollars. China is the second biggest economy in the world and is leading the charge to do business in its own currency–the renminbi. The Financial Times reported last week, “China has signed a $31bn currency swap agreement with Australia, a step towards boosting the renminbi’s profile in developed markets. Beijing has established nearly 20 bilateral swap lines over the past four years, but Australia ranks as the biggest economy yet to sign such a deal, which analysts said could give a shot in the arm to Beijing’s goal of internationalising its currency.” This is bad news for the dollar in the long term.
The Financial Times reports Brussels hit by strike as EU leaders meet.
A general strike brought widespread disruption to Belgium on Monday, as European Union leaders arrived for a summit in Brussels with a focus on boosting employment across the region. Trains, shipping, air travel and public transport were all hit by the trade union action, called in response to reforms enacted hastily by the new government of Elio Di Rupo.
It is the first time in nearly two decades that unions from all sectors of the economy have co-ordinated a strike. As well as schools, the postal service and other branches of the public sector, some private enterprises were affected as unions flexed their muscles.
The strikes in the EU’s capital are a reflection of union discontent across the continent, worried that austerity measures will jeopardise the recovery. A Europe-wide “day of action”, bringing together unions from across the continent, is planned for February 29.
Voter distress and open dissent is no where close to peaking.
Courtesy of Google Translate, please consider Spain deficit to Hit 6.8% in 2012 and 6.3% in 2013, according to IMF
6.8% is far from the 4.4% that the European Commission has imposed
IMF predicts two years of recession, with declines of 1.7 and 0.3% in 2012 and 2013
Spain will not meet deficit reduction goals of the European Commission in 2012 and 2013. Specifically, the IMF projects that the deficit will be within 6.8% of GDP in 2012 and 6.3% in 2013, when Brussels requires, at most, a deficit of 4.4% this year and 3% next.
The agency, predicts a recession of two years for the Spanish economy, ending the last three months of this year with a contraction of 2.1%. This indicates the organization in the latest update to its Global Growth Outlook, published today in Washington.
Yahoo! Finance reports EU leaders struggle to reconcile austerity, growth
Prepare for Greece to exit the Eurozone. Germany has made a request that in my opinion practically guarantees that outcome. The Financial Times has a pair of articles on the matter but the conclusion above is mine.
Please consider Call for EU to Control Greek Budget
The German government wants Greece to cede sovereignty over tax and spending decisions to a eurozone “budget commissioner” to secure a second €130bn bail-out, according to a copy of the proposal obtained by the Financial Times.
In what would amount to an extraordinary extension of European Union control over a member state, the new commissioner would have the power to veto budget decisions taken by the Greek government if they were not in line with targets set by international lenders. The new administrator, appointed by other eurozone finance ministers, would take responsibility for overseeing “all major blocks of expenditure” by the Greek government.
Even before Germany circulated its proposal, the EU and International Monetary Fund had presented a 10-page list of “prior actions” Athens must implement before the new bail-out is agreed. According to a copy of the document, also obtained by the FT, Greece must cut an additional 150,000 government jobs within three years.
Jack Crooks | Money & Markets
November 26 2011
“If you do not change direction, you may end up where you are heading.” — Lao Tzu
Most everyone thinks they know where China is headed — that is, toward world domination thanks to having the most-vibrant large economy in the world.
Of course, whenever we project from the recent past, we usually end up disappointed. And for many, their expectations for China will be no exception.
There are many obstacles along the way before China rules the economic world, and one of them is what we have dubbed “The Japanese Parallel.” This would be a game-changer, one with major implications for all global asset markets, especially currencies.
The credit crunch that happened circa 2008 took a big bite out of the U.S. consumer and has drained a lot of dollar credit out of the global system. In the aftermath, the Chinese government stepped up in a big way — replacing U.S. consumer demand with direct stimulus, to the tune of approximately half the size of the country’s GDP, in an effort to keep the music playing.
The song should be a familiar one because, interestingly, we saw a similar scenario play out before in the global economy. China’s future is on a seemingly eerie parallel with Japan’s global macroeconomic history.
The Parallel in Play
During the 1980s, it appeared Japan — as the “Creditor Superpower” — was going to gobble up the world with its powerful export machine and massive current account surpluses rolling in.
Then a little thing called the U.S. stock market crash in 1987 changed the game.
Dollar credit flowed from the global system, triggering an improvement in the U.S. current account balance (see the top-left gold box in the chart below) that was followed by a U.S. recession. This came as the Japanese yen was appreciating in value, thanks to the G-7 Plaza Accord to pressure the yen higher because of all those Japanese exports.
Here’s a brief history on what happened to Japan: