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The carnage always comes by surprise, often on an otherwise ordinary Saturday morning…

The government declares a surprise bank holiday. It shuts all the banks. It imposes capital controls to stop citizens from taking their money out of the country. Cash-sniffing dogs, which make drug-sniffing dogs look friendly, show up at airports.

At that point, the government is free to help itself to as much of the country’s wealth as it wants. It’s an all-you-can-steal buffet.

This story has recently played out in Greece, Cyprus, Argentina, and Iceland. And those are only a few recent examples. It’s happened in scores of other countries throughout history. And I think it’s inevitable in the U.S.

I believe the U.S. dollar will lose its role as the world’s premier reserve currency. When that happens, capital controls are sure to follow.

This is why it’s crucial to your financial future to understand what capital controls are, how they are used, and what you can do to protect yourself.

Why Governments Impose Capital Controls

Think of the government as a thief trying to steal your wallet as you (understandably) try to run away. With capital controls, the thief is trying to block all the exits so you can’t reach safe ground.

A government only uses capital controls when it’s desperate…when it can no longer borrow, inflate the currency, tax, or steal money in one of the “normal” ways.

In most cases, governments use capital controls in severe crises. Think financial and banking collapses, wars, or chronic economic problems. In other cases, they’re just a way to control people. It’s much more difficult to leave a country when you can’t take your money with you.

Regardless of the initial catalyst, capital controls help a government trap money within its borders. This way, it has more money to confiscate.

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

Europe Moving Into Meltdown?

January 22, 2016

Europe Moving Into Meltdown?

QUESTION: Marty, now the OECD is predicting a financial crash worse than the 2007-2009 event in Europe because they say there is over €1 trillion in bad loans that cannot be collected. They seem to be also changing their opinion to fit your model. Were they there in Berlin?

ANSWER: We cannot comment on if the OECD is following our model or whom has attended a World Economic Conference. They are the most widely attended and many just want to know where the computer stands.

We see a massive banking crisis. The European banks are in deep trouble. Deutsche Bank posted a shocking €6.7 billion euro loss with its shares falling 10% in a day. HSBC bought Republic National Bank in New York for a bit more than that. Barclay’s is pulling out of all emerging markets and cutting 1,000+ jobs.

The collapse in commodities will reek havoc on all emerging market countries, but there is one economy that nobody pays attention to closely: Germany. Yes, it is the largest economy and main supporter of the euro. They need open borders and the euro to maintain their economy that is EXPORT driven. China is advancing more rapidly than Germany and has focused on trying to develop its internal economy. Spain was the richest nation in Europe with all the gold coming in from America, but they failed to develop their internal economy and collapsed. Germany is declining. It cannot be sustained with open borders or the euro because the rest of Europe is in serious decline. The refugee crisis is a nightmare. Now, Italy is demanding taxpayer money to bailout banks in fear that a bail-in will cause a revolution.

Merkel was against allowing in refugees previously, but then changed her position to combat her poor view after her treatment of Greece. Additionally, she had the brilliant idea of bringing in cheap labor to help Germany.

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

Yanis Varoufakis Reveals – Berlin Blocked Greece From Chinese Funding During Crisis

January 21, 2016

Yanis Varoufakis Reveals – Berlin Blocked Greece From Chinese Funding During Crisis

Hundreds of millions of people throughout the Western world are being forced to admit an obvious, yet uncomfortable reality. Democracy is dead. Your vote and your voice doesn’t matter. Not at all.

No group of people understand this as intimately as the Greeks. They voted for one thing, got something else, and in the process were unceremoniously reminded of their political irrelevance.

– From the post: Greeks Flock to Grassroots Alternative Currencies in Affront to Euro Debt Slavery

Just in case you still had any doubts as relates to how slimy, nefarious and undemocratic the EU is, check out the following from Ekathimerini:

Yanis Varoufakis was instructed last year by Prime Minister Alexis Tsipras to put together a small team of people to draw up a plan for introducing a parallel currency if Greece was unable to reach an agreement with its lenders on a new bailout, the ex-finance minister said in a TV interview late Tuesday.

Speaking on Skai TV’s “Istories” (Stories) program, Varoufakis outlined what was known as Plan X. He said that a small team of about six people examined the various parameters surrounding a potential standoff that would lead to Greece being unable to meet its obligations. Among the issues examined by Varoufakis and his advisers were how the country would continue to have access to medicines, fuel and food under such circumstances.

Varoufakis said that he advised Tsipras to put the plan, which would see Greece defaulting on 27 billion euros in Greek government bonds held by the European Central Bank, into action as soon as he called a referendum at the end of June.

Varoufakis added that he was against efforts to secure funding from Russia but that there had been an agreement with China regarding investment in Greece, including in Greek bonds.

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

Italy, Greece, Financials Crash As European Stocks, Peripheral Bonds Plunge

January 20, 2016

Italy, Greece, Financials Crash As European Stocks, Peripheral Bonds Plunge

Led by a broad-based collapse in financial stocks, European markets extended and accelerated their plunge today. Thanks to the increased systemic linkages enforced by The ECB, peripheral sovereign risk is spiking as their national banking systems crash. Every European nation is now in at least correction since the end of QE3.

Europe crashed today…

Led by utter carnage in financials…

(note that thanks to Draghi’s liquidity spigots financial credit remains suppressed -for now – relative to equity. We do note that Sub financials credit is blowing out)

And every EU nation is now in at least a correction since the end of QE3 (Italy, Spain, and Greece in bear market)

And as EU financials tank, so sovereign risk soars for peripheral nations…

Average:

The Cost Of China’s “Neutron Bomb” Exploding: $7.7 Trillion And Higher

January 11, 2016

The Cost Of China’s “Neutron Bomb” Exploding: $7.7 Trillion And Higher

On Friday we presented Kyle Bass’ latest interview in which the Texas hedge fund manager explained the reasoning why he thought shorting the Yuan is the “greatest investment opportunity right now.” The crux behind the argument was well-known to Zero Hedge readers, namely China’s peaking credit cycle driven by soaring bad, or non-performing, loans which have so far been swept away, but which courtesy of a $35 trillion financial system are nothing short of a “neutron bomb“, as we first dubbed the embedded risk, waiting to go off. Here is Bass:

What I think the narrative will swing to by the end of this year if not sooner, is the real issue in China is not simply that profits have peaked. The real issue is the size of their banking system. Do you remember the reason the European countries ended up falling like dominoes during the European crisis was their banking systems became many multiples of their GDP and therefore many, many multiples of their central government revenue. In China, in dollar terms their banking system is almost $35 trillion against a GDP of $10 and their banking system has grown 400% in 8 years with non-performing loans being nonexistent. So what we are going to see next is a credit cycle, and in a credit cycle you see some losses, but if China’s banking system loses 10%, you are going to see them lose $3.5 trillion.

Today, months after we first covered the breadth of this most disturbing for Chinese bulls topic, the FT caught up with this critical, for China’s financial system, issue and reports that “the downturn in China’s fortunes — particularly across its heartland heavy industry — is already hitting the banks. Annual non-performing loan rates have been doubling annually since 2012. China Merchants Bank, China Everbright and ICBC are seen as among the most troubled.”

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

Greece’s Two Currencies

January 7, 2016

Greece’s Two Currencies

ATHENS – Imagine a depositor in the US state of Arizona being permitted to withdraw only small amounts of cash weekly and facing restrictions on how much money he or she could wire to a bank account in California. Such capital controls, if they ever came about, would spell the end of the dollar as a single currency, because such constraints are utterly incompatible with a monetary union.

Greece today (and Cyprus before it) offers a case study of how capital controls bifurcate a currency and distort business incentives. The process is straightforward. Once euro deposits are imprisoned within a national banking system, the currency essentially splits in two: bank euros (BE) and paper, or free, euros (FE). Suddenly, an informal exchange rate between the two currencies emerges.

Consider a Greek depositor keen to convert a large sum of BE into FE (say, to pay for medical expenses abroad, or to repay a company debt to a non-Greek entity). Assuming such depositors find FE holders willing to purchase their BE, a substantial BE-FE exchange rate emerges, varying with the size of the transaction, BE holders’ relative impatience, and the expected duration of capital controls.

On August 18, 2015, a few weeks after pulling the plug from Greece’s banks (thus making capital controls inevitable), the European Central Bank and its Greek branch, the Bank of Greece, actually formalized a dual-currency currency regime. A government decree stated that “Transfer of the early, partial, or total prepayment of a loan in a credit institution is prohibited, excluding repayment by cash or remittance from abroad.”

The eurozone authorities thus permitted Greek banks to deny their customers the right to repay loans or mortgages in BE, thereby boosting the effective BE-FE exchange rate. And, by continuing to allow payments of tax arrears to be made in BE, while prescribing FE as a separate, harder currency uniquely able to extinguish commercial bank debt, Europe’s authorities acknowledged that Greece now has two euros.

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

Puerto Rico Is Greece, & These 5 States Are Next To Go

January 3, 2016

Puerto Rico Is Greece, & These 5 States Are Next To Go

As Wilbur Ross so eloquently noted, for Puerto Rico “it’s the end of the beginning… and the beginning of the end,” as he explained “Puerto Rico is the US version of Greece.” However, as JPMorgan explains, for some states the pain is really just beginning as Municipal bond risk will only become more important over time, as assets of some severely underfunded plans are gradually depleted.

Wilbur Ross discusses Puerto Rico’s debt struggles and where it goes from here…

But, as JPMorgan details, Muni risk is on the rise for US states, but broad generalizations do not apply (in other words, these five states are ‘screwed’)…

The direct indebtedness of US states (excluding revenue bonds) is $500 billion. However, bonds are just one part of the picture: states have another trillion in future obligations related to pension and retiree healthcare. In the summer of 2014, we conducted a deep-dive analysis of US states, incorporating bonds, pension obligations and retiree healthcare obligations. After reviewing over 300 Comprehensive Annual Financial Reports from different states, we pulled together an assessment of each state’s total debt service relative to its tax collections, incorporating the need to pay down underfunded pension and retiree healthcare obligations.

While there are five states with significant challenges (Illinois, Connecticut, Hawaii, New Jersey, and Kentucky) , the majority of states have debt service-to-revenue ratios that are more manageable.

As a brief summary, we computed the ratio of debt, pension and retiree healthcare payments to state revenues. The blue bars show what states are currently paying. The orange bars show this ratio assuming that states pay what they owe on a full-accrual basis, assuming a 30-year term for amortizing unfunded pension and retiree healthcare obligations, and assuming a 6% return on pension plan assets.

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

Spain has Fallen – not like Greece – but Fallen all the Same

January 1, 2016

Spain has Fallen – not like Greece – but Fallen all the Same

The Spanish elections – 20 December – were a deceit and a farce. Nobody seems to notice. At least not those concerned, the ignorant electorate, those who will suffer again possibly under a new neoliberal Rajoy leadership.

People forget and are vulnerable to propaganda and lies and manipulations through the bought media in Europe as much as in the US. And this in Spain of all places, where unemployment is still hovering around the 20% – 25% mark, with youth unemployment around 50%, and where an average grad student coming out of university earns on average 1,000 euros or less per month, if he can find a job; hardly a liveable wage.

Others have to survive on monthly incomes in the 500 to 800 euro range. Spain, a country like Greece, where neoliberal troika policies cut minimum wages, pensions, increased retirement age, privatized the health system – and are at the verge of privatizing education. Spain, a country where the ruling Partido Popular (PP) was and still is involved in horrendous corruption scandals all the way to the top, as was widely divulged earlier this year even by the mainstream media. Does it not seem absurd that in this miserably down-trodden Spain, the largest single block of people are no more awake than voting again for their hangman?

Maybe they are awake, but stunned of the results and are too tired from working for peanuts than ‘wasting’ their scarce spare-time to investigate election results, analysing how elections could have turned out the way they did: The arch-conservative neoliberal PP winning a majority of parliamentary seats – 123 (28.7% of votes), though a far cry from the absolute majority (176) and a drop of 64 seats from 2011; the PSOE (Socialist Party) coming in with 22% and 90 seats (down 20), its worst result ever; the up-and-coming PODEMOS – gaining 69 seats (20.7%); and the new center-right Ciudadanos Party winning 40 seats (13.9%), the latter two from basically zero in 2011.

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

Turkish, Greek Jets Engage In Dogfight Over Mediterranean

December 29, 2015

Turkish, Greek Jets Engage In Dogfight Over Mediterranean

Turkey is no stranger to aerial conflict of late.

After months of back and forth banter between Ankara and Moscow regarding supposed Russian incursions into Turkish airspace, Erdogan finally “went there” on November 24 when Turkish F-16s shot down a Russian Su-24 near the border with Syria. One of the two pilots was killed.

Although Turkey claimed the (17 second) violation of its airspace was unacceptable and just cause for military engagement, it was just three years prior that Erdogan had decried the downing of a Turkish F-4 phantom in Syria’s airspace.”A short-term border violation can never be a pretext for an attack,” he declared.

But that wasn’t the only hypocrisy apparent in Turkey’s brazen move. According to the University of Thessaly (whose statistics are based on the Greek military’s tally), there were 2,244 violations of Greece’s airspace by Turkish jets in 2014 alone, representing an increase of some 250% from 2013.Here’s a look at the graphic:

Well don’t look now, but Turkish and Greek fighters just got into a dogfight over the Aegean.

Here’s eKathimerini:

Greek and Turkish jets engaged in a brief dogfight over the Aegean Sea on Tuesday after Turkish aircraft violated Greek national air space several times.

A formation of six Turkish jets, flanked by two CN-235 aircraft that were not in formation, violated Greek air space nine times, according to Greek defense officials.

In all cases the Turkish jets were chased off by Greek aircraft. Two of the eight Turkish aircraft were armed.

The violations were the first since early December following a minor diplomatic spat between the two Aegean neighbors after a message on Greek Prime Minister Alexis Tsipras’s Twitter account accused Turkish jets of repeated transgressions in the Aegean.

Since Erdogan is a fair man, and because we’re sure Turkey’s attack on the Russian warplane was completely legitimate, we suppose the Turkish President would have understood if Greece had shot down one of Turkey’s fighters.

The One Percent Rallies Behind IMF Director Christine LaGarde

December 21, 2015

The One Percent Rallies Behind IMF Director Christine LaGarde

Washington removed Dominique Strauss-Kahn as the leading contender for the French presidency and as director of the IMF by framing him on phony charges of raping a New York hotel maid. The obviously false charge was proven to be totally fabricated and had to be dropped. In the meantime Strass-Kahn had been forced to resign from the IMF and to drop out of the French election. Washington regarded Strauss-Kahn as insufficiently compliant with Washington’s agendas and moved him aside.

Washington got its vassal, Hollande, elected President of France, and replaced Strauss-Kahn at the IMF with the “rhymes-with-witch” Christine LaGarde.

LaGarde serves only the One Percent. She overturned the decision by the IMF’s professional staff that the Greek debt had to be written down to a sum that the country could afford to service. Instead, LaGarde enabled the One Percent to loot the Greek nation and the Greek people, forcing many young Greek women into prostitution in order to have money for food.

As Stephen Lendman points out below, LaGarde’s crimes have caught up with her. When she was French finance minister she ruled against the interest of France in order to benefit the tycoon Bernard Tapie. Corrupt prosecutors tried to cover it up, but the French judicial system has ruled that she must stand trial. http://www.wsj.com/articles/imf-chief-lagarde-ordered-to-stand-trial-in-france-1450373023 Despite the judicial order that she stand trial, she has not had to resign as IMF director. The One Percent protects its own. The IMF’s executive board “continues to express its confidence in the Managing Director’s ability to effectively carry out her duties.”

No such expression of confidence was given to Strauss-Kahn when he was arrested on obviously false charges.

IMF Chief Lagarde to Stand Trial

by Stephen Lendman

Charges are unrelated to her greatest crimes – representing the US-controlled IMF and Western monied interests at the expense of beneficial social change.

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

The Great Greek Bank Robbery

December 16, 2015

The Great Greek Bank Robbery

ATHENS – Since 2008, bank bailouts have entailed a significant transfer of private losses to taxpayers in Europe and the United States. The latest Greek bank bailout constitutes a cautionary tale about how politics – in this case, Europe’s – is geared toward maximizing public losses for questionable private benefits.

In 2012, the insolvent Greek state borrowed €41 billion ($45 billion, or 22% of Greece’s shrinking national income) from European taxpayers to recapitalize the country’s insolvent commercial banks. For an economy in the clutches of unsustainable debt, and the associated debt-deflation spiral, the new loan and the stringent austerity on which it was conditioned were a ball and chain. At least, Greeks were promised, this bailout would secure the country’s banks once and for all.

In 2013, once that tranche of funds had been transferred by the European Financial Stability Facility (EFSF), the eurozone’s bailout fund, to its Greek franchise, the Hellenic Financial Stability Facility, the HFSF pumped approximately €40 billion into the four “systemic” banks in exchange for non-voting shares.

A few months later, in the autumn of 2013, a second recapitalization was orchestrated, with a new share issue. To make the new shares attractive to private investors, Greece’s “troika” of official creditors (the International Monetary Fund, European Central Bank, and the European Commission) approved offering them at a remarkable 80% discount on the prices that the HFSF, on behalf of European taxpayers, had paid a few months earlier. Crucially, the HFSF was prevented from participating, imposing upon taxpayers a massive dilution of their equity stake.

Sensing potential gains at taxpayers’ expense, foreign hedge funds rushed in to take advantage. As if to prove that it understood the impropriety involved, the Troika compelled Greece’s government to immunize the HFSF board members from criminal prosecution for not participating in the new share offer and for the resulting disappearance of half of the taxpayers’ €41 billion capital injection.

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

World Leaders Just Agreed To A “Historic” Climate Accord… Which Is Non-Binding And Has No Enforcement Language

December 12, 2015

World Leaders Just Agreed To A “Historic” Climate Accord… Which Is Non-Binding And Has No Enforcement Language

Great news! The “greatest threat to future generations of the world” has apparently been solved. World leaders Saturday adopted an historic international climate accord in Paris, the first-ever agreement to commit almost every country to fight climate change. However, as we knew all along and just got confirmation, the 31-page pact does not have binding language or a mechanism to force countries to live up to the promises to cut greenhouse gases emissions or provide money for developing and poor nations to cope with the effects of global warming.

Basically, COP21 was a massive taxpayer-funded boondoggle, in which “leaders” enjoyed all the perks of Paris for two weeks, burned through hundreds of millions in public funding, and created millions of tons in greenhouse gases (what do you think to private jets and government 747s use to fly?) that has achieved absolutely nothing.

In other words…

Nonetheless, leaders and the environmental community hailed the United Nations agreement has a historic turning point that has the potential to stave off the worst expected effects of global warming.

And The UN reports a large round of mutual masturbation…

Follow

United Nations

✔@UN

A joyful atmosphere fills the plenary hall at #COP21. #ParisAgreement

1:36 PM – 12 Dec 2015

The Borg press is happy, clearly having no idea that absolutely nothing just took place:

Follow

T. Becket Adams @BecketAdams

Journo says she’s watching #ParisAgreement with press (https://twitter.com/MSLJeconomist/status/675732689102741504 …), tweets video of their reaction.

2:04 PM – 12 Dec 2015

Obama was delighted that “American leadership” was responsible for an agreement that is neither binding nor enforceable, in other words, something one would write on the back of a napkin:

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

Weimar Greece – The Effects of a Currency Collapse

December 8, 2015

Weimar Greece – The Effects of a Currency Collapse

Cash is a scarce commodity in Greece.

In June, Greek banks declared a surprise limitation on how much could be withdrawn from an account. At present, the government still limits the cash withdrawals of Greeks.

And, of course, this is just the most recent in a series of events that make up the cash squeeze. In response, Greeks have done what all people do when they cannot get enough currency – they improvise.

Several alternate systems for payment of goods and services have cropped up in Greece since 2010. One is TEM, which allows people to gain monetary credit on an internet site, which may then be used to pay others. Another system is the Athens Time Bank, which logs time units, allowing individuals to pay each other with their time. The services provided can be anything from language lessons to medical consultation. Other systems are popping up, as Greeks seek out any method of payment other than the euro, since they’re closed off from their own savings at the banks. As can be expected, barter is becoming more commonplace.

Greece is right where Weimar Germany was in late 1922. The 1919 Treaty of Versailles required Germany to pay reparations for WWI. At the time, Germany, having lost the war, was already on the ropes economically. The conditions of the treaty amounted to an unpayable level of debt. As it became apparent that it was impossible to pay, the allies squeezed harder. Economic conditions in Germany worsened dramatically, not unlike Greece today, and for the same reason.

Germans did their best to sidestep the economic squeeze. As the cost of goods and services was rapidly rising (on a daily basis), Germans learned that it was best to spend Reichsmarks as quickly as possible on virtually anything that was holding its value better than banknotes.

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

Greece Is A Nation Under Occupation

December 7, 2015

Greece Is A Nation Under Occupation

Perhaps the best way to show what a mess Europe is in is the €3 billion deal they made with Turkey head Erdogan, only to see him being unmasked by EU archenemy Vlad Putin as a major supporter, financial and who knows how else, of the very group everyone’s so eager to bomb the heebees out after Paris. It could hardly have been more fitting. That’s not egg on your face, that’s face on your egg.

But Brussels thinks it’s found a whipping boy for all its failures. Greece. It’s fast increasing its accusations against Athens’ handling of the 100s of 1000s of refugees flooding the country. Everything that goes wrong is the fault of Greece, not Brussels. The EU has so far given Greece €30 million in ‘assistance’ for the refugee crisis, while the country has spent over €1.5 billion in money it desperately needs for its own people. But somehow it’s still not done enough.

The justification given for this insane shortfall is that Greece doesn’t blindly follow all orders emanating from Europe’s ‘leaders’. Orders such as setting up a joint patrol of the Aegean seas with … yes, Erdogan’s Turkey. Where Greece gets next to nothing as the children keep drowning, Turkey gets €3 billion and a half-baked promise to join the Union sometime in the future.

Which was never going to happen, the EU would blow up before Turkey joins and certainly if it does, and most certainly now that Russia’s busy detailing the link between the Erdogan cabal and Europe’s supposed new archenemies -move over Putin?!, which, incidentally, are reason for France to ponder a kind of permanent state of emergency; ostensibly, this is Hollande’s way of exuding confidence. ‘We must protect our way of life’.

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

It Begins: Desperate Finland Set To Unleash Helicopter Money Drop To All Citizens

December 7, 2015

It Begins: Desperate Finland Set To Unleash Helicopter Money Drop To All Citizens

With Citi’s chief economist proclaiming “only helicopter money can save the world now,”and the Bank of England pre-empting paradropping money concerns, it appears that Australia’s largest investment bank’s forecast that money-drops were 12-18 months away was too conservative.

Over the last few months, in a prime example of currency failure and euro-defenders’ narratives, Finland has been sliding deeper into depression. Almost 7 years into the the current global expansion, Finland’s GDP is 6pc below its previous peak. As The Telegraph reports, this is a deeper and more protracted slump than the post-Soviet crash of the early 1990s, or the Great Depression of the 1930s. And so, having tried it all, Finnish authorities are preparing to unleash “helicopter money” to save their nation by giving every citizen a tax-free payout of around $900 each month!

Just over two years ago, when the world was deciding who would be Bernanke Fed Chair replacement, Larry Summers or Janet Yellen (how ironic that Larry Summers did not get the nod just because a bunch of progressive economists thought he would not be dovish enough) we wrote about a different problem: with the end of QE3 upcoming and with the inevitable failure of the economy to reignite (again), we warned that there remains one option after (when not if) QE fails to stimulate growth: helicopter money.

While QE may be ending, it certainly does not mean that the Fed is halting its effort to “boost” the economy. In fact… the end of QE may well be simply a redirection, whereby the broken monetary pathway, one which uses banks as intermediaries to stimulate inflation (supposedly a failure according to the economist mainstream), i.e., “second-round effects”, is bypassed entirely and replaced with Plan Z, aka “Helicopter Money” mentioned previously as an all too real monetary policy option by none other than Milton Friedman and one Ben Bernanke. This is also known as the nuclear option.

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

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