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Regardless of what the Greek people choose, at least the choice will be theirs, along with the consequences.

What is representative democracy but organized bribery on a mass scale?Politicians seeking control of the spigots of state wealth and power promise endless swag to voters. Those who promise the most swag and do so with the most inspirational Soaring Rhetoric ™ win elections and gain control of the spigots of state wealth and power.

What are promises of endless swag but lies cloaked in magical thinking? The magical thinking has many manifestations: the aptly named Laffer Curve, used to justify cutting taxes to the already-wealthy; entry into the Eurozone, a magical land of unicorns and endless prosperity, based not on hard work and the creation of value, but on membership alone; the blowing of serial asset bubbles in real estate and stocks (works equally well in Asia and the West), and various iterations of Manifest Destiny: it’s our right to grow rich, preferably on the labor and resources of others.

Representative democracy offers choices with no consequences: no matter which politico and party is elected, the promises of endless swag remain unchanged.

In contrast, direct democracy offers choices with consequences: voters make a choice of policies that, whether intended or not, have consequences.

This forces voters to actually ponder consequences rather than indulge politico promises of endless swag in return for supporting a corrupt, predatory, parasitic status quo that benefits the few at the expense of the many.

Even direct democracy is easily corrupted by magical thinking. The actual consequences may be ignored in favor of magical-thinking dreams of only good consequences and no trade-offs or sacrifices, all powered by the magic of debt.

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

Good On You, Alexis Tsipras (Part 1)

June 29, 2015

Good On You, Alexis Tsipras (Part 1)

Late Friday night a solid blow was struck for sound money, free markets and limited government by a most unlikely force. Namely, the hard core statist and crypto-Marxist prime minister of Greece, Alexis Tsipras. He has now set in motion a cascade of disruption that will shake the corrupt status quo to its very foundations.

And just in the nick of time, too. After 15 years of rampant money printing, falsification of financial market prices and usurpation of democratic rule, his antagonists—–the ECB, the EU superstate and the IMF—-have become a terminal threat to the very survival of the kind of liberal society of which these values are part and parcel.

In fact, the Keynesian central banking and the Brussels and IMF style bailout regime—which has become nearly universal—-eventually fosters a form of soft-core economic totalitarianism. That’s because the former first destroys honest financial markets by falsifying the price of debt. So doing, Keynesian central bankers enable governments to issue far more debt than their taxpayers and national economies can shoulder; and, at the same time, force investors and savers to desperately chase yield in a marketplace where the so-called risk free interest rate has been pegged at ridiculously low levels.

That means, in turn, that banks, bond funds and fast money traders alike take on increasing levels of unacknowledged and uncompensated risk, and that the natural checks and balances of honest financial markets are stymied and disabled. Short sellers are soon destroyed because the purpose of Keynesian central banking is to drive the price of securities to artificially high and unnatural levels. At the same time, hedge fund gamblers are able to engage in highly leveraged carry trades based on state subsidized (free) overnight money, and to purchase downside market risk insurance (“puts”) for a pittance.

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

And So It Begins – Greek Banks Get Shut Down For A Week And A ‘Grexit’ Is Now Probable

June 29, 2015

And So It Begins – Greek Banks Get Shut Down For A Week And A ‘Grexit’ Is Now Probable

Is this the beginning of the end for the eurozone? For years, European officials have been trying to “fix Greece”, but nothing has worked. Now a worst case scenario is rapidly unfolding, and a “Grexit” has become more likely than not. On Sunday, the European Central Bank announced that it was not going to provide any more emergency support for Greek banks. But that was the only thing keeping them alive. In order to prevent total chaos, Greek banks have been shut down for at least a week. ATMs are still open, but it is being reported that daily withdrawals will be limited to 60 euros. Of course nobody knows for sure if or when the banks will reopen after this “bank holiday” is over, so needless to say average Greek citizens are pretty freaked out right about now. In addition, the stock market in Greece is not going to open on Monday either. This is what a national financial meltdown looks like, and the nightmare that has been unleashed in Greece will soon start spreading to much of the rest of Europe.

This reminds me so much of what happened in Cyprus. Up until the very last minute, politicians were promising everyone that their money was perfectly safe, and then the hammer was brought down.

The exact same pattern is playing out in Greece. For example, just check out what one very prominent Greek politician said on television on Saturday…

“Citizens should not be scared, there is no blackmail,” Panos Kammenos, head of the government’s coalition ally, told local television. “The banks won’t shut, the ATMs will (have cash). All this is exaggeration,” he said.

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

Greek Contagion Spreads As Several Italian Bank Stocks Failed To Open

June 29, 2015

Greek Contagion Spreads As Several Italian Bank Stocks Failed To Open

While things have normalized since the open thanks entirely to the SNB’s aggressive EUR-buying, CHF-selling intervention (good to see that central banks have read the BIS’ report and have learned from their prior intervention mistakes), earlier this morning we got a snapshot of what happens if and when the SNB, and then the ECB itself, finally lose control when as a result of the Greek crisis the contagion promptly spread a few hundred kilometers west to Italy where as the WSJ reported, “several Italian banks failed to start trading on Monday as fears over a Greek debt default induced many investors to shed peripheral stocks, including Italian, with banks suffering the most.”

As the paper reported sales orders on Italian stocks, in particular financial stocks, piled up before the market opening. At the start, the sales orders were so numerous that the system couldn’t manage to process them, something that often happens when specific news causes a sell-off on a stock.

Theoretical prices for Italian banks–the prices at which they would have started trading–hovered around losses of 8% to 10% at the beginning of the trading session.

UniCredit SpA and Intesa Sanpaolo managed to start trading some time after the market opened, but were suspended immediately, accumulating losses of around 6% compared with Friday’s closing prices.

Ironically, in an attempt to avoid just this kind of selling panic, on Sunday, Italy’s banking lobby head Antonio Patuelli dismissed fears of contagion on Italian lenders, saying the country’s banks’ direct exposure to Greece was less than EUR1 billion.

For now the SNB has stabilized things but how much longer will this artificial “stability” continue especially if the just concluded speech by Jean-Claude Juncker managed to antagonize Greeks even further and pushed all those who were on the fence about this Sunday’s coming Greferendum, solidly into the “No” camp.

The Test Of Central Bank Omnipotence May Be Upon Us.

June 28, 2015

The Test Of Central Bank Omnipotence May Be Upon Us.

Suddenly what was discounted as a potential “isolated event” has come full circle to show just how contagious it may very well be. e.g., Greece.

Over the last few months the financial media has not only turned deaf ears to the drama, (out of boredom) they have also blindly discounted any contagion effects as “isolated” at best – relative periphery contagion at worst. In other words: Any and all problems can be contained, mitigated, or solved by none other than your friendly neighborhood Central Bank. After all, if you listen to the so-called “smart crowd” these bankers have powers even Zeus would envy.

So why worry about a little turmoil at the foot of Olympus? After all, the gods haven’t been seen nor heard from in millennia. Central Bankers give press conferences live and in person. Thunder vs a press conference? No contest in today’s role for proving omnipotence. All one needs to remember for proof is Mario Draghi’s now famous chortle of “having a bazooka and willing to use it.”

However, just as in any hero-worship endeavor one thing must remain constant or it all falls apart. Those that worship can never witness any event regardless of how minor: that the gods are not all that they portend to be. In other words: Allow just one moment of truth to be witnessed showing frailty instead of omnipotence – and the whole ruse falls regardless of the size and strength of the monuments and temples built to honor. For they will be abandoned. Sometimes slowly. At others: all at once. It doesn’t take much.

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

Greek Capital Controls Begin: Greek Banks, Stock Market Will Not Open On Monday

June 28, 2015

Greek Capital Controls Begin: Greek Banks, Stock Market Will Not Open On Monday

Update 2: Greece’s Skai reports that if/when banks reopen (supposedly on Tuesday), a 60€ withdrawal limit will be imposed.

Update: In a televised address to the nation, Greek PM Alexis Tsipras assured Greeks that their deposits are safe despite an upcoming bank holiday and despite the fact that Greek stocks will not open for trading on Monday. Tsipras also said Athens has re-applied for a bailout extension and urged Greeks to “remain calm” in the face of what is sure to be a turbulent week.

GREEK PRIME MINISTER SAYS GREEK PEOPLE SHOULD REMAIN CALM
GREEK PM: BANK OF GREECE PROPOSED BANK TRANSACTION RESTRICTIONS
GREEK PRIME SAID GREECE RE-APPLIED FOR BAILOUT EXTENSION
GREEK PRIME MINISTER SAYS DEPOSITS ARE COMPLETELY SAFE

Earlier:

Despite the reassurances from any and all elected (and unelected) officials, given the run on bank ATMs in Greece has turned into a stampede, it is not surprising that:

GREEK BANKS TO REMAIN CLOSED FROM MONDAY FOR A WEEK: PIRAEUS BANK CEO
PIRAEUS BANK CEO THOMOPOULOS SPEAKS TO REPORTERS IN ATHENS

The announcement was made when Piraeus Bank CEO Anthimos Thomopoulos told reporters after a meeting of the government’s financial-stability panel on Sunday. The launch of capital controls just as the Greek summer tourism season starts, is sure to be the final crushing blow to Greece, whose entire economy will now grind to a halt.

At the same time, Finance Minister Yanis Varoufakis said an announcement would be made after a Cabinet meeting due to start imminently in Athens. Which is ironic considering just earlier today Varoufakis said he is opposed to the “very concept” of capital controls:

Yanis Varoufakis @yanisvaroufakis

Capital controls within a monetary union are a contradiction in terms. The Greek government opposes the very concept.

7:59 AM – 28 Jun 2015

Banks will remain shut until at least after a July 5 referendum called by Prime Minister Alexis Tsipras on whether to accept austerity in exchange for a European bailout, Kathemerini newspaper reported, citing unnamed sources.

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

I Fear The Greeks, Even When They Bring Gifts

June 28, 2015

I Fear The Greeks, Even When They Bring Gifts

Just another normal morning at the Automatic Earth. Shaking off the local drink – when in Rome.. – and perusing a thousand views and pieces, many on the inevitable topic of ‘Da Referendum’. And I got to say, I can’t even tell whether it’s just me, but there is this huge divide between what a simple vote can and should be, and how it is perceived and presented.

And no, it’s not my ouzo-riddled stupor, it’s what common sense I have left that has me wondering what causes the divide. Case in point, Bloomberg has a piece called “Tsipras Asking Grandma to Figure Out If Greek Debt Deal Is Fair”. The implied connotation being that asking grandma about anything other than knitting patterns and souvlaki recipes is asking for trouble. What does she know? Politics should be decided by politicians. Well, and bankers of course. And Bloomberg editors. Did I mention economists?

Tsipras Asking Grandma to Figure Out If Greek Debt Deal Is Fair

Economists with PhDs and hedge-fund traders can barely stay on top of the vagaries of Greece’s spiraling debt crisis. Now, try getting grandma to vote on it. That’s what Prime Minister Alexis Tsipras is doing by calling a snap referendum for July 5 on the latest bailout package from creditors.

The 68-word ballot question namechecks four international institutions and asks voters for their opinion on two highly technical documents that weren’t made public before the referendum call and were only translated into Greek on Saturday. Worse, they may no longer be on the table. IMF chief Christine Lagarde told the BBC late on Saturday that “legally speaking, the referendum will relate to proposals and arrangements which are no longer valid.”

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

The Greek Butterfly Effect

June 28, 2015

The Greek Butterfly Effect

Many times nothing happens for a long time. Then all of a sudden everything happens at once. Like a dam break. It builds slowly and then it bursts. Example: Who would have ever thought the Confederate flag would be taken down across the South during the same week that a rainbow flag is symbolically hoisted across the entire country? Just because things seem unthinkable doesn’t mean they won’t happen.

Take the global debt construct as another example. For decades the world has immersed itself in ever higher debt. The general attitude has been one of indifference. Oh well, it just goes higher. Doesn’t really impact me or so the complacent rationalize.

When the financial crisis brought the world to the brink of financial collapse the solution was based on a single principle:

Make the math workable.

In the US the 4 principle “solutions” to make the math workable were to:

1. End mark to market which had the basic effect of allowing institutions to work with fictitious balance sheets and claim financial viability.

2. Engage in unprecedented fiscal deficits to grow the economy. To this day the US, and the world for that matter, runs deficits. Every single year. The result: Global GDP has been, and continues to be overstated as a certain percentage of growth remains debt financed and not purely organically driven.

3. QE, to flush the system with artificial liquidity, the classic printing press to create demand out of thin air.

4. ZIRP. Generally ZIRP has been sold to the public as an incentive program to stimulate lending and thereby generate wage growth & inflation. While it could be argued it had some success in certain areas such as housing, the larger evidence suggests that ZIRP is not about growth at all.

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

Greece Invokes Nuclear Option: Tsipras Calls For Referendum

June 26, 2015

Greece Invokes Nuclear Option: Tsipras Calls For Referendum

Update: Greek PM Alexis Tsipras has announced a referendum in a televised speech to the nation after another day of fractious negotiations with creditors closed without a deal.

The dramatic move comes after Athens rejected a proposal from the troika aimed at delivering some €16 billion in aid to Greece as part of an extension of the country’s second bailout program.

GREECE’S TSIPRAS SAYS CREDITORS POSED ULTIMATUM TO GOVT
GREECE’S TSIPRAS SAYS CREDITORS PROPOSALS ARE AGAINST EU RULES
TSIPRAS SAYS CREDITORS AIM TO HUMILIATE GREEK PEOPLE
TSIPRAS SAYS WILL CALL REFERENDUM ON GREEK DEAL WITH CREDITORS
TSIPRAS GREEK REFERENDUM WILL BE HELD ON JULY 5
TSIPRAS SAYS HE NOTIFIED MERKEL, DRAGHI ON REFERENDUM PLAN
TSIPRAS SAYS GREECE IS, AND WILL STAY PART OF EUROPE
TSIPRAS SAYS GREECE NEEDS TO SEND DEMOCRATIC RESPONSE TO EU

Protothema now says the Greek parliament will meet on Saturday and a referendum will be called as early as next week. Whether this is simply a last minute attempt to put pressure on EU finance ministers ahead of Saturday’s Eurogroup meeting remains to be seen, but one thing is for sure: Tsipras is playing a dangerous game with the ECB ahead of a difficult week that could very well see the imposition of capital controls.

Troika Offers Greece Third Bailout Program, Prepares Emergency Plan If No Deal

June 26, 2015

Troika Offers Greece Third Bailout Program, Prepares Emergency Plan If No Deal

On the heels of Thursday’s failed Eurogroup meeting and heading into what is again being presented as an all or nothing, “Lehman weekend” for Greece and its creditors, reports suggest the troika has offered Greece a third bailout program:

GREEK CREDITORS OFFER EU15.5B OVER NEXT 5 MONTHS: HANDELSBLATT
ECB, IMF, EU OFFER GREECE 3RD AID PROGRAM: HANDELSBLATT
GREECE’S CREDITORS PROPOSE EU15.5B TIED TO AID DEAL: OFFICIAL

Here are the details, according to Bloomberg (citing an unnamed EU official):

EU creditor proposal foresees EU8.7b in EFSF funds: official

Creditor proposal foresees EU3.3b in SMP profits: EU official

Creditor proposal foresees EU3.5b in IMF funds: EU official

If true, this would mark a dramatic about-face for the IMF which had suggested it would not be interested in participating in a third Greek program. Similary, lawmakers in Berlin have voiced their opposition to a third bailout program for Athens as the German public has grown tired of throwing money at the Greek ‘problem.’

European finance ministers will meet again on Saturday. Angela Merkel, who met with Greek PM Alexis Tsipras and French President Francois Hollande on Friday, has indicated that a deal must be struck before the market opens on Monday. Here’s a bit of color from Reuters:

The leaders of Germany and France discussed extending Greece’s bailout programme and providing financing with Greek Prime Minister Alexis Tsipras on Friday on the eve of a decisive meeting of euro zone finance ministers, a French source said.

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

EU’s Tusk To Greece’s Tsipras: “Game Over”

June 26, 2015

EU’s Tusk To Greece’s Tsipras: “Game Over”

Brinksmanship is building:

*GREEK OFFICIAL SAYS TUSK TOLD TSIPRAS AT EU SUMMIT “GAME OVER”
*GREEK GOVT OFFICIAL COMMENTS IN TEXT MESSAGE
*TSIPRAS TOLD TUSK AT EU SUMMIT “THIS ISN’T A GAME”: OFFICIAL
*TSIPRAS SAID AT SUMMIT CREDITORS’ PROPOSALS EXTREME: OFFICIAL
*GREECE-AID DEAL IS MATTER OF POLITICAL WILL: GREEK OFFICIAL
*GREEK GOVERNMENT EXPECTS MIX OF GREEK, CREDITOR PLANS: OFFICIAL
*TSIPRAS TOLD EU SUMMIT GREECE HAS NEW PRIORITIES: OFFICIAL

* * *

Insert Coin!

The People Must Be Overthrown

June 26, 2015

The People Must Be Overthrown

Perhaps I should apologize for writing about Greece all the time. Thing is, not only have I just arrived in Athens last night (and been duly showered in ouzo), but Greece is the proverbial early harbinger of everything that’s wrong with the world (not to worry, I know that’s a hyperbole), and of everything that could be done about it.

That places a responsibility on the shoulders of Syriza leader Alexis Tsipras and his team that maybe they don’t want, and for all I know don’t deserve either. But they’re all we have, and besides, they’re all their own people have. In that sense, this is not about everything that’s wrong with the world, other than that’s the same as everything that’s wrong with Greece.

I was struck last night, talking to people here in Athens, by how much their appreciation of Tsipras, his overall composure and the way he handles the Troika talks, has increased over the past five months. They were doubtful about him before the Syriza election win; they no longer are.

Still, the negotiations are nice and all, but they’re not going anywhere, and they never will. The Troika side of the table is interested in one thing only: to humiliate Athens and force it into ultimate submission, along the lines of those photographs we’ve come to know of Abu Graibh.

Yanis Varoufakis labeled the Troika policies vis-a-vis Greece ‘fiscal waterboarding’ when he started out as finance minister, and here’s thinking he should have stuck with that image in a much more persistent and a much louder fashion.

Yes, we know, Syriza doesn’t have the mandate to take the country out of the eurozone. A daily dose of fear tactics in the domestic and international media still have Greeks, even Syriza voters, scared stiff about going it alone.

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

Greece illustrates 150 years of socialist failure in Europe

June 25, 2015

Greece illustrates 150 years of socialist failure in Europe

Greece cannot pay its debts…ever. Nor can several other members of the European Union. That’s why Europe’s elite are loath to place Greece in default. If Greece is allowed to abrogate its debts, why should any of the other debtor members of the EU pay up? The financial consequences of massive default by most of the EU members is hard to predict, but it won’t be pretty. Europe has built a financial house of cards, and the slightest loss of confidence will bring it crashing down.

The tragedy of Europe has socialism at its core. Europe has flirted with socialism since the late nineteenth century. Nineteenth century Bismarckian socialism produced two world wars. Leninist socialism slaughtered and enslaved hundreds of millions until it collapsed, mercifully without a third world war. Yet, not to be deterred, in the ashes of World War II Europe’s socialists embarked on a new socialist dream. If socialism fails in one country, perhaps it will succeed if all of Europe joined a supranational socialist organization. Oh, they don’t call what has evolved from this dream “socialism”, but it is socialism nonetheless.

Socialism will not work, whether in one country, a multi-state region such as Europe, or the entire world. Ludwig von Mises explained that socialism is not an alternative economic system. It is a program for consumption. It tells us nothing about economic production. Since each man’s production must be distributed to all of mankind, there is no economic incentive to produce anything, although there may be the incentive of coercion and threats of violence.

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

The U.S. And EU Will Collapse Regardless Of Economic ‘Contagion’

June 25, 2015

The U.S. And EU Will Collapse Regardless Of Economic ‘Contagion’

In order to understand what is really going on around the globe in terms of the collapsing economy, we must set aside false mainstream versions of reality. When it comes to the EU and its current fiscal turmoil, it is very important to, in some respects, ignore Greece entirely. That’s right; forget about all the supposed drama surrounding Greek debt obligations. Will they find a way to pay creditors? Will they default? Will they make a deal with Russia and the BRICS? Will there be last-minute concessions to save the system? It doesn’t matter. It’s all a soap opera, an elaborate Kabuki theater run by international financiers and globalists.

It is most important to remember the fundamentals. Greece will default on its debts. Period. There is no way around it. Maybe Greece makes a deal today, maybe it makes a deal tomorrow; but eventually, the country’s ability to stretch out its resources in order to meet its exponential liabilities will end. It is inevitable, and no last-minute “deal” is going to change the math at the core of it all.

Why are so many economists so worried about a little country like Greece? It’s all due to a great lie: a dishonest narrative being perpetuated by the establishment that if Greece falls, defaults or leaves the EU, this could trigger a domino effect of other nations hitting a debt wall and following suit. The lie embedded in this narrative is the claim that Greece will cause a “contagion” through the act of default. Let’s be clear – there is no contagion. Multiple countries within the EU have developed their own debt problems in spite of Greece over the past couple of decades, not because of Greece. Each of these countries, from Italy, to Spain, to Portugal, etc. has its OWN sovereign debt disasters to deal with caused by its own fiscal irresponsibility. The only legitimate reason for a so-called contagion is the fact that these countries have been forced into socialist interdependency through the EU structure.

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

Greece Rejects “Totally Unaccepetable” IMF Counterproposal Demanding Pension Cuts, VAT Hike

June 24, 2015

Greece Rejects “Totally Unaccepetable” IMF Counterproposal Demanding Pension Cuts, VAT Hike

As reported earlier and as tipped here on Monday, markets will have to call off the party for now because the focus of the Greek debt deal negotiations has now shifted back to Brussels after all eyes had turned briefly to Athens on Tuesday following reports which indicated a deal in principle had been struck. Here’s what we said less than 24 hours ago:

The IMF demands no tax hikes and pension cuts. Instead it will get almost exclusively tax hikes, amounting to 92% of the proposed measures, and just a few cuts, few of which actually impact Greek pensions. In short: the proposal is not only unsustainable, it is also unenforceable, something which the Germans – already facing a third Greek bailout – will be quick to point out.

Which is why tomorrow, after Tsipras is finished with the meeting with the Troika, he will have a new homework assignment: revise the “final final” proposal and come up with much less in tax hikes, much more in spending cuts: something which the already furious hard-line elements within Syriza will have a field day with.

And that is precisely what happened. As WSJ reports, creditors have decided to stick to their “red lines” after all:

Significant divisions remain between Greece and its international creditors over measures Athens must implement before receiving desperately needed bailout aid, according to a document seen by The Wall Street Journal on Wednesday ahead of a crucial meeting of eurozone finance ministers.

Key points of disagreement are corporate taxation, the overhaul of Greece’s pension system and value-added taxes, according to the document. For instance, Greece had planned to increase corporate taxes to 29%, but in the document creditors limited increase to 28%. That may cause new budget shortfalls that need to be plugged with other measures.

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

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