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This is a transcript of Zoe Konstantopoulou’s important July 22nd speech in the Hellenic Parliament.

I confess that the consciously, politically and personally painful moments which we are being called on to experience in parliament during this parliamentary term are multiplying.

From my capacity as Speaker of the House, I have just sent a letter to the President, Mr. Prokopis Pavlopoulos and to Prime Minister Alexis Tsipras noting that it is my institutional responsibility to emphasize and underline that the conditions this bill is being introduced under allow no guarantees of compliance with the constitution, no protection of the democratic process or the exercise of legislative power of parliament, nor a conscience vote by members of parliament, under conditions of blatant blackmail, which is aimed by foreign government of European Union member States at this government and the members of parliament and which is in fact introduced without any possibility of amendment by the parliament as was confessed by the Minister, whom I honor and respect deeply, as he knows, a statute through which a major intervention in the functioning of justice and the exercise of the fundamental rights of the citizens is being attempted, in a manner that tears down both the functioning of Greek democracy as a social state under the rule of law and in which there is a separation of powers according to the constitution, as well as the preservation of the principle of fair trial.

Ministers are being coerced to introduce a legislation whose content they do not agree with, and the statement made by the Justice Minister was characteristic, but who are directly opposed to it and members of parliament are being coerced to vote for it who are also opposed to its content, and the statements made by members of parliament in the two parliamentary groups, which make up the parliamentary majority were also characteristic, every one of them.

…click on the above link to read the rest of the article…

Eurozone Debt Just Keeps Rising—–What Austerity?

July 27, 2015

Eurozone Debt Just Keeps Rising—–What Austerity?

The eurozone is supposedly in a state of recovery. However, in spite of that recovery, public debt and debt-to GGP levels are still rising. Austerity is difficult to find in any realistic sense.

Please consider Eurozone Borrowing Rises to Record as Recovery Remains Weak.

The European Central Bank’s programme of quantitative easing has pushed down interest rates to ultra low levels, encouraging governments to borrow more in the early part of this year, despite turmoil in Greece.

Across countries that use the euro, average debt to gross domestic product reached 92.9 per cent in the first quarter of 2015, up from 92 per cent in the previous quarter and 91.9 per cent in the same period last year, according to figures from Eurostat, the EU’s statistical agency.

Greece remains the EU’s most indebted nation, with debt equal to 169 per cent of annual GDP, but Italy, Belgium, Cyprus and Portugal also carry government debt that exceeds 100 per cent of economic output.

The rise in debt comes despite a pickup in the pace of recovery in the eurozone, with the region’s economy expanding 0.4 per cent in the first quarter of this year — while the US saw a contraction.

Targets vs. Reality

The “Growth and Stability” pact on which the Eurozone was founded limits debt to 60% of GDP and deficits at no more than 3%.

Average Debt-to-GDP is 92.9% and rising.

Eurostat Data shows Ireland, Greece, Spain, France, Cyprus, Portugal, Belgium, Slovenia, and Finland all exceeded 3% budget deficit requirement in 2014.

France and Spain have been given warnings and extensions on numerous occasions.

Greece Sideshow

By any realistic measure, Greece is just a sideshow for what is to come.

Pater Tenebrarum at the Acting Man blog pinged me with this comment: “The true reason for the bust of Greece and other countries – apart from their truly atrocious socialist policies and abominable corruption – isfractional reserve banking. The euro has of course enabled an even bigger credit boom and bust than would have been the case otherwise, but it is not the fixed exchange rate that is at fault, it is the underlying economic policies and the monetary system as such.”

…click on the above link to read the rest of the article…

Europe’s New Colonialism: ECB Rejects Greek Request To Reopen Stock Market

July 26, 2015

Europe’s New Colonialism: ECB Rejects Greek Request To Reopen Stock Market

It has been one month since Greek capital controls were imposed, and as we explained earlier, Greece is nowhere closer to having its deposit limits lifted. In fact, with several more months of capital controls at least, the Greek banks are likely to suffer ongoing balance sheet impairments which will ultimately result in depositor bail-ins, with Germany already pushing for haircuts on deposits over €100,000.

However, when it comes to banks there is at least still the illusion that Greece has some residual sovereignty. The reality is that it does not, as Greece is no longer an independent nation, and as of July 15, the Greek “In Dependence” day, every Greek decision needs to get pre-approval from both the ECB, Brussels and, naturally, Berlin.

This was made very clear earlier today when Reuters reported that the Greek stock exchange will remain closed on Monday but might reopen on Tuesday after a one-month shutdown which started on June 29. “It’s certain that it will not open on Monday, maybe on Tuesday,” a spokesperson for the Athens Stock Exchange told Reuters on condition of anonymity.

A spokesman for the Athens Stock Exchange said on Friday a proposal to reopen the bourse had been submitted to the European Central Bank for an opinion before a decision on the matter is made by the Greek finance ministry.

Another person with direct knowledge of the matter confirmed that Greek authorities aimed to reopen the bourse on Tuesday.

However, to understand what really happened, one should read the Bloomberg explanation, according to which it was the ECB which rejected proposals by Greek authorities to reopen country’s financial markets with no restrictions in place for both Greek and foreign traders, citing an Athens Exchange spokeswoman.

Ministerial decree is now expected, setting some restrictions in use of money from Greek bank accounts for trading.

…click on the above link to read the rest of the article…

The Big Bad Bear Case

July 26, 2015

The Big Bad Bear Case

My aim with this article is to outline, with facts, large global structural issues that I believe everyone, bulls and bears alike, should be fully aware of. While some of this discussion may rattle the cage a bit you will hopefully find this article well researched and informative.

Recently I’ve outlined why we switched our trading stance from buy mode (Door Shut) to sell mode (Inversion) on stocks. This week I’ve also outlined the aggregate technical factors that have us very cautious on stocks in general (Totality) while not precluding the possibility of new highs.

This article, however, will focus on much larger structural issues that have been building for years, decades indeed. And no this article is not so much about central banks, debt issues, Greece, China, deficits, etc. While all these are important as part of the overall picture, they are mere current symptoms of a much larger issue that is at the core of all that is already in play and will only deepen in our societies in the decades to come: Institutionalized poverty with an ever widening divide between the haves and the have nots which will result in an eventual drastic revaluation of asset classes across the board.

And before you think I’m off on a hyperbolic rant let me assure you my reasoning will be very much fact based and I have reason to believe the US Fed and Janet Yellen are very much aware of it all, but have no solution to prevent it from happening. In fact it is mathematically unavoidable.

A few weeks ago in The Greek Butterfly I discussed the concept of a global math construct that needs to maintain its integrity to make global debt serviceable. To that end I concluded that they would not let Greece default.

…click on the above link to read the rest of the article…

Greek Capital Controls To Remain For Months As Germany Pushes For Bail-In Of Large Greek Depositors

July 26, 2015

Greek Capital Controls To Remain For Months As Germany Pushes For Bail-In Of Large Greek Depositors

Two weeks ago we explained why Greek banks, which Greece no longer has any direct control over having handed over the keys to their operations to the ECB as part of Bailout #3’s terms, are a “strong sell” at any price: due to the collapse of the local economy as a result of the velocity of money plunging to zero thanks to capital controls which just had their 1 month anniversary, bank Non-Performing Loans, already at €100 billion (out of a total of €210 billion in loans), are rising at a pace as high as €1 billion per day (this was confirmed when the IMF boosted Greece’s liquidity needs by €25 billion in just two weeks), are rising at a pace unseen at any time in modern history.

Which means that any substantial attempt to bailout Greek banks would require a massive, new capital injection to restore confidence; however as we reported, a recapitalization of the Greek banks will hit at least shareholders and certain bondholders under a new set of European regulations—the Bank Recovery and Resolution Directive—enacted at the beginning of the year. And since Greek banks are woefully undercapitalized and there is already a danger of depositor bail-ins, all securities that are below the depositor claim in the cap structure will have to be impaired, as in wiped out.

Now, Europe and the ECB are both well aware just how insolvent Greek banks are, and realize that a new recap would need as little as €25 billion and as much as €50 billion to be credible (an amount that would immediately wipe out all existing stakeholders), and would also result in a dramatic push back from local taxpayers. This explains why Europe is no rush to recapitalize Greece – doing so would reveal just how massive the funding hole is.

…click on the above link to read the rest of the article…

The Number One Lesson From Athens

July 26, 2015

The Number One Lesson From Athens

There’s arguably nothing that’s been more hurtful -in more ways than one- to Greece and its Syriza government over the past six months, than the lack of support from the rest of Europe. And it’s not just the complete lack of support from other governments -that might have been expected-, but more than that the all but complete and deafening silence on the part of individuals and organizations, including political parties.

It’s no hyperbole to state that without their loud and clear support, Syriza never stood a chance in its negotiations with the Troika. And it’s downright bewildering that this continues to get so little attention from the press, from other commentators, and from politicians both inside Greece and outside of it.

This gives the impression that Greece’s problems are some sort of stand-alone issue. And that Athens must fight the entire Troika all on its own, a notion the same Troika has eagerly exploited.

It’s strange enough to see the supposedly well-educated part of the rich northern European population stay completely silent in the face of the full demolition of the Greek state, of its financial system, its healthcare and its economy.

Perhaps we should put that down to the fact that public opinion in for instance Germany is shaped by that country’s version of the National Enquirer, Bild Zeitung. Then again, the well-educated in Berlin allegedly don’t read Bild.

That no massive support movements have risen up in “rich Europe” to provide at least financial and humanitarian aid, let alone political support, can only be seen as a very significant manifestation of what Europe has become.

…click on the above link to read the rest of the article…

Capitalism, Engineered Dependencies and the Eurozone

July 26, 2015

Capitalism, Engineered Dependencies and the Eurozone

Greece

As fact and metaphor the ongoing crisis in Greece is the vanguard of broad social disintegration across the capitalist West. IMF Director Christine Lagarde is being put forward as the voice of reason calling for writing down Greece’s debt to manageable levels. But her actual public statements have paid deference to German Chancellor Angela Merkel’s suggestion, a slight variation on Barack Obama’s mortgage ‘rescue’ packages, that maturities be extended but that people be left with debts far greater than they can reasonably pay. As attractive as permanent debt servitude might appear to those demanding it, it is a form of economic extraction, a transfer of economic production from nominal borrowers to banks and bankers.

Current IMF tactics are being placed in a neo-Cold War frame with the U.S. trying to maintain European political stability on the side of the U.S. against Russia and China. But the broader tendency is toward collective suicide through imperialist revival economics, a global race to replicate Western consumption through increasingly ‘managed’ capitalism and through renewed competition for resources that led to the catastrophic wars of the twentieth century. The geopolitical frame understates the crudeness of the economic logic that gives banker / creditor ‘workouts’ the appearance of geopolitical machinations. The economic relations in play are ‘political,’ but they derive from economic ideology that preceded the Cold War by a half-century or more.

The practical problem with the neo-Cold War frame is that it takes the underlying economic relations as given when they are in fact causal. The euphemistically-called ‘trade’ agreements being pushed by the ‘developed’ West grant broad authority over civil governance to multi-national corporations, the point being that the ideology that drives corporate actions is economic, not ‘political’ in the Western liberal sense of the term.

…click on the above link to read the rest of the article…

Deflation Is Winning – Beware!

July 25, 2015

Deflation Is Winning – Beware!

Expect the ride to get even rougher

Deflation is back on the front burner and it’s going to destroy all of the careful central planning and related market manipulation of the past 6 years.

Clear signs from the periphery indicate that a destructive deflationary pulse has been unleashed. Tanking commodity prices are confirming that idea.

Whole groups of enterprises involved in mining and energy are about to be destroyed. And the commodity-heavy nations of Canada, Australia and Brazil are in for a very rough ride.

Whether the central banks can keep all of their carefully-propped equity and bond markets elevated throughout the next part of the cycle remains to be seen. We know they will try very hard. They certainly are increasingly willing to use any all tools at their disposal to keep the status quo going for as long as possible.

Whether it’s the People’s Bank of China stepping in to the market to buy 10% stakes in major Chinese corporations in a matter of weeks, the Bank Of Japan becoming the majority owner of key ETFs in the Japanese markets, or the Swiss National Bank purchasing $100 billion of various global equities, we see the same desperation. Equity prices are being propped, jammed and extended higher and higher without regard to risk or repurcussions.

It makes us wonder: Why haven’t humans ever thought to print their way to prosperity before?

Well, that’s the problem. They have.

And it has always ended up disastrously. History shows that the closest thing that economics has to an inviolable law is: There’s no such thing as a free lunch.

Sadly, all of our decision-makers are trying their hardest to ignore that truth.

First, The Fall….

So how will all of this progress from here?

We’ve always liked the Ka-Poom! theory by Erik Janzen which we explained previously like this:

…click on the above link to read the rest of the article…

Aussie Dollar Tests Long-Term Trendline As China Contagion Spreads

July 25, 2015

Aussie Dollar Tests Long-Term Trendline As China Contagion Spreads

Last week, we asked “Is Australia the next Greece?” It appears, judging bu the collapse in the Aussie Dollar, that some – if not all – are starting to believe it’s possible after last night’s 15-month low in China Manufacturing PMI. As UBS previously noted, China’s real GDP growth cycles have become an increasingly important driver of Australia’s nominal GDP growth this last decade. With iron ore and coal prices plumbing new record lows, a Chinese (real) economy firing on perhaps 1 cyclinder, and equity investors reeling from China’s collapse; perhaps the situation facing Australia is more like Greece than many want to admit.

Australian consumers are more worried about the medium term outlook than at the peak of the financial crisis, and rightfully so…

As China plumbs new depths in manufacturing, just piling on Aussie’s woes…

The Dollar is rising this morning but all eyes are on AUD as it tests a very long-term trendline…

h/t @RaoulGMI

* * *

As The Telegraph previously concluded, rather ominously,

The problem is that Australia, after decades of effort to diversify, is looking ever more like a petrodollar economy of the Middle East, but without the vast horde of foreign currency reserves to fall back on when commodity prices fall.

Instead, Australians must borrow to maintain the standards of living that the country has become accustomed to, which even some Greeks will admit is unsustainable.

Charts: Bloomberg

The Dangers of European Dis-Union

July 24, 2015

The Dangers of European Dis-Union

The “European Project” is under unprecedented stress from fissures both east-and-west (over the Ukraine crisis) and north-and-south (over the Greek and refugee crises) – and it’s unclear whether the Continent’s bureaucrats can keep the European Union from splintering apart, as Nat Parry explains.

The near collapse of the Greek economy and the harsh austerity package forced on Athens by the European Union has led to increasing commentary in recent weeks on what the developments might mean for the “European project” – the one-time seemingly inevitable drive on the European continent for an “ever closer union” based on principles of economic, social and territorial cohesion and solidarity among EU member states.

Far from a demonstration of cohesion and solidarity, as New York Times columnist Paul Krugmannoted in a July 12 op-ed, the lesson learned over the past few weeks is that “being a member of the eurozone means that the creditors can destroy your economy if you step out of line.” In Krugman’s view, the fundamental economics are simple enough: “imposing harsh austerity without debt relief is a doomed policy no matter how willing the country is to accept suffering.”

Krugman is not alone in his bleak appraisal of the situation. In testimony to the House Foreign Affairs Committee’s Subcommittee on Europe, Eurasia, and Emerging Threats on July 14 on the topic of “The European Union’s Future,” prominent American academic Stephen Walt said that the EU, despite its past achievements, now suffers from growing tensions and several self-inflicted wounds.

…click on the above link to read the rest of the article…

So you say you don’t want a revolution?

July 21, 2015

So you say you don’t want a revolution?

Over the past few months we have been forced to bear witness to a humiliating farce unfolding in Europe. Greece, which was first accepted into the European Monetary Union under false pretenses, then saddled with excessive levels of debt, then crippled through the imposition of austerity, finally did something: the Greeks elected a government that promised to shake things up. The Syriza party platform had the following planks, which were quite revolutionary in spirit.

Put an end to austerity and put the Greek economy on a path toward recovery
Raise the income tax to 75% for all incomes over 500,000 euros, adopt a tax on financial transactions and a special tax on luxury goods.
Drastically cut military expenditures, close all foreign military bases on Greek soil and withdraw from NATO. End military cooperation with Israel and support the creation of a Palestinian State within the 1967 borders.
Nationalize the banks.
Enact constitutional reforms to guarantee the right to education, health care and the environment.
Hold referendums on treaties and other accords with the European Union.

Of these, only the last bullet point was acted on: there was a lot made of the referendum which returned a resounding “No!” to EU demands for more austerity and the dismantling and selling off of Greek public assets. But a lot less was made of the fact that the results of this referendum were then ignored.

But the trouble started before then. After being elected, Syriza representatives went to Brussels to negotiate. The negotiations generally went like this: Syriza would make an offer; the EU officials would reject it, and advance their own demands for more austerity; Syriza would make another offer, and the EU officials would reject it too and advance their own demands for even more austerity than in the last round; and so on, all the way until Greek capitulation.

…click on the above link to read the rest of the article…

Citi Predicts Greek Hyperinflation Breaks Out In Two Years

July 21, 2015

Citi Predicts Greek Hyperinflation Breaks Out In Two Years

Earlier, we showed that according to Citigroup (among many) for Greece to have any hope of surviving, it needs a masive debt haircut: the bigger, the better, with Citi tossing out numbers as high as €130 billion. Still, even if Greece does get debt relief, as long as it remains in the Eurozone, its economy has nothing but hell to look forward to.

Here is how Citi previews the next few years:

From an economic and financial sector angle, the success or failure of a third programme will depend on i) the strength of a possible economic recovery in coming quarters, following an overhaul of the Greek banking system, and on ii) whether debt re-profiling discussions look likely and take place as envisaged. On the first item, the degree of fiscal austerity and outright reforms to be implemented in a short period of time is likely to result in a prolongation of economic recession in coming quarters. And we need to factor in the economic costs from the (very likely) persistence of stringent capital controls and the lack of liquidity in the economy. We recently updated our real GDP growth forecasts and now expect the Greek economy to contract by at least 2.4% YY in 2015 (compared with -0.2% YY projected in June), with the economy likely to remain in recession at least until Q1 2016. Such a poor performance in terms of economic activity would mean a higher risk that Greek economic and fiscal performance would undershoot its programme targets, which could likely challenge its membership in the Eurozone. In addition, debt re-profiling is likely to be deferred, conditional and tranched, and is unlikely to boost the government’s fiscal space for public spending increases or tax cuts. Failure by the Greek authorities to lift capital controls in a meaningful way and a further increase in unemployment (we forecast that the jobless rate will rise from 27% in 2015 to 29% in 2016) could also increase social tensions, in our view.

…click on the above link to read the rest of the article…

“Something Revolutionary Is In The Air”: Grexit By “Insurrection” Is The “Most Probable” Outcome

July 21, 2015

“Something Revolutionary Is In The Air”: Grexit By “Insurrection” Is The “Most Probable” Outcome

A week ago, we said the following about the situation faced by Greek PM Alexis Tsipras when he and his new finance minister arrived in Brussels for the final round of bailout negotiations earlier this month:

…the entire world looked on in horror as Alexis Tsipras – who just days earlier secured a crucial referendum victory which by all accounts empowered him to ride into Brussels a conquering hero – was eviscerated by German FinMin Wolfgang Schaeuble and several like-minded EU finance ministers who smelled blood after Greece submitted a proposal that betrayed the Greek PM’s lack of conviction.

In short, Tsipras made a fatal error. In an act of alarming defiance, he boldly called for a referendum on creditors’ proposals, campaigned for a “no” vote, and then, once 61% of the Greek populace gave their leader a mandate to reject more austerity, he proceeded to resubmit the very same proposal Greeks had just voted against. That told EU officials that Tsipras had no intention of leveraging the referendum outcome and from there, the “mental waterboarding” was on.

Now, Greece is stuck with a deal that promises more of the same austerity measures that have so far served only to prolong an intractable recession and indeed, without some manner of debt relief or re-profiling, the new program has no chance of success.

Given all of this, it isn’t surprising that economists are once again beginning to talk about Grexit, and indeed, who can blame them? It’s difficult to take seriously the idea that the new “deal” has taken a Greek exit off the table when German FinMin Wolfgang Schaeuble still claims that a Greek exit from the EMU might be the country’s best chance at a “classic” haircut and economic recovery. Here’s Bloomberg with more on why Grexit is “back on the agenda”:

…click on the above link to read the rest of the article…

Is Democracy Hitting theFossil Fuels too Hard?

July 21, 2015

Is Democracy Hitting the Fossil Fuels too Hard?

Stick that in your democracy and smoke it?

Over the past few weeks the notion of democracy has been getting its fair share of attention in the media, and quite rightfully so; Greece had a referendum on whether or not it was going to accept new terms for another round of bailout funds in exchange for the prolongment of austerity measures and the continuation of its debt peonage.

That this was a welcome occurrence is thanks to the short shrift that the term “democracy” has been getting the past few years, and I’m not just talking about neoliberals claiming to bring “democracy” to Middle East countries and such. What I’m talking about is how the term “democratization” has been continually added willy-nilly to just about every new technology that comes along: there’s been the democratization of cell phones, of high-speed Internet access, of automobiles, and much more. So rather than “democratization” implying the beneficence of freedom upon a people, it now generally means the accessibility and wide adoption of the latest consumer gimmick by the masses.

Democracy, however, did not start out as a device for unfettered consumption, but rather implied a government assembled by the people through freely elected representatives. So it was therefore a welcome relief to hear Greece’s prime ministerstating the other day after the recent referendum that “Today we celebrate the victory of democracy. We proved even in the most difficult circumstances that democracy won’t be blackmailed,” for that was in fact an exercise in democracy.

Nonetheless, with some commentators going so far as to claim that we are seeing an “epic battle for the future of European democracy,” one could be forgiven for thinking that the Greek crisis has spurred on what might be called “democracy at the crossroads.”

…click on the above link to read the rest of the article…

Fighting over democracy

July 21, 2015

Fighting over democracy

One of the problems of political science, and social science generally, is that it is hard to prove a hypothesis. A sceptic can always say that there were particular circumstances that affected the outcome. We only get to play our history once.

But the recent events in Brussels in which the ‘Institutions’ settled with Greece have, without any doubt, vindicated the work of the late political scientist Peter Mair. His book Ruling The Void, assembled after his sudden death by his lifelong friend and colleague Francis Mulhern, argued that we were watching a long secular decline in party political engagement, and secondly that our political institutions were being shaped so that they had the appearance of being democratic, but none of the structure. His critical case was the European Union; it looked as if had the right institutions in place, but it was not designed to permit opposition or the expression of representative democracy.

Removing opposition

Here’s one of the key passages from his book:

The behaviour and preferences of citizens constitute virtually no formal constraint on, or mandate for, the relevant policy makers. Decisions can be taken by political elites with more or less a free hand. … Despite the seeming availability of channels of access, the scope for meaningful input and hence for effective electoral accountability is exceptionally limited. It is in this sense that Europe seems to have been constructed as a protected sphere, safe from the demands of voters and their representatives. (pp 108-109)

Whatever failings Syriza has had in its “negotiations” with the EU, and whatever the particularities of the Greek history and situation, it has shown clearly that the EU as constituted is not willing to entertain any form of oppositional view that does not accept the broad principles of both austerity and neoliberalism/neomercantilism, even when this is both bad politics and bad economics.

…click on the above link to read the rest of the article…

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