Financial Nonsense Overload

greeceDmitry Orlov“Those whom the gods wish to destroy they first make mad” goes a quote wrongly attributed to Euripides. It seems to describe the current state of affairs with regard to the unfolding Greek imbroglio. It is a Greek tragedy all right: we have the various Eurocrats—elected, unelected, and soon-to-be-unelected—stumbling about the stage spewing forth fanciful nonsense, and we have the choir of the Greek electorate loudly announcing to the world what fanciful nonsense this is by means of a referendum.

As most of you probably know, Greece is saddled with more debt than it can possibly hope to ever repay. Documents recently released by the International Monetary Fund conceded this point. A lot of this bad debt was incurred in order to pay back German and French banks for previous bad debt. The debt was bad to begin with, because it was made based on very faulty projections of Greece’s potential for economic growth. The lenders behaved irresponsibly in offering the loans in the first place, and they deserve to lose their money.

However, Greece’s creditors refuse to consider declaring all of this bad debt null and void—not because of anything having to do with Greece, which is small enough to be forgiven much of its bad debt without causing major damage, but because of Spain, Italy and others, which, if similarly forgiven, would blow up the finances of the entire European Union. Thus, it is rather obvious that Greece is being punished to keep other countries in line. Collective punishment of a country—in the form of extracting payments for onerous debt incurred under false pretenses—is bad enough; but collective punishment of one country to have it serve as a warning to others is beyond the pale. Continue reading

Your Moment Has Come, Mr Tsipras, Take Back Control Of Your Country – UKIP leader Nigel Farage [Video]

EuropeNigel Farage – “Thank you. What we’re seeing in this chamber this morning and indeed across the whole of Europe is an irreconcilable cultural difference between Greece and Germany. A split between the North and the South of Europe. The European project is actually beginning to die. Nobody in this room will recognise that the peoples of Europe are saying, we were never asked whether we want in this. This has been foisted upon on us and we need to understand why the EMU doesn’t work. Those monsters Kohl and Mitterrand, backed up by the clever but dangerous Delors believed that if they put in place an economic and monetary union then as night follows day, there would be political union and there would be an acceptance of this project and the North and South of Europe would converge. That we would all start to love each other and we would all start to feel a European identity, that we would all start to show allegiance to the flag and the anthem.”

[youtube=https://youtu.be/94UcyJnRcGU]

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Greek Drama – Open Thread

James Corbett – There is a drama of epic proportions unfolding in Greece right now. It’s surely not a comedy, but will it end in tragedy? eurozoneStay tuned.

The story so far:

The Greek people defied the majority of the world’s expectations on Sunday by voting “no” to the Eurozone’s bailout proposals. What does this mean? No one knows yet, and don’t believe anyone who tells you otherwise. The word on the street are that the options on the negotiating table at this point are:

a) Back to square one looking for a new bailout deal with bigger and better structural reforms than ever before!

b) The Greek government could start a “parallel currency” by issuing promissory notes to key creditors, or a kind of ‘lesser euro’ within the Eurozone itself.

c) Greece could officially declare bankruptcy and be ejected from the Euro. Continue reading

Monetary Collusion Masking A Vulnerable Aussie Dollar

chinaJack Crooks – This week global central banks announced a coordinated effort to inject liquidity into credit markets. From Reuters: “The central banks of the United States, euro zone, Japan, Canada, Britain and Switzerland announced on Wednesday coordinated global action to provide liquidity to the financial system, lowering the price on existing dollar swaps.”

As frequently as these monetary powers must work together in world-saving plans, this is only the third instance of this particular type of announced collusion.

The first was in December 2007. The second was in September 2008.

Here is what happened then:

chinaNot exactly the market reaction we’ve come to know from the more popular (and admittedly larger) quantitative easing measures implemented by the Federal Reserve.

Here is the QE1 and QE2 impact on the S&P 500 as a reminder:

chinaThe financial markets’ kneejerk reaction this week to the coordinated central bank action was one of optimism. But I doubt that optimism can carry on the back of a mere “coordinated effort.”

First, we know that things in the euro zone are not improving and the economy will only worsen. And we know that the stop-gap solutions proposed by euro-zone leaders cannot really succeed.

Second, China’s economy is not playing along …

I’ve harped on a potential Chinese hard landing for some time. And I figured investors would turn their attention to China once they got tired of the euro-zone debacle. But because of so many new proposals to fix the euro zone, investors have not tired out and caved in to the ultimate fate.

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