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Sorry, I disagree with the impact of a "NO" vote.  There is no reason for Greece to leave the EU; indeed, if they do so without the reform necessary -- that is, no more deficit spending -- then they accomplish nothing.  Further, if they do enact those reforms then there is no reason to leave the Euro and the benefits from tariffs -- which I would expect the EU to immediately hammer them with if they DO leave -- would be substantial!

But yes..... the Greeks should vote NO!

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Folks, go back and read this again:

Note that when you start spending in deficit there's a little "belly" between GDP and debt which appears to hold up for the first 20 or so years.  This is why people do it; it feels like you're getting ahead.

But you're not -- just a few years later debt is accelerating away from GDP and it's not that long before it's more than three times your economic output.  Long before it gets there you wind up with negative "growth" because the expense of financing that debt exceeds your economic surplus and you inevitably go bankrupt.

This is math, not politics and it happens every single time.

The IMF just came out and said that Greece has a €50 billion cash deficit from October through 2018.

This means that even if they just try to run on their revenue they're spending more than they're taking in and need to "finance" their operating costs.

This cannot work.

It cannot work there, it cannot work here, it cannot work anywhere.  The only means by which Greece can return to reasonable fiscal health is to default (that is, erase) a large part of the debt they have.  


There is no -- zero -- justification for "markets" to be anywhere near where they are given that the entire operational structure of virtually all western governments is reliant on continued borrowing of more and more money.  This is not confined to Greece!

The act of ever borrowing more money on an indefinite basis inevitably must eventually collapse all of the parties that do this.


Why would anyone try to "participate" in a scheme that is guaranteed to fail and blow up in your face?  Do you really think you'll be better and faster than everyone else and will get out in time while everyone else will not?


If the governments involved stop that then what is a realistic value for the markets without all of this phony-baloney nonsense?

And if the governments do not then I'm back to my first question: Do you really think you're smarter than everyone else?

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Well well what do we have here?

Yanis Varoufakis said Greece won’t “extend and pretend” that it can pay its debts, vowing to quit as finance minister if voters don’t support him in Sunday’s referendum.

With banks shuttered and Greece’s economy hobbled by capital controls, Varoufakis said in a Bloomberg Television interview in Athens that he would “rather cut my arm off” than sign a deal that fails to restructure Greece’s debt. The 54-year-old economics professor said he “will not” continue in his post if Greece endorses austerity in the plebiscite.

He's right.

There is no way forward for any of these nations, Greece included, that is both sustainable and does not remove much of the debt allegedly taken on.

The debt in question was contracted by fraud and force on both sides; it is void.  Further, it's mathematically impossible to pay it on the original terms or even on any sort of reasonable renegotiated terms.

But far more important than the debt itself is that the structural changes in the government necessary to prevent accumulating more debt in the future, including a hard bar on refusing to spend more than it can tax, has to take place.  This Varoufakis has not said -- but he must.

This weekend is going to be interesting, but unless reality comes to the table the premise that there will be no more "extending and pretending" (which is just a polite way of saying lying) is just another in a long line of false claims.

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2015-07-02 08:01 by Karl Denninger
in Employment , 155 references

From the Bureau of Lies and Scams:

Total nonfarm payroll employment increased by 223,000 in June, and the unemployment rate declined to 5.3 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in professional and business services, health care, retail trade, financial activities, and in transportation and warehousing.


First, let me dispose of the horsecrap that is being spewed by Zandi and others on CNBS (all the BS, all the time) right now.  They're claiming we need about 100,000 jobs a month to "keep up" with labor force expansion.  This is a bald lie; I present the population-adjusted employment delta every month.  Over the last 12 months the economy added 2.849 million working-age people to it.

Steve LIESman's (and the rest of the CNBS crew) claim is that we need "100,000" jobs a month, or 1.2 million a year, to absorb all the new entrants of working age.  He's lying and the numbers published every single month prove it -- not only is he lying he's radically lying, in that the real number over the last 12 months is 2.849 million.

This sort of outright bogus "reporting" is exactly as outrageous as was Brian Williams' "remembered" shelling that never happened (among others) and yet these jackclowns remain on the air.

Now, on to the data:

That's the actual population-corrected job addition number; it's negative this month by 308,000.  That is, over the last 12 months the economy added 308,000 more working-age people than it did jobs.  That's a fact, period, end of discussion.

The 12 month run-rate is down a bit; it still remains over 2 million but that's insufficient to make up for the addition of working-age people to the employment pool.

The participation rate ticked up one tenth while the "headline" rate ticked down.  That the participation rate is increasing a bit is good, but the fact that it remains a full three to four points under where it was during the 2000 decade, and another two points below the 1990s, is horrifyingly bad when it comes to government spending and, ultimately consumer spending sustainability.

There are a couple of troubling numbers in the internals of this report.  One of them is that women had their unemployment rate tick up -- especially young women.  The second is that both genders among teens (16-19) went from 17.8% -> 21.4% unemployment in one month, and this is the summer when employment for that age cohort tends to be at its best!  The reason appears to be a huge jump in their reported numbers, while employment itself rose as it more-or-less usually does for the month (in other words a hell of a lot of kids turned 16 in the last month.)  I'll ignore this for right now as it is wildly out of character with expectations and can be explained, but if it continues it does not portend good things.

One trend that is continuing and troubles me is that the jobs are, on balance, coming in low-skill areas.  The unemployment ratio for college graduates is stable but that among those without even a high school diploma is falling, as it is for those with just high school educations.  While those with college educations have a much better employment status to begin with if the economy is only adding low-skill, low-wage jobs then it's not doing a damn thing in terms of advancing household earnings capacity and in fact may be going the other way.

Incidentally, self-employed, unincorporated workers (small proprietors) decreased last month by 427,000.  That is a very, very bad number considering that entrepreneurship is the economic engine that powers growth.  If those people wound up pulling coffees at Starbucks (and it appears they did) it's a materially-large step down in terms of forward economic expectations -- if you're looking at the data with any sort of honest analysis.

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Yes, Puerto Rico has a ~70% debt-to-gdp ratio.

That's hideous, and they can't service it over the long term.  The reason is found in math.

The United States has $18.2 trillion of debt and a GDP of roughly the same amount.  In other words, it is higher than Puerto Rico's.

This is why the US is cheating by spending in deficit.  But that can't work either as this spreadsheet shows.

The bottom chart is on the same scale in years as the other two I've recently posted.  The top is from roughly 1982 to today; I deliberately based both from right around that time (plus or minus a few months.)

Note that when you start spending in deficit there's a little "belly" between GDP and debt which appears to hold up for the first 20 or so years.  This is why people do it; it feels like you're getting ahead.

But you're not -- just a few years later debt is accelerating away from GDP and it's not that long before it's more than three times your economic output.  Long before it gets there you wind up with negative "growth" because the expense of financing that debt exceeds your economic surplus and you inevitably go bankrupt.

This is math, not politics and it happens every single time.

Incidentally that debt and GDP growth rate was not selected in an arbitrary fashion -- it is approximately the United States' rate of change from 1982 forward, and now we're getting much worse GDP growth than the 5% shown -- which will make the acceleration much worse.

 by tickerguy

There is only one question -- when would you prefer to deal with this -- when the chart is at the top point (which is roughly where we are now or are you going to sit on your butt until the below happens -- and it inevitably will as it is the same chart just extended out in time.

Further, if you actually believe GDP will be approximately $500 billion as this chart shows as an extrapolation I have a bridge to sell you.

Now let's put some other facts on this -- that historical GDP growth number in my spreadsheet, which was around 5% until the "Great Recession", appears to have been permanently reduced to about half that.

What reduced it?  The addition of about $9 trillion to our Federal Debt since 2007, which was immediately dilutive to your purchasing power, and what's worse all debt has a carrying cost and thus will depress GDP permanently thereafter.  This was my expectation and it is being born out as fact and has been accepted by policymakers.

You cannot argue with this chart.  Whenever public Federal Debt increases faster than GDP it exerts a downward slope on GDP growth.  When it is less than GDP advancement then the slope is positive.  Since the 2000 recession Federal debt growth has not been materially under GDP growth and the additions since the 2007 recession have been utterly outrageous.

Next question: How much more debt has to be added to drive nominal GDP to zero, given this experience, and how long will it take before we no longer can generate economic growth at all?

Answer: About another $9 trillion, and at today's accumulation rates of approximately 7% a year we're dead in less than seven years (since we only have 2.5-3% GDP now, not the historical since 1990ish 5%.)

That's the math.  Now here's the problem: Markets never let you to get to the mathematical endpoint because people figure out what's coming and act accordingly before it does.

Incidentally these projections of debt growth are already out there. The CBO, which amusingly claims a $483 billion "deficit" for last fiscal year (despite the fact that the government borrowed roughly double that amount!) accumulates more than that $9 trillion by 2025.  Since they are usually off by about half this means they're actually projecting that we hit the zero-GDP wall in about five years, not seven, and this presumes no recessions in the interim, an exceedingly unlikely outcome.

At the point recognition of permanent GDP impairment occurs the markets will collapse because "growth" of earnings is no longer possible.  At the same time borrowing costs for the Federal and State governments will skyrocket because without GDP growth increasing tax receipts to pay for said borrowing is also impossible without directly impoverishing the people, and simply emitting more debt results in a larger negative GDP print!

We either stop this -- that is, deficit spending -- or it will destroy us, exactly as it has destroyed Greece and threatens to destroy Puerto Rico.  The EU and ECB people, along with Krugman, Bernanke, all of Congress and our Presidents, both past and present are liars; they all know this and deserve to be in prison for the rest of their lives, as do any in the so-called "media" and our political sphere who keep lying about these mathematical facts.

You cannot bargain with math.

If YOU are not willing to do whatever must be done to stop this in the current time frame then you are a monster, you are "invested" in fraud, you are consigning your children to privation and you are destroying not only your future (unless you're older than 75 you're nearly-certain to get what's coming to us all) but theirs as well.


Not someone else, YOU.

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