The Road to World War III – The Global Banking Cartel Has One Card Left to Play
by ilene - September 28th, 2010 2:19 am
The Road to World War III – The Global Banking Cartel Has One Card Left to Play
By David DeGraw (h/t ZH)
The following is Part I to David DeGraw’s new book, “The Road Through 2012: Revolution or World War III.” This is the second installment to a new seven-part series that we will be posting throughout the next few weeks. You can read the introduction to the book here. To be notified via email of new postings from this series, subscribe here.
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Editor’s Note: The following is Part I to David DeGraw’s new book, “The Road Through 2012: Revolution or World War III.” This is the second installment to a new seven-part series that we will be posting throughout the next few weeks. You can read the introduction to the book here. To be notified via email of new postings from this series, subscribe here.
I: Economic Imperial Operations
When we analyze our current crisis, focusing on the past few years of economic activity blinds us to the history and context that are vital to understanding the root cause. What we have been experiencing is not the result of an unforeseen economic crash that appeared out of the blue with the collapse of the housing market. It was certainly not brought on by people who bought homes they couldn’t afford. To frame this crisis around a debate on economic theory misses the point entirely. To even blame it on greedy bankers,…
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DiggBeware of Greeks Bearing Bonds
by ilene - September 11th, 2010 6:52 pm
This is a fascinating study of Greece and how the largest of part of its bankruptcy may be in its collective conscience. - Ilene
Beware of Greeks Bearing Bonds
Vanity Fair’s Introduction: As Wall Street hangs on the question “Will Greece default?,” the author heads for riot-stricken Athens, and for the mysterious Vatopaidi monastery, which brought down the last government, laying bare the country’s economic insanity. But beyond a $1.2 trillion debt (roughly a quarter-million dollars for each working adult), there is a more frightening deficit. After systematically looting their own treasury, in a breathtaking binge of tax evasion, bribery, and creative accounting spurred on by Goldman Sachs, Greeks are sure of one thing: they can’t trust their fellow Greeks.
After an hour on a plane, two in a taxi, three on a decrepit ferry, and then four more on buses driven madly along the tops of sheer cliffs by Greeks on cell phones, I rolled up to the front door of the vast and remote monastery. The spit of land poking into the Aegean Sea felt like the end of the earth, and just as silent. It was late afternoon, and the monks were either praying or napping, but one remained on duty at the guard booth, to greet visitors. He guided me along with seven Greek pilgrims to an ancient dormitory, beautifully restored, where two more solicitous monks offered ouzo, pastries, and keys to cells. I sensed something missing, and then realized: no one had asked for a credit card. The monastery was not merely efficient but free. One of the monks then said the next event would be the church service: Vespers. The next event, it will emerge, will almost always be a church service. There were 37 different chapels inside the monastery’s walls; finding the service is going to be like finding Waldo, I thought.
“Which church?” I asked the monk.
“Just follow the monks after they rise,” he said. Then he looked me up and down more closely. He wore an impossibly long and wild black beard, long black robes, a monk’s cap, and prayer beads. I wore white running shoes, light khakis, a mauve Brooks Brothers shirt, and carried a plastic laundry bag that said eagles palace hotel in giant letters on the side. “Why have you come?” he asked.
That was
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Paul Farrell Expects No Recovery Until The End Of Obama’s Second Term… IF He Gets Reelected
by ilene - August 31st, 2010 10:33 am
Paul Farrell Expects No Recovery Until The End Of Obama’s Second Term… IF He Gets Reelected
Courtesy of Tyler Durden
Paul Farrell’s take on Jeremy Grantham’s recent essay Seven Lean Years (previously posted on Zero Hedge) is amusing in that his conclusion is that should Obama get reelected, his entire tenure will have been occupied by fixing the problems of a 30 year credit bubble, and if anything end up with the worst rating of all time, as the citizens’ anger is focused on him as the one source of all evil. "Add seven years to the handoff from Bush to Obama in early 2009 and you get no recovery till 2016. Get it? No recovery till the end of Obama’s second term, assuming he’s reelected — a big if." Also, Farrell pisses all over the recent catastrophic Geithner NYT oped essay, which praised the imminent recovery which merely turned out to be the grand entrance into the double dip: "In his recent newsletter, "Seven Lean Years Revisited," Grantham tells us why expecting a summer of recovery was unrealistic, why America must prepare for a long recovery. Grantham details 10 reasons: "The negatives that are likely to hamper the global developed economy." Sorry, but this recovery will take till 2016."
For those who have not had a chance to read the original Grantham writings, here is Farrell’s attempt to convince you that Grantham is spot on:
But should you believe Grantham? Yes. First: Like Joseph, Grantham’s earlier forecasts were dead on. About two years before Wall Street’s 2008 meltdown Grantham saw: "The First Truly Global Bubble: From Indian antiquities to modern Chinese art; from land in Panama to Mayfair; from forestry, infrastructure, and the junkiest bonds to mundane blue chips; it’s bubble time. … The bursting of the bubble will be across all countries and all assets … no similar global event has occurred before."
Second: The Motley Fools’ Matt Argersinger went back to the dot-com crash of 2000: Grantham "looked out 10 years and predicted the S&P 500 would underperform cash." Bull’s-eye: The S&P 500 peaked at 11,722; it’s now around 10,000. Factor in inflation: Wall Street’s lost 20% of your retirement since 2000. Yes, Wall Street’s a big loser.
Third: What’s ahead for the seven lean years? Wall Street will keep losing. Argersinger: "Grantham predicts below-average economic growth, anemic corporate-profit margins, and other
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Anecdotes from Germany regarding ‘Kurzarbeit’ (Part-Time for Economic Reasons)
by ilene - July 8th, 2010 7:07 pm
Anecdotes from Germany regarding ‘Kurzarbeit’ (Part-Time for Economic Reasons)
Courtesy of Mish
Here is an interesting email from "Klaus" in response to Economists Surprised Again as German Factory Orders Unexpectedly Fall
Hey Mish,
I have a German friend visit whose family owns a small manufacturing company that makes the machinery to clean and refurbish commercial concrete forms.
This is his story: a few years ago business was steady and they had about 12 employees. They didn’t really see any slowdown in 2008. Moreover, 2009 was a bit of a boom year and they staffed up to about 15. That lasted for a while, but this spring (May) business fell off a cliff.
They are now down to about 3 people, the rest are on ‘Kurzarbeit’ (translated: ‘short work’), which is essentially a way to keep people on payroll while slashing their hours and pay.
A quick search shows ‘Kurzarbeit’ is being hailed as a model for other countries to follow. This makes me wonder how much ‘Kurzarbeit’ is masking unemployment problems in the US.
Klaus
Kurzarbeit in the US
Hello Klaus, thanks for the report and thanks for your question. I am quite certain Europe will slow much more than the mainstream talking heads realize.
In the US, "on Kurzarbeit" is known as "part time for economic reasons".
If you work as much as 1 hour you are considered employed.
Part-time census workers alone added 411,000 jobs in May. 225,000 of those jobs went away in June as noted in Jobs Decrease by 125,000, Rise by 100,000 Excluding Census; Unemployment Rate Drops to 9.5%; A Look at the Details
Table A-8 Part Time Status
click on chart for sharper image
The above table shows we have 8,627,000 "on Kurzarbeit".
Those "Not in the Labor Force"
Moreover, those "not in the labor force" rose by a whopping 842,000 in a single month. In the last 3 months, those "not in the labor force" rose from 82.6 million to 83.9 million, an increase of 1.3 million.
In the US, if you want a job, but do not report you looked for a job, you are not a part of the labor force and therefore are not considered unemployed. This explains how the unemployment rate dropped.
Most of those not in the labor force are under the age of 16, retired, or in prison. However, there are 2.6…
Leadership To Bits In New Must-Read Essay
by ilene - July 8th, 2010 6:45 pm
Leadership To Bits In New Must-Read Essay
Courtesy of Joe Weisenthal at Clusterstock
Before you leave the office! Do check out George Soros’ just-released essay in the New York Review of Books on the crisis and the euro. Even if you disagree with his argument — which is basically that Germany has been to blame at every time — he does bring original insights to the table regarding recent history.
Why has Germany been to blame? Here’s the core.
Germany now wants to treat the Maastricht Treaty as the scripture that has to be obeyed without any modifications. This is not understandable, because it is in conflict with the incremental method by which the European Union was built. Something has gone fundamentally wrong in Germany’s attitude toward the European Union.
He goes on, citing Germany’s budget cutting, and the inevitable deflationary spiral that will occur when everyone is doing austerity at the same time.
And he notes that European monetary policy is essentially a sprocket wrench that only goes in one direction. Due to German anti-inflation paranoia, the ECB only is prepared to fight inflation. Deflation will never be considered an enemy.
Here’s Soros at his most poetic:
To be sure, Germany cannot be blamed for wanting a strong currency and a balanced budget. But it can be blamed for imposing its predilection on other countries that have different needs and preferences—like Procrustes, who forced other people to lie in his bed and stretched them or cut off their legs to make them fit. The Procrustes bed being inflicted on the eurozone is called deflation.
Economists Surprised Again as German Factory Orders Unexpectedly Fall
by ilene - July 7th, 2010 2:41 pm
Economists Surprised Again as German Factory Orders Unexpectedly Fall
Courtesy of Mish
Economists are surprised by the strangest things.
The UK has announced austerity measures, Greece, Spain, Portugal (3 little PIIGS) are in forced austerity programs, and Germany is paying more attention to deficit reduction than growth (rightfully so), yet somehow economists expect factory orders in Germany to keep improving.
Please consider the Bloomberg report German Factory Orders Unexpectedly Fell in May
German factory orders unexpectedly fell for the first time in five months in May as demand for goods made in Europe’s largest economy waned across the 16- nation euro region.
Orders, adjusted for seasonal swings and inflation, declined 0.5 percent from April, when they rose a revised 3.2 percent, the Economy Ministry in Berlin said today. Economists had forecast a 0.3 percent gain for May, according to the median of 30 estimates in a Bloomberg News survey. From a year earlier, orders increased 24.8 percent.
Europe’s sovereign debt crisis has pushed the euro down 17 percent against the dollar since late November, making exports to countries outside the currency bloc more competitive just as the global recovery gathered pace. With governments cutting spending to convince investors that budget deficits are under control, growth in the euro area, Germany’s biggest export market, may slow.
“You have to see today’s decline in orders in the context of strong increases in the previous months,” said Klaus Schruefer, an economist at SEB Bank AG in Frankfurt. “It doesn’t throw the German economy off its recovery track.”
Recovery Off The Rails
While it is true that any month can be an outlier, the European macro picture is anemic in light of austerity programs virtually everywhere you look.
Moreover, the Asia picture is anemic, the US macro picture is anemic, and indeed the entire global macro picture is anemic. Yet economists, an ever optimistic lot, still have faith in a recovery 100% based on unsustainable government spending even though governments in general are cutting government spending in an attempt to reduce budget deficits.
For now, the US is an exception to global budget tightening. However, it should be perfectly clear that Congress is taking a harder stance towards more stimulus efforts as a measure to extend unemployment benefits has died in the US senate.
Talk of continued recovery is nonsense. The best anyone can possibly hope for…
Trichet Reiterates Austerity Message; Germany Plans More Borrowing Cuts; Will the Treasury Rally Last?
by ilene - July 4th, 2010 2:47 pm
Trichet Reiterates Austerity Message; Germany Plans More Borrowing Cuts; Will the Treasury Rally Last?
Courtesy of Mish
Once again and with greater force, Europe has snubbed its nose (and rightfully so) the Keynesian clowns in US academia and the Obama administration.
Bloomberg reports Trichet Calls on EU Governments to Reduce Budget Deficits to Boost Growth.
European Central Bank President Jean- Claude Trichet pressed governments to trim their budget deficits, saying such action would boost economic growth by improving confidence of consumers and investors.
“We are in a period where we have to manage budgets very tightly,” Trichet told journalists in Aix-en-Provence, France. “I have no problem with austerity, rigor. I call this good budgetary management.”
Trichet said today that deficit reduction won’t choke growth and a failure to stem budget gaps would be equally risky for the recovery.
“Confidence is key for growth, and if you cannot have confidence in the sustainability of the fiscal policies then you have no growth because you have no confidence,” he said. “The two things are complimentary.”
Germany to Reduce Deficit by 80 billion euros ($100 billion) over five years
Reuters reports Germany plans to cut new borrowing in savings drive
Germany plans to cut net new borrowing by some 80 billion euros ($100 billion) over five years, reducing supply of Europe’s benchmark debt and adding pressure on other euro zone members to tighten their own public finances.
The draft budget for 2011, which the cabinet plans to approve on Wednesday for ratification in parliament in November, will anchor a 34 billion euro reduction in new issuance over the next two years compared to earlier plans.
The federal government also aims to cut spending to 307.4 billion euros next year, a 3.8-percent decrease from plans made before a "debt brake" law was passed in 2009, details of the draft made available to Reuters on Sunday showed.
The budget is the latest chapter in Germany’s drive to consolidate public finances, a move that has drawn criticism from some other large countries that say it is too early to withdraw support enacted during the financial crisis.
Unions have promised stiff resistance and industrial action looks likely — a threat that could rise as cuts in social services deepen and health care costs rise as planned.
In addition, some politicians from within Merkel’s ruling coalition say the measures are
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Krugman Suffers Foot-In-Mouth Disease; Lessons on Price Stability
by ilene - June 24th, 2010 11:53 am
Krugman Suffers Foot-In-Mouth Disease; Lessons on Price Stability
Courtesy of Mish
Paul Krugman has been on a nonstop rant in favor of fiscal insanity in the past few weeks. Thankfully, Europe is listening and doing the opposite of what Krugman suggests.
Please consider the Wall Street Journal article Krugman Criticism Bolsters Weber in Germany
Princeton University Prof. Krugman caused a stir in Germany this week with a stinging critique of Bundesbank President Axel Weber, who is considered a frontrunner to succeed Jean-Claude Trichet as head of the European Central Bank when Trichet’s term expires in October 2011.
“If you are looking for someone who is aiming for zero inflation while unemployment is rising to 13%, then Weber is definitely the right guy,” Krugman said in an interview published in German with the business daily Handelsblatt.
“Weber is concerned about inflation, when there is no inflation. I would rather see an ECB President who gives more weight to deflation risks and the risk of a protracted stagnation,” Krugman said, adding that he doesn’t know Weber personally. Before joining the Bundesbank Weber was an economics professor in Germany and fairly well known in U.S. academic circles.
Krugman didn’t stop with Weber. He has taken on Germany’s plans to rein in its budget deficit, which is already considerably smaller than the U.S.’s as a share of GDP. “German austerity will worsen the crisis in the euro area, making it that much harder for Spain and other troubled economies to recover,” he wrote in his New York Times column.
Wolfgang Franz, who heads the German government’s economic advisory panel known as the Wise Men, tore into Krugman — and the US — in an op-ed in the German business daily Wednesday, titled “How about some facts, Mr. Krugman?”
“Where did the financial crisis begin? Which central bank conducted monetary policy that was too loose? Which country went down the wrong path of social policy by encouraging low income households to take on mortgage loans that they can never pay back? Who in the year 2000 weakened regulations limiting investment bank leverage ratios, let Lehman Brothers collapse in 2008 and thereby tipped world financial markets into chaos?” he wrote.
So if Krugman really wants to keep Weber from the ECB presidency, or at least cool some of his support in Germany, he might want to consider damning the Bundesbank
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DB: Greece is Bear Stearns, (fill in the blank) is Goldman Sachs
by ilene - June 22nd, 2010 3:18 am
DB: Greece is Bear Stearns, (fill in the blank) is Goldman Sachs
Courtesy of Andy Kessler
Even a win in the World Cup soccer tournament won’t save Europe. Nor will the G-20 meeting in Toronto this week. With Grecian urns, Irish eyes, Spanish flies, and Portuguese waterdogs all up to their eyeballs in debt, it’s only a matter of time before the whole venture implodes. Even after an almost trillion dollar bailout across Europe, Moody’s Investors Service last week downgraded Greece’s debt from A3 to Ba1--junk bonds.
We’ve seen this movie before—in 2008, when it was banks, not countries, reeling out of economic control. Once you recognize this pattern—desperate nations behaving just as the desperate banks did—the next 12 months of news will all make sense. Here is a handy guide.
Greece is clearly Bear Stearns. They’ve taken on too much debt, used derivatives created by Goldman Sachs to put off payment well into the future, and aren’t generating enough tax revenue to pay for their bloated expenses. The cost of Greece’s debt financing is skyrocketing, now 8 percent higher than the benchmark German bund. Either Athens defaults, causing more firebombs to be tossed and even larger riots in the streets, or the European Union arranges a takeover by deep-pocketed Germany.
Germany is the JP Morgan of this story. It will provide a lowball 200 billion Euros to Greece and then end up paying 1000 billion, reminiscent of JP Morgan offering $2 and then paying $10 for Bear Stearns. Now wait a second, I can hear you complain, countries can’t merge like companies.
Of course they can, it happens all the time—though usually when tanks roll. Ask Poland. Or Hungary. In this case, Germany won’t legally own Greece, but in reality, it will absolutely be in charge of fixing Greece’s mess. My sense is the Germans will be quite good at tax collection and not so strong at dismantling the welfare state. But Greek debt will be resolved and maybe the Euro will even rally.
But it won’t be over quite yet. That’s because sadly, Spain is Lehman Brothers. With 22 percent unemployment, and loaded with debt and deteriorating real estate prices, who is going to save it? Tongues will wag that defaulting on debts will teach a lesson to countries that live beyond their means. As a huge exporter,…
Merkel Tells Obama To Stuff It
by ilene - June 20th, 2010 4:56 pm
Merkel Tells Obama To Stuff It
Courtesy of Karl Denninger at The Market Ticker
This ought to get interesting….
Referring to the G20 summit in Canada next weekend, Merkel said in a videotaped message that "we are going to discuss when to quit the phase of short-term measures and go on to lasting budget consolidation."
Such a move was "urgently necessary, in the view of the Europeans and particularly of Germany," she said.
Obama urged the world’s leading economies Friday to avoid scaling back government spending too quickly or risk derailing the global recovery.
Heh heh heh….
Oh Mr. President? Yes, you Mr. Obama.
Chancellor Merkel appears to have figured out the meaning of this graph:
That is, more than two years of attempting to force credit creation to expand, thereby once-again restarting the Ponzi Scheme, has failed.
All further exercises in this vein will do is make the damage worse, exactly as I said it would in 2007 initially.
"Our highest priority in Toronto must be to safeguard and strengthen the recovery," Obama said in the letter dated June 16, but released Friday amid concerns about the pace of the global recovery.
There is no recovery Mr. President. There has not been and will not be until the speculators and banksters that have taken on excessive debt, either as creditors or debtors, are forced to disgorge same.
The below chart lays forth the wasteland you are creating:
You (and you predecessor, George Bush) have replaced 11% of final demand (in the form of GDP) with deficit spending. You have no credible plan to stop doing it as final private demand has failed to rebound, just as it did not in the 2003-2007 years and thus George Bush was unable to withdraw his bogus "stimulus" measures.
You are now trapped in an exponentially-deteriorating credit picture Mr. President. The only question remaining is whether you and your idiot "advisors" will recognize this and act in time to prevent the destruction of the political system of The United States.
There is no means by which you can avoid the pain and adjustment that has to be taken. It is not possible, mathematically, to continue to increase the total systemic indebtedness, irrespective of the manipulations and games you attempt to pull on the body politic.
Angela Merkel and the rest of the EU have come to recognize that the…
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