International

See, I told you so.....

March 18 (Bloomberg) -- Greek Prime Minister George Papandreou set a one-week deadline for the European Union to craft a financial aid mechanism for Greece, challenging Germany to give up its doubts about a rescue package.

Papandreou said he may turn to the International Monetary Fund to overcome its debt crisis unless leaders agree to set up a lending facility at a summit March 25-26.

How about this?

Your nation made the mess, now clean it up!

“It’s an opportunity to make a decision next week at the summit,” Papandreou told reporters in Brussels today. “This is an opportunity we should not miss. When you have that instrument in place, that could be enough to tell the markets hands off, no speculation, let this country do what it’s doing.”

What's wrong with speculation when you give people reason to speculate?  More to the point, is it speculation if you get caught lying on your financials and taking intentional actions designed to cover up your true debt position?

I'd call that an educated guess, and it's very different than "speculation."

Greece pinned its hopes on the Brussels summit as German officials voiced qualms about an EU-led rescue, potentially backtracking on a commitment hammered out by finance ministers just three days ago. Greek bonds and the euro fell.

There was no commitment.  There was an attempt to jawbone - that is, lie - by politicians who find it easy to lie.

The market, however, calls all bets. It always has and always will.  If Greece learned anything from our little market collapse in 2008 it should have been this - remember, Hank (I'm gonna roll the tanks!) Paulson tried this very same game - repeatedly.  It didn't work - not with Bear Stearns, not with Fannie, not with Freddie, and not with Lehman. 

It didn't take long for the market to decide that he was full of the dark side and press the bet, and as soon as that happened we found out that the "Bazooka" was really nothing more than a fancy form of bankruptcy. 

Oops.

If Greece doesn't like the consequences of getting caught cooking the books, one solution would be to stop doing that and come clean with the people - even if it results in your government being sacked.

The "reaction" in Greece to reality poking its head in the tent is instructive, and something that all developed nations that have decided to go down this sort of road with lying about fiscal and banking matters (cough-United States-cough-Britain-cough-Spain-cough-Germany-cough-Portugal-cough-take-your-pick) should pay attention to. 

I wonder if it has sunk into the consciousness of Obama and Geithner, along with Congress, that having "replaced" 10% of consumer final demand in the economy in a ridiculous (and doomed) attempt to prevent bad debt from being defaulted, not to mention the lies told about our actual fiscal situation (holding retirement "promises" off book anyone?), we (along with a bunch of other nations that have done the same) are headed down the same road that Greece is.

And surprise-surprise, it has nothing to do with the Euro - it is, once again, to bail out bad speculative bets made by banks:

"If the country is not stabilised, the next problem will be the banks," Ackermann in a speech to an academic audience on Wednesday, adding that German banks had "billions in the fire."

So once again we have banksters literally putting a gun to government heads and threatening them.

When does this stop?

It's not like Deutsche Bank (and the rest) didn't know Greece was cooking their books and holding debt off balance sheet!  They sold them the swaps to enable the deception!

These banksters knew damn well that the nation was in trouble long before there was any public notice of it. 

So why were they buying Greece's debt?  Why didn't they sell it?  Why are they stuck with it?

Is it because their intention was to shove a gun up the nose of the governments in the Euro Zone - just as our banks did here - and threaten to shoot unless they get bailed out?

Let's cut the crap.  These "institutions" are, in my opinion, a criminal enterprise.  It is my contention that they have engaged in knowing and willful frauds up and down the line, whether it be selling "swaps" that were intended to hide debt (that is, to fraudulently misrepresent an entity's finances), buying debt of nations they knew were in trouble and thus was risky (and now they want to be backstopped) or other forms of scamming as is alleged by the FHLB Seattle in their lawsuit against Deutsche Bank itself, among others.

These acts are common garden-variety swindles wrapped in fancy clothing.  People think there's something magical or complex about all this "financial engineering" that led to these losses.

There is not.

The simple fact of the matter is that getting someone to overpay for a thing by lying to them is no different than the shifty used-car salesman who turns back an odometer so you think a car has fewer miles on it than it really has.

We all recognize that as an act of fraud and we arrest those engaged in it.

These actions are no different in type but have stolen from we, the people of this planet literal trillions of dollars, yet it seems to be impossible to find one law-enforcement agency that will press criminal charges against any of these clowns!  At the same time if you steal $50 from a convenience store or turn back that odometer you are sentenced to hard time in prison.

This has gone far beyond the point where we, the citizens of this world - not just in The United States - must demand and put a stop to these heists by whatever means are necessary.

If our governments will not bring charges and lock up the executives in these firms then we must shut these institutions down by refusing not only to do business with them directly but by going one step further - we must refuse to do business with any firm or person that is employed by them or uses them for their financial services.

I thus call for this boycott of all banking firms that issue threats of this sort here and now, both directly of the firms and of their customers, to continue until and unless criminal indictments issue for this outrageous and repetitive conduct.

What these people have done is in fact no different than this:

The easiest way to rob a bank is to own one.....

IT IS TIME FOR WE THE PEOPLE TO PUT A STOP TO THIS CRAP!

Weren't we told Greece was "bailed out", "backstopped", or whatever you care to use?  That's all I've heard all week on ToutTV.

So what's this about?

Greece could seek IMF funding to help overcome its debt crisis if its EU partners do not provide "clear support" next week, a government spokesman said Wednesday.

George Petalotis said the March 25-26 European Union summit on how to deal with a potential bailout for Greece will be crucial, as the country struggles to reduce a bloated budget deficit and public debt.

"I believe the summit is when it will become evident whether the European partners want to support a country ... or whether we have to resort to some other solution," Petalotis said.

Doesn't sound "done" to me!

Oh wait - what's this?

“The idea that Greece can go from a 12 percent deficit now to a 3 percent deficit two years from now seems fantasy,” Feldstein, an adviser to U.S. presidents since Ronald Reagan, said in a March 13 interview in Geneva. “The alternatives are to default in some way or to leave, or both.”

Of course it's a fantasy.  So tell me this - why are the markets going up in the belief that the Greece problem is in fact fixed, when:

• Mathematically it is basically impossible to do so given the constraints that exist AND
  
  
• Germany's Constitution prohibits a bailout using German public funds in any way, shape or form (including a backstop of their banks if they "help privately.")

So now we're back to the old "Bazooka" argument, eh? 

“We would like to have a loaded gun on the table and hope never to have to use it,” Papaconstantinou told reporters today in Brussels. “It’s clear that the terms of refinancing the Greek debt improve as the markets and European partners see the determination of the Greek government.”

Ah, the old Paulson argument. 

Remember the tape folks and Paulson's "Bazooka":

Remember folks, the "Paulson Bazooka" was good for one hundred S&P 500 handles in less than a month (hmmmm...... isn't that what we've seen here?) but in the end it failed, because as is always the case the market called the bluff.

But this time it's different, so I think you should believe our fine friends over in Greece, even though Germany says they won't violate their Constitution (Merkel has repeated this enough times now that she's got to be blue in the face) and the news reports that trickle out say that indeed, Greece has no deal - not in the bag, not on the table, just plain not.

Wen "cats in the kettle" Jaibao spouted:

“I don’t think the renminbi is undervalued,” Wen said yesterday at a press conference in Beijing marking the end of China’s annual parliamentary meetings, using another term for the yuan. “We oppose countries pointing fingers at each other and even forcing a country to appreciate its currency.”

Oh really?

It's time that we stop the the BS here with regard to China.

The entire premise of so-called "Free Trade" with the Chinese was predicated on the belief that if we opened our borders to their products on a "no tariff" basis that we would, over time, change their political system.  That is, we would import cheap Chinese plastic junk and export democracy.  More or less.

Well, we got all the cheap DVD players but they didn't get any democracy.  Quite to the contrary.  There have been no meaningful improvements in areas of environmental protection, workers rights and wages or political freedom.  Indeed, the recent dust-up with Google just underlines the reality in China: Their government is a band of murderous brigands and thugs.

Disagree with them inside their nation, refuse to censor The Internet, for example, so that people can't read about Falun Gong and China will be happy to arrest the executives of your firm inside the nation and provide this as "corrective influence" to your head:

Oh, they send the 50 cent bill for it to your family too.  Isn't that special?

At least in this country they don't shoot people for talking about the evil-doing that both private parties and government engage in.  If they did, well, I'd be long-dead.

Second, China hasn't changed its spots a bit.  It has pursued a mercantilist policy for over two decades while at the same time stealing anything that isn't nailed down (and some things that are), including such wonders as our technological prowess in nuclear warhead design.  Argue the defensive merits of nukes in a silo all you want - when they're flying, they're anything but defensive.

In short our policies have been an abject failure.  We've destroyed consumer product manufacturing in The United States, we've shuffled a huge amount of wealth over to China due to their manipulated currency, we've trashed our real standard of living and replaced production with debt and the supposed benefits of an open and free market, along with a democratic political system in China have failed to materialize.

It's time to stop the stupid.  It's time to force those firms who want to offshore production to return the so-called "savings" to the United States as something more than executive bonuses.  And it's time to treat those who are a communist dictatorship as exactly that.

The simplest solution is to hit China with a 25% tariff on everything - literally everything - and close the market entirely to anything coming over here that contains stolen intellectual property.

China has done us one better with their "liquidity program."  Instead of allowing the economy to adjust and build internal demand, they have stoked a huge bubble in fixed assets.  This, coming on the back of what we just experienced in our property market, is one of the most-pernicious and outrageous series of acts I've seen out of a sovereign in a long time.  Couple that with questionable (at best) "official" statistics on China's economy and you've got the ingredients for real trouble.

There are often claims that we're "hostage" to China's holdings of Treasuries and other bonds.  Nonsense.  First, if China sells them they cut off their own nose.  Second, in an extreme circumstance we could easily institute capital controls that would effectively neuter their influence entirely - and they know it.  Third, it's time for us to live within our means anyway, so if China was to provoke that, where's the foul?  There's a solid argument to made for such an event being positive for America, not negative.  And finally, China needs us more than we need them - should we throw up a complete barrier to their cheap junk, along with the Euro zone who is likewise tired of the manipulation their mercantilist game would collapse on their heads.

It's time to call the curtain down on the cock-and-bull story coming from China.  We have not achieved our goals with "engagement" and "trade", and won't.  Our nation has been intentionally and severely damaged by these thugs who have adopted a mercantilist "raid 'em and loot 'em" approach to commerce, then hidden behind their communist ability to manipulate and even kill those who disagree with them.  If we don't deal with this now, we will wind up having to deal with it militarily, and it will be even less-pleasant than telling them to stick it with the slave-labor-produced, water-fouling and air-blackening $30 DVD players.

In short, it's time for us to grow a pair of balls and tell the Chinese to put it where the sun doesn't shine, neutering their interference and intentional distortion of trade balance and currency valuation.

We didn't get what we bargained for, so it's time for us to change the bargain.

The idiocy coming from the EU reeks of desperation:

“For Greece, the problem is completely over,” said Prodi, who was also Italian prime minister, in an interview in Shanghai today. “I don’t see any other case now in Europe. I don’t think there is any reason to think the euro system will collapse or will suffer greatly because of Greece.”

Continuing...

Prodi, 70, who headed the European Commission from 1999 to 2004, will teach at the China Europe International Business School in Shanghai. He said budget deficits are “a general problem for almost all the wealthy countries.”

No, really?  You mean having the government be responsible for half of GDP is a problem, when everything that they actually obtain has to come, in the end, by taxing the citizens inside their borders?

The euro has weakened 5.8 percent against the dollar this year as concern Greece will struggle to finance its deficit eroded confidence in the European currency.

“Europe is more than happy,” said Prodi. “For the benefit of the European economy, the decrease of the value has been absolutely positive.”

Bah. 

As in the United States, European nations more-or-less index their entitlement programs to inflation.  And like the United States, they hold most of the costs of these programs off their balance sheet, where that indexing is not visible (directly) to markets, never mind that those are promises for tomorrow, not today.

It is here that the theories of all those so-called "economists" who claim that we "benefit" through currency devaluation by "inflating the debt away" have their thesis run head-on into a brick wall.

In the United States, for example, our "forward liability" for those entitlement programs is somewhere between $60-100 trillion, depending on who you ask.  The on-balance sheet public float of the debt is about $8 trillion.

So let's assume we try to double that over the remainder of the decade (as the economists believe we both must and will) the only way to make that able to be carried is to devalue the currency through money-printing - "monetization", if you will.

But doing so, because of the indexing in these entitlement programs, causes their forward costs to explode.

Let's take an example and run the "forwards" on it.  We will assume that the "current" cost of a set of entitlement programs is $5 trillion, but it is to be delivered in 30 years.  If the forward implied inflation rate is 2%, as Bernanke claims is the "goal" (1-2% annually) then the 30-year forward implied cost of this program can be easily calculated since it is simply the compound growth rate over that time. In this case, that program has a "forward" (or "as delivered in 30 years") cost of $9.06 trillion.

But now let's assume we decide to "inflate away" the debt as "suggested" by the IMF (and on which point, I might add, Bernanke was grilled in his last testimony before Congress) by raising the inflation target to 5%.  That's not all that bad, right?  It's only three more percent!

Well, except for one small problem - that inflation rate drives the delivered cost of this entitlement from $9.06 trillion to $21.6 trillion, well more than a doubling, and what's worse is that this additional cost totally destroys any "savings" in debt payment ability that would otherwise be generated by attempting to inflate away the "on balance sheet" debt amount.

In the case of the United States, of course, the forward cost is already $100 trillion.  Attempting to "inflate away" our $8 trillion (today) of public float, or the $17 trillion that the CBO says we'll have by 2020, would cause that $100 trillion to explode upward.  Indeed, simply trying to get "a bit of relief" with a 5% inflation policy would more than double it, and an actual attempt to inflate it off over the course of ten years (which would require approximately a 7% inflation rate) would cause that $100 trillion forward liability to balloon to more than $300 trillion.

With that it should be obvious that any attempt to play "inflate it away" will simply never work.  It will and must cause the immediate detonation of all forward-promised social entitlement programs, and when you have placed half or more of the population at the time in a position of effective dependence on those programs attempting such a foolhardy path of action is guaranteed to lead to the total destitution of half or more of the populace.

Since it is an essential certainty that a population so-impoverished will inexorably rise in violent revolution there is a clear argument that can be made that any such suggestion or policy, whether made publicly or "in the dark of the House Cloak Room", is in fact a violation of US Code, Title 18 Chapter 115 Sec2385, which provides in part:

Whoever knowingly or willfully advocates, abets, advises, or teaches the duty, necessity, desirability, or propriety of overthrowing or destroying the government of the United States or the government of any State, Territory, District or Possession thereof, or the government of any political subdivision therein, by force or violence, or by the assassination of any officer of any such government; or

 

Whoever, with intent to cause the overthrow or destruction of any such government, prints, publishes, edits, issues, circulates, sells, distributes, or publicly displays any written or printed matter advocating, advising, or teaching the duty, necessity, desirability, or propriety of overthrowing or destroying any government in the United States by force or violence, or attempts to do so; or

 

Whoever organizes or helps or attempts to organize any society, group, or assembly of persons who teach, advocate, or encourage the overthrow or destruction of any such government by force or violence; or becomes or is a member of, or affiliates with, any such society, group, or assembly of persons, knowing the purposes thereof—

 

Shall be fined under this title or imprisoned not more than twenty years, or both, and shall be ineligible for employment by the United States or any department or agency thereof, for the five years next following his conviction.