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Europe Warns Of “State Of Emergency” As Greek Stalemate Drags On
Europe Warns Of “State Of Emergency” As Greek Stalemate Drags On
Talks between Greece and creditors collapsed on Sunday after Athens once again refused to compromise on a the pension cuts and VAT hike the troika insists are necessary if the country is to receive the final tranche of aid from its second bailout program.
We noted yesterday that the charade is hardly over as Greek PM Alexis Tsipras knows he can continue to bluff for a few more weeks. Even in the event Greece misses its June 30 payment to the IMF, Christine Lagarde would need to muster the political will to send a failure to pay notice to the IMF board, at which point Athens would be formally in default and cross acceleration rights for the country’s other creditors would trigger. But Lagarde has considerable discretion on the default notice and can delay it for at least 30 days. Between this and the fact that a critical payment to the ECB is still more than a month away, we suggested that the brinksmanship was far from over and that the new ‘deadline’ would be Thursday’s meeting of EU finance ministers in Luxembourg.
On Monday the usual back-and-forth between the IMF, Greece, and EU officials continued with IMF chief economist Olivier Blanchard insisting that Greece must implement changes to pensions and the VAT in order to hit (reduced) budget surplus targets while EU creditors should reshuffle Greece’s payment schedule, reduce interest rates on the country’s debt, and, if push comes to shove, writedown Greek bonds:
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More Central Banking Lunacy
More Central Banking Lunacy
US Rate Hike: The Back-Pedaling Brigade
Last week’s payrolls report was “stronger than expected”, which should actually be fairly meaningless, given how many times it will be revised and considering that it is a lagging economic indicator. However, in light of the Fed’s absurd employment mandate, it does slightly increase the chances of a token rate hike at some point this year.
IMF chief Lagarde – a political operator and bureaucrat since 2005, thinks monetary policy should remain as loose as possible. No-one seems to really know why.
Photo credit: Reuters
To this it should be noted that whether the Federal Funds rate is or isn’t 25 basis points higher shouldn’t make much difference either, but it would certainly have some symbolic significance if the Fed were to move away from its current zero interest rate policy. In the meantime, the broad US money supply TMS-2 has most recently recorded an approx. 7.8% year-on-year growth rate, which remains a historically very high level. Only in the context of the ever wilder oscillations since the Nasdaq bubble blow-out in 2000 can it be considered a “middling” rate of money supply growth:
The broad US money supply aggregate TMS-2 (true money supply) is growing at 7.8% y/y at last count – click to enlarge.
Given that the Fed has stopped “QE” and its balance sheet growth has turned slightly negative, current money supply growth is the result of credit creation by commercial banks – especially industrial and commercial loans are essentially back at typical boom growth rates. Most recently they clocked in at a rate of 12.45% annualized.
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IMF has betrayed its mission in Greece, captive to EMU creditors
IMF has betrayed its mission in Greece, captive to EMU creditors
The IMF’s Original Sin in Greece was to let Dominique Strauss-Kahn hijack the institution to save Europe’s banks and the euro when the crisis erupted, dooming Greece to disaster.
The International Monetary Fund is in very serious trouble. Events have reached a point in Greece where the Fund’s own credibility and long-term survival are at stake.
The Greeks are not withholding a €300m payment to the IMF because they have run out of money, though they soon will do.
Five key players in the radical-Left Syriza movement – meeting in the Maximus Mansion in Athens yesterday – took an ice-cold, calculated, and carefully-considered decision not to pay.
They knew exactly what they were doing. The IMF’s Christine Lagardewas caught badly off guard. Staff officials in Washington were stunned.
On one level, the “bundling” of €1.6bn of payments due to the IMF in June is just a technical shuffle, albeit invoking a procedure last used by Zambia for different reasons in the 1980s. In reality it is a warning shot, and a dangerous escalation for all parties.
Syriza’s leaders are letting it be known that they are so angry, and so driven by a sense of injustice, that they may indeed default to the IMF on June 30 and in so doing place the institution in the invidious position of explaining to its 188 member countries why it has lost their money so carelessly, and why it has made such a colossal hash of its affairs.
The Greeks accuse the IMF of colluding in an EMU-imposed austerity regime that breaches the Fund’s own rules and is in open contradiction with five years of analysis by its own excellent research department and chief economist, Olivier Blanchard.
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