STOCK MARKET WATCH -- Monday, 6 July 2015

[Tansy_Gold]

[font size=3]STOCK MARKET WATCH, Monday, 6 July 2015[font color=black][/font]

SMW for 2 July 2015

AT THE CLOSING BELL ON 2 July 2015
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Dow Jones 17,730.11 -27.80 (-0.16%)
S&P 500 2,076.78 -0.64 (-0.03%)
Nasdaq 5,009.21 -3.91 (-0.08%)


[font color=green]10 Year 2.38% -0.01 (-0.42%)
[font color=black]30 Year 3.19% 0.00 (0.00%) [font color=black]


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[font color=red]Partial List of Financial Sector Officials Convicted since 1/20/09 [/font][font color=red]
2/2/12 David Higgs and Salmaan Siddiqui, Credit Suisse, plead guilty to conspiracy involving valuation of MBS
3/6/12 Allen Stanford, former Caribbean billionaire and general schmuck, convicted on 13 of 14 counts in $2.2B Ponzi scheme, faces 20+ years in prison
6/4/12 Matthew Kluger, lawyer, sentenced to 12 years in prison, along with co-conspirator stock trader Garrett Bauer (9 years) and co-conspirator Kenneth Robinson (not yet sentenced) for 17 year insider trading scheme.
6/14/12 Allen Stanford sentenced to 110 years without parole.
6/15/12 Rajat Gupta, former Goldman Sachs director, found guilty of insider trading. Could face a decade in prison when sentenced later this year.
6/22/12 Timothy S. Durham, 49, former CEO of Fair Financial Company, convicted of one count conspiracy to commit wire and securities fraud, 10 counts of wire fraud, and one count of securities fraud.
6/22/12 James F. Cochran, 56, former chairman of the board of Fair, convicted of one count of conspiracy to commit wire and securities fraud, one count of securities fraud, and six counts of wire fraud.
6/22/12 Rick D. Snow, 48, former CFO of Fair, convicted of one count of conspiracy to commit wire and securities fraud, one count of securities fraud, and three counts of wire fraud.
7/13/12 Russell Wassendorf Sr., CEO of collapsed brokerage firm Peregrine Financial Group Inc. arrested and charged with lying to regulators after admitting to authorities he embezzled "millions of dollars" and forged bank statements for "nearly twenty years."
8/22/12 Doug Whitman, Whitman Capital LLC hedge fund founder, convicted of insider trading following a trial in which he spent more than two days on the stand telling jurors he was innocent
10/26/12 UPDATE: Former Goldman Sachs director Rajat Gupta sentenced to two years in federal prison. He will, of course, appeal. . .
11/20/12 Hedge fund manager Matthew Martoma charged with insider trading at SAC Capital Advisors, and prosecutors are looking at Martoma's boss, Steven Cohen, for possible involvement.
02/14/13 Gilbert Lopez, former chief accounting officer of Stanford Financial Group, and former controller Mark Kuhrt sentenced to 20 yrs in prison for their roles in Allen Sanford's $7.2 billion Ponzi scheme.
03/29/13 Michael Sternberg, portfolio mgr at SAC Capital, arrested in NYC, charged with conspiracy and securities fraud. Pled not guilty and freed on $3m bail.
04/04/13 Matthew Marshall Taylor,fmr Goldman Sachs trader arrested, charged by CFTC w/defrauding his employer on $8BN futures bet "by intentionally concealing the true huge size, as well as the risk and potential profits or losses associated."
04/04/13 Matthew Taylor admits guilt, makes plea bargain. Sentencing set for 26 June; faces up to 20 years in prison but will likely only see 3-4 years. Says, "I am truly sorry."
04/11/13 Ex-KPMG LLP partner Scott London charged by federal prosecutors w/passing inside tips to a friend in exchange for cash, jewelry, and concert tickets; expected to plead guilty in May.
08/01/13 Fabrice Tourré convicted on six counts of security fraud, including "aiding and abetting" his former employer, Goldman Sachs
08/14/13 Javier Martin-Artajo and Julien Grout charged with wire fraud, falsifying records, and conspiracy in connection with JP Morgan's "London Whale" trade.
08/19/13 Phillip A. Falcone, manager of hedge fund Harbinger Capital Partners, agrees to admit to "wrongdoing" in market manipulation. Will banned from securities industry for 5 years and pay $18MM in disgorgement and fines.
09/16/13 Javier Martin-Artajo and Julien Grout officially indicted on charges associated with "London Whale" trade.
02/06/14 Matthew Martoma convicted of insider trading while at hedge fund SAC (Stephen A. Cohen) Capital Advisors. Expected sentence 7-10 years.
03/24/14 Annette Bongiorno, Bernard Madoff's secretary; Daniel Bonventre, director of operations for investments; JoAnn Crupi, an account manager; and Jerome O'Hara and George Perez, both computer programmers convicted of conspiracy to defraud clients, securities fraud, and falsifying the books and records.
05/19/14 Credit Suisse, which has an investment bank branch in NYC, agrees to plead guilty and pay appx. $2.6 billion penalties for helping wealthy Americans hide wealth and avoid taxes.
09/08/14 Matthew Martoma, convicted SAC trader, sentenced to 9 years in prison plus forfeiture of $9.3 million, including home and bank accounts







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[font size=3][font color=red]This thread contains opinions and observations. Individuals may post their experiences, inferences and opinions on this thread. However, it should not be construed as advice. It is unethical (and probably illegal) for financial recommendations to be given here.[/font][/font][/font color=red][font color=black]

[Hotler]

1. Let us revisit some things that make you go hhmmmmmmmmm!

Let's revisit some thing that will remind us just how corrupt how our government is and how sick members of the PTB are. This was posted in Jonestown and I replied to it.
http://www.democraticunderground.com/10026940913#post2

Please have a read here.
http://www.tomflocco.com/fs/PhotographerTied.htm

WASHINGTON—March 13, 2005—TomFlocco.com—Photographer Russell E. "Rusty" Nelson was recently arrested two days after journalist Hunter Thompson reportedly committed suicide four weeks ago on February 10, according to two phone interviews with attorney John DeCamp last week.

Nelson was allegedly employed by a former Republican Party activist to take pictures of current or retired U.S. House-Senate members and other prominent government officials engaging in sexual criminality by receiving or committing sodomy and other sex acts on children during the Reagan-Bush 41 administrations.

Hunter Thompson’s death and the news blackout of Rusty Nelson’s simultaneous arrest raise questions that someone may be attempting to limit Nelson’s freedom or threaten him, since according to testimony, both men had allegedly witnessed homosexual prostitution and pedophile criminal acts in a suppressed but far-reaching child sex-ring probe closely linked to Senate and House members--but also former President George H. W. Bush. [In U.S. District Court testimony, Rusty Nelson told Judge Warren Urbom he took 20,000 to 30,000 pictures, 2-5-1999, p.52]

[libdem4life]

26. I bought and read the Franklin Scandal book...it was chilling.

\

[Demeter]

2. Are Plunging Petrodollar Revenues Behind the Fed’s Projected Rate Hikes? By Mike Whitney

http://www.counterpunch.org/2015/01/20/are-plunging-petrodollar-revenues-behind-the-feds-projected-rate-hikes/

Why is the Fed threatening to raise interest rates when the economy is still in the doldrums? Is it because they want to avoid further asset-price inflation, prevent the economy from overheating, or is it something else altogether? Take a look at the chart below and you’ll see why the Fed might want to raise rates prematurely. It all has to do with the sharp decline in petrodollars that are no longer recycling into US financial assets. This is from Reuters:


Petrodollar Exports
Source: Reuters

“Energy-exporting countries are set to pull their ‘petrodollars’ out of world markets this year for the first time in almost two decades, according to a study by BNP Paribas. Driven by this year’s drop in oil prices, the shift is likely to cause global market liquidity to fall, the study showed…

This decline follows years of windfalls for oil exporters such as Russia, Angola, Saudi Arabia and Nigeria. Much of that money found its way into financial markets, helping to boost asset prices and keep the cost of borrowing down, through so-called petrodollar recycling.

This year, however, the oil producers will effectively import capital amounting to $7.6 billion. By comparison, they exported $60 billion in 2013 and $248 billion in 2012, according to the following graphic based on BNP Paribas calculations:

‘At its peak, about $500 billion a year was being recycled back into financial markets. This will be the first year in a long time that energy exporters will be sucking capital out,’ said David Spegel, global head of emerging market sovereign and corporate Research at BNP.

In other words, oil exporters are now pulling liquidity out of financial markets rather than putting money in. That could result in higher borrowing costs for governments, companies, and ultimately, consumers as money becomes scarcer.” (Petrodollars leave world markets for first time in 18 years – BNP, Reuters)

Can you see what’s going on?

Now that petrodollar funding has dried up, the Fed needs to find an alternate source of capital to keep the markets bubbly and to shore up the greenback. That’s why the Fed has been talking up the dollar (“jawboning”) and promising to raise rates even though the economy is still pushing up daisies. According to the Fed’s favorite mouthpiece, Jon Hilsenrath:

“Federal Reserve officials are on track to start raising short-term interest rates later this year, even though long-term rates are going in the other direction amid new investor worries about weak global growth, falling oil prices and slowing consumer price inflation…

Many Fed officials have signaled they expect to start lifting their benchmark short-term rate from near zero around the middle of the year. Recent developments in the economy and markets have caused some trepidation among Fed officials and, if sustained, could cause them to delay acting. However several have indicated recently they still expect to move this year and are withholding judgment on delay.” (Fed Officials on Track to Raise Short-Term Rates Later in the Year, Jon Hilsenrath, Wall Street Journal)

And we’re hearing the same from Reuters:

“The Federal Reserve is still on track for a potential mid-year interest-rate increase, a top Fed official said on Friday, citing strong U.S. economic momentum and a falling unemployment rate.”

Notice the sudden change in tone from dovish to hawkish? Expect that to intensify in the months ahead as the major media tries to spin the data in a way that serves the Fed’s broader objectives. Like this article in Bloomberg titled, “Yellen Signals She Won’t Babysit Markets in Turmoil”:

“Janet Yellen is leaving the Greenspan ‘put' behind as she charts the first interest-rate increase since 2006 amid growing financial-market volatility.

The Federal Reserve chair has signaled she wants to place the economic outlook at the center of policy making, while looking past short-term market fluctuations. To succeed, she must wean investors from the notion, which gained currency under predecessor Alan Greenspan, that the Fed will bail them out if their bets go bad — just as a put option protects against a drop in stock prices.

“The succession of Fed puts over the years has led to a wide range of distortions in financial markets,” said Lawrence Goodman, president of the Center for Financial Stability, a monetary research group in New York. “There have been swollen asset values followed by sharp declines. This is a very good time for the Fed to move away.

“Let me be clear, there is no Fed equity market put,” William C. Dudley, president of the New York Fed, the central bank’s watchdog on financial markets, said in a Dec. 1 speech in New York.” (She’s No Greenspan: Yellen Signals She Won’t Babysit Markets in Turmoil)

“There’s no Fed equity put”?

That’s ridiculous. Then how does one explain the way the Fed has launched additional rounds of QE every time stocks have started to sputter? And how does one explain the Fed’s $4 trillion balance sheet all of which was spent on financial assets? Let’s face it, Central bank intervention has been the only game in town. It’s not just the main driver of stocks. It’s the only driver of stocks. Everyone knows that. Yellen is going to do everything in her power to keep stocks in the stratosphere just like her predecessors, Greenspan and Bernanke. The only thing that’s going to change is her approach.

As for the economy, well, just a glance of the headlines tells the whole story. Like this gem from CNBC last week:

“U.S. consumer prices recorded their biggest decline in six years in December and underlying inflation pressures were benign,…The Labor Department said on Friday its Consumer Price Index fell 0.4 percent last month, the largest drop since December 2008, after sliding 0.3 percent in November. In the 12 months through December, CPI increased 0.8 percent…

Darkening prospects for the global economy could also complicate matters for the U.S. central bank.

Inflation is running below the Fed’s 2 percent target, despite a strengthening labor market and overall economy.” (Consumer Price Index drops 0.4% in December, in line with estimates, CNBC)

Think about that for a minute: Consumer prices just logged their biggest drop since the freaking slump of 2008 and, yet, the Fed is still babbling about raising rates. Talk about lunacy. Not only has the Fed not reached its inflation target of 2%, but it’s abandoned the project altogether. Why? Why has the Fed suddenly stopped trying to boost inflation when the yields on benchmark 10-year US Treasuries have just plunged to record lows (1.70%) and are blinking red? In other words, the bond market is signaling slow growth and zero inflation for as far as the eye can see, but the Fed wants to raise rates and slash growth even more?? It doesn’t make any sense, unless of course, Yellen has something else up her sleeve. Which she does.

Now get a load of this shocker on retail sales in last week’s news. This is from Bloomberg:

“The optimism surrounding the outlook for U.S. consumers was taken down a notch as retail sales slumped in December by the most in almost a year, prompting some economists to lower spending and growth forecasts.
The 0.9 percent decline in purchases …. extended beyond any single group as receipts fell in nine of 13 major retail categories.
…
Treasury yields and stocks fell as a deepening commodities rout and the drop in sales spurred concern global growth is slowing…

…average hourly earnings falling 0.2 percent in December from the month before in the first drop since late 2012. That limits the amount of spending consumers can undertake without dipping into savings or racking up debt.” (U.S. Retail Sales Down Sharply, Likely Cuts to Growth Forecasts Ahead, Bloomberg)

Remember when everyone thought that low oil prices were going to save the economy? It hasn’t worked out that way though, has it? Nor will it. Falling oil prices usually indicate recession, crisis or deflation. Take your pick. They’re usually not a sign of green shoots, escape velocity, or sunny uplands. And did you catch that part about falling wages? How do you expand a consumer-dependent economy, when workers are seeing their wages shrivel every month? In case, you haven’t seen the abysmal stagnation of wages in graph-form, here’s a chart from American Progress:



Negative real wage growth means the amount of slack in the market is still considerable. So while stock prices have doubled or tripled in the last 6 years, wages have basically been flatlining. That’s a pretty crummy distribution system, don’t you think. Unless you’re in the 1 percent of course, then everything is just hunky dory. But at least Yellen can find some comfort in the fact that unemployment continues to improve. In fact, just two weeks ago unemployment dropped to an impressive 5.4%, the lowest since 2007. So if we forget about the fact that wages are stagnating, that management has nabbed all the productivity-gains for the last 40 years, and that another 451,000 workers dropped off the radar altogether in December, then everything looks pretty rosy. But, of course, it’s all just a bunch of baloney. Take a look at this from Zero Hedge:

“Another month, another attempt by the BLS to mask the collapse in the US labor force with a seasonally-adjusted surge in waiter, bartender and other low-paying jobs. Case in point… the labor participation rate just slid once more, dropping to 62.7%, or the lowest print since December 1977. This happened because the number of Americans not in the labor forced soared by 451,000 in December, far outpacing the 111,000 jobs added according to the Household Survey, and is the primary reason why the number of uenmployed Americans dropped by 383,000.

(Labor Participation Rate Drops To Fresh 38 Year Low; Record 92.9 Million Americans Not In Labor Force, Zero Hedge)

So, yeah, unemployment looks great until you pick through the data and see it’s all a big fraud. Unemployment is only falling because more and more people are throwing in the towel and giving up entirely. Finally, there’s the rapidly-expanding mess in the oil patch where the news on layoffs and cut backs gets worse by the day. This is from Wolf Richter at Naked Capitalism:

“Layoffs are cascading through the oil and gas sector. On Tuesday, the Dallas Fed projected that in Texas alone, 140,000 jobs could be eliminated. Halliburton said that it was axing an undisclosed number of people in Houston. Suncor Energy, Canada’s largest oil producer, will dump 1,000 workers in its tar-sands projects. Helmerich & Payne is idling rigs and cutting jobs. Smaller companies are slashing projects and jobs at an even faster pace. And now Slumberger, the world’s biggest oilfield-services company, will cut 9,000 jobs.” (Money dries up for oil and gas, layoffs spread, write-offs start, Wolf Richter, Naked Capitalism)

And then there’s this tidbit from Pam Martens at Wall Street on Parade:

“In a December 15 article by Patrick Jenkins in the Financial Times, readers learned that data from Barclays indicated that “energy bonds now make up nearly 16 per cent of the $1.3 trillion junk bond market — more than three times their proportion 10 years ago,” and “Nearly 45 per cent of this year’s non-investment grade syndicated loans have been in oil and gas.” Raising further alarms, AllianceBernstein has released research suggesting that the deals were not fully subscribed by investors with the potential that “as much as half of the outstanding financing from the past couple of years may be stuck on banks’ books.” (The perfect storm for Wall Street banks, Russ and Pam Martens, Wall Street on Parade)

How do you like that? So nearly half the toxic energy-related gunk that was bundled up into dodgy junk bonds (and is likely to default in the near future) is sitting on bank balance sheets. Does that sound like a potential trigger for another financial crisis or what?

And, no, I am not trying to ignore the fact that third quarter GDP came in at a whopping 5 percent which vastly exceeded all the analysts estimates. But let’s put that into perspective. According to economist Dean Baker, the growth spurt was mainly “an anomaly” …”driven by extraordinary jump in military spending and a big fall in the size of the trade deficit that is unlikely to be repeated.” Here’s more from Baker:

“As usual, just about everything we’ve heard about the economy is wrong. To start, the 5.0 percent growth number must be understood against a darker backdrop: The economy actually shrank at a 2.1 percent annual rate in the first quarter. If we take the first three quarters of the year together, the average growth rate was a more modest 2.5 percent.” (Don’t Believe What You Hear About the US Economy, Dean Baker, CEPR)

So, the economy is growing at a crummy 2.5 percent, but Yellen wants to raise rates. Why? Does she want to shave that number to 2 percent or 1.5 percent? Is that it? She wants to go backwards?

Of course not. The real reason the Fed wants to raise rates, is to attract foreign capital to US markets in order to keep stocks soaring, keep borrowing costs low, and reinforce the dollar’s role as the world’s reserve currency. That’s what’s really going on. The petrodollars are drying up, so US markets need a new source of funding. Direct foreign investment, that’s the ticket, Ducky. All the Fed needs to do is boost rates by, let’s say, 0.5 percent and “Cha-ching”, here comes the capital. Works like a charm every time, just ask former Treasury Secretary Robert Rubin whose strong dollar policy sent stock prices into orbit while widening the nation’s current account deficit by many orders of magnitude. (We never said the plan didn’t have its downside.) The Fed’s sinister plan to raise interest rates (sometime by mid-2015) will push the dollar’s exchange rate higher thus triggering capital flight in the emerging markets which are already struggling with plunging commodities prices and an excruciating slowdown. The investment flows from the EMs to US financial assets and Treasuries will offset the loss of petrodollar revenue while expanding Wall Street’s ginormous stock market bubble. As for the emerging markets, well, they’re going to take it in the shorts bigtime as one would expect. Here’s a clip from an article by Ambrose-Evans Pritchard that lays it out in black and white:

“The US Federal Reserve has pulled the trigger. Emerging markets must now brace for their ordeal by fire. They have collectively borrowed $5.7 trillion in US dollars, a currency they cannot print and do not control. This hard-currency debt has tripled in a decade, split between $3.1 trillion in bank loans and $2.6 trillion in bonds. It is comparable in scale and ratio-terms to any of the biggest cross-border lending sprees of the past two centuries…

Officials from the Bank for International Settlements say privately that developing countries may be just as vulnerable to a dollar shock as they were in the Fed tightening cycle of the late 1990s, which culminated in Russia’s default and the East Asia Crisis. The difference this time is that emerging markets have grown to be half the world economy. Their aggregate debt levels have reached a record 175pc of GDP, up 30 percentage points since 2009…”

This time the threat does not come from insolvent states. They have learned the lesson of the late 1990s. Few have dollar debts. But their companies and banks most certainly do, some 70pc of GDP in Russia, for example. This amounts to much the same thing in macro-economic terms. ” (Fed calls time on $5.7 trillion of emerging market dollar debt, Ambrose-Evans Pritchard, Telegraph)

The Fed has been through this drill so many times before they could do it in their sleep. (” U.S. interest-rate hikes in 1980s and 1990s played a role in financial crises across Latin America and East Asia.” Foreign Policy Magazine) They’ve learned how to profit off every crisis, particularly the one’s that they themselves create, which is just about all of them. In this case, most of the loans to foreign businesses and banks were denominated in dollars. So, now that the dollar is soaring, (“The dollar’s value has risen about 15 percent relative to the euro and the yen just since the summer.” NPR) the debts are going to balloon accordingly (in real terms) which is going to push a lot of businesses off a cliff forcing sovereigns to step in and provide emergency bailouts.

Did someone say “looming financial crisis”?

Indeed. Bernanke’s “easy money” has inflated bubbles across the planet. Now these bubbles are about to burst due to the strong dollar and anticipated higher rates. At the same time, the policy-switch will send hundreds of billions of foreign capital flooding into US markets pushing stocks and bonds through the roof while generating mega-profits for JPM, G-Sax and the rest of the Wall Street gang. All according to plan.

Naturally, the stronger dollar will weigh heavily on employment and exports as foreign imports become cheaper and more attractive to US consumers. That will reduce hiring at home. Also the current account deficit will widen significantly, meaning that the US will again be consuming much more than it produces. (This took place under Rubin, too.) But here’s what’s interesting about that: According to the Bureau of Economic Analysis: “Our current account deficit has narrowed sharply since the crisis…The U.S. current account deficit now stands at 2.5 percent of GDP, down from more than 6 percent in the fourth quarter of 2005.” (BEA)

Great. In other words, Obama’s obsessive fiscal belt-tightening lowered the deficits enough so that Wall Street can “party on” for the foreseeable future, ignoring the gigantic bubbles they’re inflating or the emerging market economies that are about to be decimated in this latest dollar swindle.

If that doesn’t make you mad, I don’t know what will.

Mike Whitney lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press). Hopeless is also available in a Kindle edition. He can be reached at [e-mail].

[Demeter]

3. The US Is Desperate By Dmitry Orlov

http://www.informationclearinghouse.info/article40760.htm


The leadership in the US knows full well that their days as the world's largest oil producer are numbered in days or months, not years. Over the course of 2014 the prices the world pays for crude oil have tumbled from over $125 per barrel to around $45 per barrel now, and could easily drop further before heading much higher before collapsing again before spiking again. You get the idea. In the end, the wild whipsawing of the oil market, and the even wilder whipsawing of financial markets, currencies and the rolling bankruptcies of energy companies, then the entities that financed them, then national defaults of the countries that backed these entities, will in due course cause industrial economies to collapse. And without a functioning industrial economy crude oil would be reclassified as toxic waste. But that is still two or three decades off in the future.

In the meantime, the much lower prices of oil have priced most of the producers of unconventional oil out of the market. Recall that conventional oil (the cheap-to-produce kind that comes gushing out of vertical wells drilled not too deep down into dry ground) peaked in 2005 and has been declining ever since. The production of unconventional oil, including offshore drilling, tar sands, hydrofracturing to produce shale oil and other expensive techniques, was lavishly financed in order to make up for the shortfall. But at the moment most unconventional oil costs more to produce than it can be sold for. This means that entire countries, including Venezuela's heavy oil (which requires upgrading before it will flow), offshore production in the Gulf of Mexico (Mexico and US), Norway and Nigeria, Canadian tar sands and, of course, shale oil in the US. All of these producers are now burning money as well as much of the oil they produce, and if the low oil prices persist, will be forced to shut down.

An additional problem is the very high depletion rate of “fracked” shale oil wells in the US. Currently, the shale oil producers are pumping flat out and setting new production records, but the drilling rate is collapsing fast. Shale oil wells deplete very fast: flow rates go down by half in just a few months, and are negligible after a couple of years. Production can only be maintained through relentless drilling, and that relentless drilling has now stopped. Thus, we have just a few months of glut left. After that, the whole shale oil revolution, which some bobbleheads thought would refashion the US into a new Saudi Arabia, will be over. It won't help that most of the shale oil producers, who speculated wildly on drilling leases, will be going bankrupt, along with exploration and production companies and oil field service companies. The entire economy that popped up in recent years around the shale oil patch in the US, which was responsible for most of the growth in high-paying jobs, will collapse, causing the unemployment rate to spike.

It bears pointing out that the excess inventory of oil that has precipitated this price collapse is not particularly large. It all started with a concerted effort by Saudi Arabia and the US to dump oil on the international market, to drive down the price. The leadership in the US knows full well that their days as the world's largest oil producer are numbered in days or months, not years. They realize what a major economic hangover will result from the collapse of shale oil production. The Canadians, realizing that their tar sands adventure is likewise nearing its end, want to play along.

The game they are playing is basically a game of chicken. If everybody pumps all the oil they can regardless of the price, then at some point one of two things will happen: shale oil production will collapse, or other producers will run out of money, and their production will collapse. The question is, Which one of these will happen first? The US is betting that the low oil prices will destroy the governments of the three major oil producers that are not under their political and/or military control. These are Venezuela, Iran and, of course, Russia. These are long shots, but, having no other cards to play, the US is desperate. Is Venezuela enough of a prize? Previous attempts at regime change in Venezuela failed; why would this one succeed? Iran has learned to survive in spite of western sanctions, and maintains trade links with China, Russia and quite a few other countries to work around them. In the case of Russia, it is as yet unclear what fruit, if any, western policies against it will bear. For example, if Greece decides to opt out of the European Union in order to get around Russia's retaliatory sanctions against the EU, then it will become entirely unclear who has actually sanctioned whom.

Of course, toppling the governments of all three of these petro-states, destroying them economically, “privatizing” their oil resources and pumping them dry free of charge using foreign labor would be just the shot in the arm the US needs. But, if you've been following along, it appears that the US doesn't always get what it wants, and of late hardly at all. Which recent US foreign policy gambit has actually paid off the way it was supposed to? Hmm...

And so, for now, all the oil producers are continuing to pump flat out. Some producers have the financial cushion to produce at a loss, and will do so to protect their market share. Other producers have already sunk the money into drilling the wells and have paid back enough of the loans while the oil price was high to continue producing profitably even at the lower price. Lastly, a number of producers (with Russia in the lead) can make a small profit even at $25-30 per barrel (if it weren't for taxes and tariffs).

Each producer has a slightly different reason to continue pumping flat out. A lot has been said about the US and Saudi Arabia colluding to drive down the price of oil. But the collusion theory can be sliced away with Occam's Razor, since they would be expected to behave exactly the same even without colluding.

The US is making a desperate attempt to knock over a petro-state or two or three before its shale oil runs out, with the Canadians, their tar sands now unprofitable, hitching a ride on its coat-tails, because if this attempt doesn't work, then it's lights out for the empire. But none of their recent gambits have worked. This is the winter of imperial discontent, and the empire is has been reduced to pulling pathetic little stunts that would be quite funny if they weren't also sinister and sad. Take, for instance, the words spoken by the US State Department's remote-controlled Ukrainian prime minister Yatsenyuk in Berlin recently: it turns out that the USSR invaded Nazi Germany, not the other way around! We are coming up on the 70th anniversary of the Soviet victory over Nazi Germany; and so there is no better time to do—what exactly? The Russians are confused. But the Germans took this howler on board and stayed mum, so score one for the empire!

Or take the Charlie Hebdo psy-ops in Paris, which, for anyone paying attention, was eerily reminiscent of the Boston Marathon bombing almost two years ago. Boston still hasn't got rid of all of the idiotic “Boston strong” stickers (no, Boston was not destroyed by a few firecrackers and a few amputee actors bursting bags of fake blood to pretend that they just had a leg blown off). And now Paris is festooned with eerily similar "I am Charlie" stickers. Killing a handful of innocents is, of course, standard procedure: few real atrocities help render the “conspiracy theory” version of the events unthinkable for anyone under imperial mind control because, you see “They are the good guys” and “good guys” don't do such things. But that mind control is slipping away, and even some national leaders—such as Turkey's Erdogan—publicly declared that the event had been staged. Also similarly, the supposed perpetrators were summarily executed by the police before anyone could find out anything about them. It's become quite clear by now that such events are being cooked up by the same bunch of not-terribly-creative hacks. They seem to be recycling the PowerPoints: delete Boston; insert Paris. But the French have defended their right to insult Moslems (and Christians) with impunity (but these rights are sure to be taken away when nobody is looking)—but not the inexplicably important Jews or gays, mind you, because that will get you a prison term. Score another one for the empire!

Or take the shoot-down of Malaysia's flight MH17 over Eastern Ukraine earlier this year. The western public officials and press instantaneously blamed "Putin-supported rebels" with the shoot-down. When the results of the ensuing investigation led to a different conclusion, they were made secret. But now the Russians have a Ukrainian defector in witness protection who has identified the Ukrainian pilot who shot down the airliner, using an air-to-air missile fired from a fighter jet. Since the rebels have no air force, an air-to-air missile was an unusual bit of ordnance for the Ukrainians, and was clearly loaded up just for this occasion. So we know who, how, and why; the only remaining question is, for whom; bets are, the hit was ordered from Washington. This was big news in Russia, but western media has self-censored the story out of existence and, whenever the topic is mentioned, continues to repeat the "Putin did it" mantra, so... score another one for empire!

But a bunch of deluded people muttering to themselves in a dark corner, while the rest of the world points at them and laughs, does not an empire make. With this level of performance, I would venture to guess that nothing the empire tries from here on will work to its satisfaction.

Saudi Arabia is generally displeased with the US, because the US has been failing at its job of policing the neighborhood and generally keeping a lid on things. Afghanistan is reverting to Talebanistan, Iraq has ceded territory to ISIS and now only controls the territory of the bronze age kingdoms of Akkad and Sumer, Libya is in a state of civil war, Egypt has been “democratized” into a military dictatorship, Turkey (a NATO member and a EU candidate member) is now trading primarily with Russia, the mission to topple Syria's Assad is in shambles, the US “partners” in Yemen have just been overthrown by Shiite militiamen, and now there is ISIS, initially organized and trained by the US, threatening to destroy the House of Saud. Add to that that the US-Saudi joint venture to destabilize Russia by formenting terrorism in Northern Caucasus has completely failed. It couldn't organize even a single terrorist action to disrupt the Sochi Olympics. (Saudi Arabia's Prince Bandar bin Sultan lost his job over that fiasco.) And so the Saudis are pumping flat out not so much to help the US as for other, more obvious reasons: to drive out high-priced producers (US included) and to maintain their market share. They are also sitting on a stockpile of US dollars, which they want to put to good use while they are still worth something.

Russia is pumping the usual amount because there is really no reason to stop and plenty of reasons to continue. Russia is a low-price producer, and can wait out the US. It is also sitting on a large stockpile of dollars, which might as well get used up while they are still worth something. Russia's greatest asset is not its oil but the patience of its people: they understand that they will go through a difficult patch as they scramble to replace imports (from the west especially) with domestic production and other sources. They can afford to take a loss; they will make it all back once the price of oil recovers. Because it will recover. The fix for low oil prices is... low oil prices. Past some point high-priced producers will naturally stop producing, the excess inventory will get burned up, and the price will recover. Not only will it recover, but it will probably spike, because a country littered with the corpses of bankrupt oil companies is not one that is likely to jump right back into producing lots of oil while, on the other hand, beyond a few uses of fossil fuels that are discretionary, demand is quite inelastic. And an oil price spike will cause another round of demand destruction, because the consumers, devastated by the bankruptcies and the job losses from the collapse of the oil patch, will soon be bankrupted by the higher price. And that will cause the price of oil to collapse again.

And so on until the last industrialist dies. His cause of death will be listed as “whiplash”: the “shaken industrialist syndrome,” if you will. Oil prices too high/low in rapid alternation will have caused his neck to snap. Some artisans will collect a bit of oil from some slowly oozing old wells, refine it using clay pots heated with wood, and use it to power an antique hearse that will take the planet's last industrialist to the industrialist boneyard.

Dmitry Orlov is currently working on a new book that will be out later this year. Orlov says, “The new book is about communities and what makes them resistant to adverse events such as financial collapse.” Orlov adds, “The U.S., as a whole, is not resistant to shocks, but some parts of America are.” You can find Dmitry Orlov at ClubOrlov.com.

[Demeter]

4. Greeks defy Europe with overwhelming referendum 'No'

http://www.reuters.com/article/2015/07/05/us-eurozone-greece-idUSKBN0P40EO20150705?feedType=RSS&feedName=topNews

Greeks overwhelmingly rejected conditions of a rescue package from creditors on Sunday, throwing the future of the country's euro zone membership into further doubt and deepening a standoff with lenders. Stunned European leaders called a summit for Tuesday to discuss their next move after the surprisingly strong victory by the 'No' camp defied opinion polls that had predicted a tight contest.

The euro currency and stock prices in Asia fell sharply in early trade, although dealers emphasized that markets were orderly, with no signs of financial strain. European stock and bond markets were expected to take a hit when they open for trading later on Monday.

In Athens, thousands of jubilant Greeks waving flags and bursting fire crackers poured into the city's central square as official figures showed 61 percent of Greeks had rejected a deal that would have imposed more austerity measures on an already ravaged economy.

"You made a very brave choice," Prime Minister Alexis Tsipras said in a televised address. "The mandate you gave me is not the mandate of a rupture with Europe, but a mandate to strengthen our negotiating position to seek a viable solution."

The vote leaves Greece in uncharted waters: risking a banking collapse that could force it out of the euro. Without more emergency funding from the European Central Bank, Greece's banks could run out of cash within days after a week of rising desperation as banks shut and cash machines ran dry. That might force the government to issue another currency to pay pensions and wages. For millions of Greeks the outcome was an angry message to creditors that Greece can no longer accept repeated rounds of austerity that, in five years, had left one in four without a job and shrank the economy by a quarter.

Tsipras has denounced the price paid for aid as "blackmail", a national "humiliation".

"The message from the 'No' is that we're not scared after all the pressure that we faced from both Europe and within," said Stathis Efthimiadis, a 47-year-old teacher.

"We want to live fairly and freely within Europe."

[Demeter]

5. Asia markets' Grexit bloodbath: Latest on stocks, FX, commodities

http://www.cnbc.com/id/102810558

The shock results from Greece's referendum on Sunday sent markets into a tailspin during Asian trade on Monday, with U.S. crude suffering the biggest declines.

Athens has denied that the 'no' vote could lead to an exit from the euro zone, but experts remain unconvinced.

The increased probability of a 'Grexit' has moved above 50 percent for the first time and that could see a risk-off mood prevail, according to ING.

Wolfgang Piccoli, managing director at Teneo Intelligence, told CNBC in Athens that the likelihood of a Grexit stood at 75 percent, from 15 percent previously. "We're running short of time. We have bank flows, capital controls, the Prime Minister stronger than ever who will go to Brussels asking for more concessions....meanwhile, the other side thinks he has zero credibility, even less now that he won the referendum."

MARKET DETAILS FOLLOW SEE LINK

[Demeter]

6. Eurozone Central Bank Now Controls Destiny of Greece’s Battered Banks

NOT TO MENTION GERMANY, FRANCE AND HEDGE FUNDS....

http://www.nytimes.com/2015/07/06/business/international/eurozone-central-bank-now-controls-destiny-of-greeces-battered-banks.html

Now that Greek voters have said no to the economic demands of its international creditors, the fate of the country’s struggling banks is in the hands of the European Central Bank.

Greece’s banks, closed since last Monday because they are perilously low on cash, have been kept alive in recent weeks by emergency loans from the European Central Bank. On Monday, the central bank’s policy makers plan to convene to determine how much longer they are willing to prop up the Greek banks, now that the country has essentially said no to the unpopular dictates of the other eurozone countries.

No economy can function properly without banks; if they topple, so would the Greek economy. SOUNDS LIKE A GREAT ESSAY OR DEBATE TOPIC....

The European Central Bank said it had no immediate comment on Sunday evening....If Europe’s central bank hews strictly to its rules — which require banks to be solvent to receive loans — its Governing Council on Monday would stop providing cash to Greek banks. But the central bank’s president, Mario Draghi, who has repeatedly cited the human cost of Greece’s crisis, might be tempted to find a way around those rules, arguing that choking off financial support would thrust untold hardship upon ordinary Greeks and might send the country on its way out of the euro currency union.

And the central bank may want to wait to see what eurozone heads of state decide at an emergency summit meeting on Tuesday that was announced on Sunday night. Donald Tusk, president of the European Council — which represents European leaders — wrote in a Twitter message that the meeting would be held Tuesday at 6 p.m. “to discuss situation after referendum in #Greece.’’ Assuming that the Greek prime minister, Alexis Tsipras attends, it would be his first meeting with his eurozone peers since the referendum on Sunday.

The summit meeting could be intended to help the European Central Bank make difficult decisions in the coming days, said one analyst, Mujtaba Rahman, the Europe director for the Eurasia Group, a political risk consultancy. One purpose of the summit is probably to give the E.C.B. “the political cover it needs if it decides to cut off Greece’s banking system,” he said...


IT APPEARS THAT EUROPE IS HAVING ITS "MITT ROMNEY" MOMENT....REMEMBER HOW HIS BILLIONAIRE SUPPORTERS WERE ALL JETTING IN TO CELEBRATE HIS ELECTION AND LOGAN AIRPORT WAS INUNDATED WITH PRIVATE PLANES?

WHAT DELUSIONAL FANTASY COULD MAKE THE 1% THINK THAT IT'S OKAY WITH US IF THEY STOMP ON OUR LIVES, FUTURES, AND THAT OF OUR CHILDREN AND GRANDCHILDREN?

[Demeter]

7. Will Greece now leave the euro? Watch the money to find out

http://www.marketwatch.com/story/will-greece-now-leave-the-euro-watch-the-money-to-find-out-2015-07-05?siteid=YAHOOB

European leaders were scrambling to figure out their next move, with a rush of meeting due in the coming hours.

These are slated to include an emergency conference of top eurozone finance officials, as well as a meeting of European leaders Tuesday.

But most important of all such gatherings will likely be the one that takes place Monday at the European Central Bank. There, the ECB’s Governing Council will discuss Greece’s monetary lifeline, the Emergency Liquidity Assistance (ELA) program, which provides vital funds to the country’s financial system.

“We have long argued that the day the ECB cuts off ELA is, de facto, the day that Greece would leave the euro,” Société Générale chief economist Michala Marcussen wrote several hours ahead of the Greek referendum result.

While leaders in Athens have said they want to retain the euro as Greece’s currency, Barclays analysts posit that a Greek exit from the euro EURUSD, -0.7648% — as soon as the ELA goes dry — would be a simple matter of mathematics.

“The bank liquidity crisis is likely to turn into a solvency crisis once the ECB shuts down ELA, probably no later than July 20 (when a €4.2 billion payment to the ECB becomes due),” the Barclays team wrote following initial news of the referendum’s outcome.

“Fiscal problems would become more acute; the government may be forced to issue IOUs, which effectively become a parallel currency to the euro. A new currency by the central bank of Greece is likely to eventually become necessary to inject both liquidity and recapitalize banks,” they wrote.

This, of course, begs the question as to whether the ECB will cut off Greece’s ELA on July 20 or earlier. While most analysts said such a move is unlikely this week, there is less consensus as to whether the ELA will last the month.

SocGen’s Marcussen says the ECB would wait until negotiations are completely and utterly exhausted before pulling the plug.

“It is clear that the ECB has no appetite to front-run the political process, and as long as discussions are ongoing between the Greek administration and the euro area, we consider it unlikely that the ECB would fully cut the ELA and Greek banks’ access to ECB liquidity facilities,” she wrote late Sunday.

Barclays, meanwhile, sees a so-called “Grexit” from the euro system as the more likely scenario now that Greek voters appear to have rejected the current rescue deal, but nor does Barclay dismiss other, less likely potential outcomes.

“Can an exit be avoided? We believe the answer is potentially yes; we see two possibilities, even if both are less likely than an exit. Europe and Greece could agree on a program on the [International Monetary Fund’s] terms. A more disruptive scenario would be one in which financial and macroeconomic conditions rapidly worsen, and social unrest could result in a political crisis, yielding a more moderate pro-deal government,” they wrote.

That last consideration about who will lead Greece could be a deciding factor, with many commentators saying the referendum’s result now ensures the left-wing Syriza party of Prime Minister Alexis Tsipras will remain in power....


NAH, NAH-NAH NAH-NAH!

[Demeter]

8. WAS IT ONLY 6 MONTHS AGO? Trojan Hearse:Greek Elections and the Euro Leper Colony By Greg Palast

http://www.informationclearinghouse.info/article40851.htm

Europe is stunned, and bankers aghast, that the new party of the Left, Syriza, won Sunday's parliamentary elections in Greece. Syriza won on the promise that it will cure Greece of leprosy. Oddly, Syriza also promises that it will remain in the leper colony. That is, Syriza wants to rid Greece of the cruelty of austerity imposed by the European Central Bank but insists on staying in the euro zone.

The problem is, austerity run wild is merely a symptom of an illness. The underlying disease is the euro itself. For the last five years, Greeks have been told that, if you cure your disease—that is, if you dump the euro—the sky will fall. I guess Greeks haven’t noticed, the sky has fallen already. With unemployment at 25%, with doctors and teachers eating out of garbage cans, there is no further to fall.

In 2010, when unemployment was a terrible 10%, a year into the crisis, the “Troika” (the European Central Bank, European Commission and the International Monetary Fund) told the Greeks that brutal austerity measures would restore their economy by 2012. Ask yourself, Was the Troika right?

There is a saying in America: Fool me once, shame on you. Fool me twice, shame on me.

Can Greece survive without the euro? Greece is already dead, but the Germans won’t even bother to bury the corpse. Greeks are told that if they leave the euro and renounce its debts, the nation will not be able to access world capital markets. The reality is, Greece can’t access world markets now: no one lends to a corpse. There’s a way back across the River Styx. But it’s not by paddling on a euro.

There’s Life after Euro

Many nations do quite well without the euro. Sweden, Denmark and India do just fine without the euro—and so does Turkey, which had the luck to be excluded from the euro-zone. As long as Turks stick to the lira, even Turkey’s brain-damaged Islamo-fascist President Tayyip Erdoğan cannot destroy their economy.

Can Greece just dump the euro? They have happy precedents to follow. Argentina was once pegged to the US dollar much as Greece is tied to the euro today. In 2000, Argentines, hungry and angry, revolted. Argentina ultimately overthrew the dollar dictatorship, the IMF diktats and the threats of creditors, and defaulted on its dollar bonds. Free at last! In the decade since, the Argentine economy soared. Yes, today, Argentina is under attack by financial vultures, but that is only because the nation became so temptingly wealthy.

I was in Brazil when its President Luiz Inácio Lula da Silva told the IMF to go to hell—and rejected privatization of the state banks and the state oil company, rejected cutting pensions and thumbed his nose at the rest of the austerity nonsense. Instead, Lula created the bolsa familia, a massive pay-out to the nation’s poor. The result: Brazil not only survived but thrived during the 2008-10 world financial crisis. Despite pressure, Brazil never ceded control of its currency. (It is a sad irony that Brazil is only now faltering. That’s the fault entirely of Lula’s successor, President Dilma Rousseff, who is beginning to dance the austerity samba.)

Austerity: Religion, Not Economics

The euro is simply the deutschmark with little stars on it. Greece cannot adopt Germany’s currency without adopting Germany’s finance minister, Wolfgang Schäuble, as its own. And Schäuble has determined that Greece must be punished. As my homey Paul Krugman points out, there is no credible economic theory that says that austerity—that is, cutting government spending, cutting wages, cutting consumer demand—can in any way help a nation in recession, in deflation. That’s why, in 2009, Obama ordered up stimulus, not a sleeping pill. But austerity has nothing to do with economics. It is religion: the belief by the stern Lutheran Germans that Greeks have had too much fun, spent too much money, and spent too much lazy time in the sun—and now Greeks must pay a price for their sins.

Oddly, I hear this self-flagellating nonsense from Greeks themselves: we are lazy. We deserve our punishment. Nonsense. The average Greek works more hours in a year than any other worker in the 34 nations of the OECD; Germans the least.

The Euro’s Father Describes his Little Bastard

Alexis Tsipras, the leader of Syriza, would like to pretend that austerity and the euro are two different things, that you can marry the pretty girl but not invite her ugly sister to the wedding. Apparently, the Syriza chief is blissfully ignorant of the history of the euro. The horror of austerity is not the consequence of Greek profligacy: it was designed into the euro’s plan from the beginning. This was explained to me by the father of the euro himself, economist Robert Mundell of Columbia University. (I studied economics with Mundell’s buddy, Milton Friedman.) Mundell not only invented the euro, he also fathered the misery-making policies of Thatcher and Reagan, known as “supply-side economics” – or, as George Bush Sr. called it, “voodoo economics.” Supply-side voodoo is the long-discredited belief that if a nation demolishes the power of unions, cuts business taxes, eliminates government regulation and public ownership of utilities, economic prosperity will follow.

The euro is simply the other side of the supply-side coin. As Mundell explained it, the euro is the way in which congresses and parliaments can be stripped of all power over monetary and fiscal policy. Bothersome democracy is removed from the economic system. “Without fiscal policy,” Mundell told me, “the only way nations can keep jobs is by the competitive reduction of rules on business.”

Greece, to survive in a euro economy, can only revive employment by reducing wages. Indeed, the recent tiny reduction in unemployment is the sign that Greeks are slowly accepting a permanent future of low wages serving piña coladas to Germans on holiday cruises...It is argued that Greece owes Germany, the IMF and the European Central Bank for bail-out-billions. Nonsense. None of the billions in bail-out funds went into Greek pockets. It all went to bail out Deutsche Bank and other foreign creditors. The EU treasuries swallowed 90% of its private bankers’ bonds. Germany bailed out Germany, not Greece. Nevertheless, Greece must pay Germany back, Mr. Tsipras, if you want to continue to use Germany’s currency, that is.

Greece: Goldman Sacked

Greece’s ruin began with secret, fraudulent currency swaps, designed a decade ago by Goldman Sachs, to conceal Greek deficits that exceeded the euro zone’s 3%-of-GDP limit. In 2009, when the truth came out, Greek debt holders realized they had been cheated. These debt buyers then demanded usurious levels of interest (or, if you prefer, a high “spread”) to insure themselves against future fraud. The compounding of this interest premium brought the Greek nation to its knees. In other words, the crimes committed to join and stay in the euro, not Greek profligacy, caused the crisis.

The USA, Brazil and China escaped from depression by increasing their money supply and government spending and taking control of currency exchange rates—crucial tools Greece gave up in return for the euro. Worse, once the Trojan hearse of the euro entered Athens, tourism, Greece’s main industry, drained to Turkey where hotels and souvenirs are priced in cheap lira. This allowed Dr. Mundell’s remorseless wage-lowering machine, the euro, to do its work, to force Greece to strip all its workers of pensions and power. Greece fell to its knees, with no choice but to beg Germany for mercy.

But there is no mercy. As Germany’s Schäuble insists, democracy, this week’s vote, means nothing. "New elections change nothing in the accords struck with the Greek government,” he says. “Greeks have no alternative.” Ah, but they do, Mr. Schäuble. They can tell you to take your euro and shove it up your Merkel.




Investigative reporter Greg Palast's book, Vultures' Picnic, with the no-BS inside story of the financial collapse, will soon be released in a Greek edition by Livanis.

Support the Palast Investigative fund with a tax-deductible donation and get a signed copy Vultures' Picnic or or simply make a tax-deductible contribution to keep our work alive!

Greg Palast is also the author of several New York Timesbestsellers includingThe Best Democracy Money Can Buy andBillionaires & Ballot Bandits.

Palast is a Puffin Foundation Fellow for Investigative Reporting.

[Demeter]

9. Why the Greek Government Rejects a Grexit

http://www.nakedcapitalism.com/2015/07/why-the-greek-government-rejects-a-grexit.html


European leaders like Merkel and Hollande have argued that the referendum in Greece tomorrow on an expired offer from the creditors is a vote on whether or not to stay in the Eurozone. When the press picked up their pronouncements, Greek officials reacted quickly and furiously, accusing Greece’s creditors of trying to push Greece out of the currency union and saying they would fight any such effort vigorously. In keeping, Yanis Varoufakis, stated in Why we recommend a NO in the referendum – in 6 short bullet points:

5. Greece will stay in the euro…Geece’s place in the Eurozone and in the European Union is non-negotiable.

6. The future demands a proud Greece within the Eurozone and at the heart of Europe. This future demands that Greeks say a big NO on Sunday, that we stay in the Euro Area.

Varoufakis curiously maintains this position despite having his key assumptions back in February overturned:

The Greek state, let me remind you, is quite close to a primary surplus. With judicious top-down reductions of wages and pensions, plus the issue of tax-bonds, the Greek public sector could finance itself for the foreseeable future. All that is needed is that the ECB continues to provide liquidity to the Greek banks….As for those who argue that the ECB will take an aggressive stance, think again: the ECB will not knowingly take steps which will destroy the eurozone.

In fact, the ECB has taken a stunningly aggressive move by refusing to increase the ELA and pushing the Greek banking system towards failure by limiting the support it has provided to deeply insolvent institutions. The ECB looks to have been authorized by European leaders to naplam Greece to produce regime change. This would hardly be the first instance of German/creditor meddling in domestic politics. As the Economist observed in a 2013 story on Merkel, “…she helped get rid of clowns like Italy’s Silvio Berlusconi.” The lenders could have engineered Syriza’s demise less thuggishly by refusing to give ground in negotiations and letting the Greek government cross its red lines itself by being unable to pay pensions and salaries in cash, which would have been certain to start happening in July. A month or two of payments partly or fully in scrip would lead to a rapid decay of support for the ruling coalition...But as brutal as this move is, the ECB is within its rights. As the Economist noted in February:

The growing reliance on ELA makes the banks, and thus the Greek government vulnerable. According to Karl Whelan, an economist at University College Dublin, the ECB has great discretion over how much ELA to permit and when to withdraw it. So Greek banks’ growing dependence on ELA leaves the government at the ECB’s mercy as it tries to renegotiate its bail-out.

Accordingly, we’ve been saying for months that the ECB holds the whip hand. It has finally decided to use it. This is what a mere four days of a bank holiday and capital controls had produced. From Ambrose Evans-Pritchard of the Telegraph:

Greece is sliding into a full-blown national crisis as the final cash reserves of the banking system evaporate by the hour and swathes of industry start to shut down, precipitating the near disintegration of the ruling coalition…

The daily allowance of cash from many ATMs has already dropped from €60 to €50, purportedly because €20 notes are running out. Large numbers are empty. The financial contagion is spreading fast as petrol stations and small businesses stop accepting credit cards…

Constantine Michalos, head of the Hellenic Chambers of Commerce, said lenders are simply running out of money. “We are reliably informed that the cash reserves of the banks are down to €500m. Anybody who thinks they are going to open again on Tuesday is day-dreaming. The cash would not last an hour,” he said.

“We are in an extremely dangerous situation. Greek companies have been excluded from the electronic transfers of Europe’s Target2 system. The entire Greek business community is unable to import anything, and without raw materials they can’t produce anything,” he said.

Yves here. It isn’t just “can’t produce for export.” In Greece, a large percentage of imports aren’t inputs to production (major exception being unrefined petroleum) but final consumption goods

The next day, last Friday, Evans-Pritchard reported:

Food has been exempted from an import freeze since capital controls were introduced last weekend. Grains, meats, dairy products, and other foodstuffs should be able to enter the country freely, averting a potential disaster as the full tourist season kicks off.

Translation: Food imports are so important that the government is taking the risking bank survival to keep that supply chain open.

The Guardian was also grim:

Greece’s economy is on the brink of collapse after the capital controls imposed ahead of Sunday’s referendum left the country with shortages of food and drugs, the tourist industry facing a wave of cancellations and banks with barely enough money to survive the weekend.

Banks said they had a €1bn cash buffer to see them through the weekend – equal to just €90 (£64) a head for the 11 million-strong population – and would require immediate help from the European Central Bank on Monday whatever the result of the referendum, in which the two sides are running neck and neck…

The survival of the Syriza coalition, formed just over five months ago to repudiate five years of austerity programmes, was in doubt as Greece started to suffer shortages of basic provisions, including the sale of vital drugs in pharmacies nationwide.

Food staples, such as sugar and flour, were also fast running out on Friday as consumers started to feel the effect of the restrictions.

“We have shortages,” said Mary Papadopoulou, who runs a pharmacy in the picturesque district of Plaka beneath the ancient Acropolis. “We’ve run out of thyroxine [thyroid treatment] and unless things change dramatically we’ll be having a lot more shortages next week.”…

“Imports, exports, factories, firms, transport – everything is frozen,” said Vasilis Korkidis, who heads the national Confederation of Hellenic Commerce. “The only sectors in demand are food and fuel.”

Korkidis said the economy had suffered losses worth €1.2bn in the past week and that the cost would have to be added to any fresh bailout deal. “Even in the best-case scenario, it is going to take months to recover from the shock of closed banks and capital controls,” Korkidis said. “Now that they are in place, capital controls may last for a year.”

We had warned readers that a 12 day bank holiday in Cyrpus, with capital controls that continued for two years, did major harm. Businesses were on the verge of failure. And Cyrpus was prosperous when the bank holiday started. In far more fragile Greece, which has already been suffering a slow-motion bank run for months, the shockwave hit harder and faster.

Yet quite a few pundits who claim they support self-determination for Greece advocate a Grexit despite the clear preference of Syriza leadership and the Greek public otherwise. A Bloomberg poll last week found that 81% wanted to Greece to remain in the Eurozone. That demonstrates that Greek citizens appreciate that as bad as things are under austerity, a Grexit could tip Greece into being a failed state. What is starting to happen now, the inability of companies to import, constrained access to international payment systems like debit and credit card networks, is a pale shadow of what Greece would experience with a Grexit.

We’ve tried to convey what it would mean for Greece to convert to drachma and have a drachma-based payment system interface with international payment systems. Payment systems run at mission critical standards; errors or unplanned outages can lead to huge losses, as well as serious to disastrous effects for end users. And as many readers know, IT projects in large organizations, even with stable systems and capable staff, take months to complete even when they go well. The failure rate for large IT projects is well over 50 percent. As as we hope to convey, a reintroduction of the drachma is an order or two a magnitude more daunting than a “normal” big IT project. Hence the Greek government’s refusal to consider it is well justified (note that our sources who are in contact with Greek government officials say the government has not undertaken any preparatory IT work for a Grexit).

As we’ll discuss, even introducing drachma notes, a comparatively simple part of this exercise, would be a well over six month project for Greece in and of itself. But if a payments system is like an electrical grid, being reduced to using cash only is analogous to Iraqis using portable generators after the US took the electrical system out in the 2003 war. It’s still well short of what would be needed to get the power back in your outlets, or the streetlights and subways working again....

APPARENTLY, IT'S ALL THE SOFTWARE CHANGES...THE MODERN ECONOMY RUNS ON BITS

[Demeter]

10. The Card System, Demystified, and Implications for Re-Introducing Drachma By Clive, a payments syste

http://www.nakedcapitalism.com/2015/07/the-card-system-demystified-and-implications-for-a-grexit.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29



Yves here. Please thank reader Clive for providing a detailed explainer on how card systems work and what the impact of a drachma re-introductoin would be for them.

By Clive, a payments system professional

Perhaps the main reason well intentioned laypeople suggest what to them are obvious, simple solutions to implementing either a new drachma in Greece, or some sort of parallel running of both a new drachma and the euro, or a new cryptocurrency which somehow can be like a drachma or even both a euro and a drachma at the same time and so on (there’s been many other ideas proposed) which are nevertheless unfortunately completely impractical in terms of allowing a functional, reliable, robust, high volume payment system is that so much of the financial system’s complexity is transparent to the end user.

We’re lulled into a false sense of understanding by the ubiquity and apparent simplicity of the modern retail non-cash payments system which operates in most countries (we’ll concentrate on the retail system here, the sorts of things we as joe public use in our everyday transactions; commercial, business-to-business payments systems and “treasury” systems used by large banks and the central banks are different but no less complex, perhaps even more so but outside the scope of what we’ll discuss here).

We hand over our card, sign the ticket (or enter our PIN, or even just wave our NFC card over the reader) and know that in a couple of days at most, usually a couple of hours, our bank accounts will be deducted the relevant amount. We even use our credit and debit cards overseas, and as if by magic the correct local currency amount is converted into the currency in which our “native” bank account is denominated in and away the money goes.

The card payments system has evolved over the past 40 or more years to reach its current level of sophistication and automation. Over that time, various parties have carved out particular places in the overall system often at the direction of regulators who have insisted on fragmentation to avoid any one single part of the overall system being allowed to have dominant influence — and so provide an opportunity for rent extraction. While this is laudable action by the regulators the result is systemic complexity.

Let’s start by identifying who the various participants in a card payment transaction are:

1) The customer. That’s you, with your card presented for payment. You are known as The Cardholder in payments industry speak. You want to pay by either credit or debit card and aren’t using cash because either you don’t have the cash and need to use a line of credit or even just for convenience.

2) The retailers (this could be a hotel, a restaurant, supermarket, a bar or whatever) — the place you’re presenting your card for payment to settle a bill. These are known in the industry as the “Merchant” so that is what we will refer to them from hereon.

3) The Merchant Services Provider. Now we’re into the realm of things which end users of payments systems probably don’t think too much about. Who are Merchant Services Providers and what do they do ? Well, the machine you put your card into (or the Merchant uses to swipe you card) wasn’t left there by the tooth fairy. Someone built it, someone owns it, someone has to maintain it, update it such as to apply security patches and even periodically replace it when the hardware it contains doesn’t support new features which are deemed necessary such as Chip and PIN authentication, or “contactless” (using Near Field Communications) payments etc. This hardware is commonly referred to as an “EPoS” (Electronic Point of Sale) terminal. It costs the Merchant Services Provider money to supply and support the EPoS terminals, so they charge the Merchant a fee. This can be either as a high “one off” cost to buy the EPoS terminal or the Merchant Services Provider can “give away” the terminal for a low nominal cost but then levy a fee on each transaction the Merchant completes using the terminal for taking card payments.

In Europe (and this includes the eurozone, Greece too) the number of Merchant Service Providers who supply of EPoS terminals has grown like topsy over the last decade or so. This is because it can be insanely profitable — the EPoS terminals are fairly cheap to manufacture in bulk, support can be crapified but those transaction fees just keep rolling in. Here is a typical offer https://www.paypal.com/uk/webapps/mpp/credit-card-reader (this one is from PayPal but there are dozens and dozens of Merchant Service Providers offering different EPoS devices, different tariffs and supporting different EPoS features as well as other services like how you are able to manage your account with the Merchant Service Provider).

4) The Card Network. You, the user (or The Cardholder) has a card. That card is produced under licence, the terms of which are specified by the Card Network. Well known Card Networks are Visa, MasterCard, American Express – but there are several others. Some operate just in one locality, most try to offer a good range of international acceptance. But what exactly do the Card Networks do and, perhaps more interestingly, what don’t they do when you present one of their licensed cards for payment ? Firstly, the Card Networks do not remit funds between the Cardholder (you) and the Merchant. Secondly, the Card Networks do not define the currency in which the transaction is to take place. Nor do they transfer the jurisdiction where the payment and settlement takes place from or to any other country.

So what do they do ? Well, when you (the Cardholder) presents your card to the Merchant, the Merchant uses their EPoS terminal to acquire (that is the industry standard wording) the card details and the transaction amount. The EPoS terminal appends some other details such as the location of the transaction and the currency in which the transaction is to be denominated in (such as U.S. dollars, Yen, sterling, euros etc.) using the software built into the EPoS terminal itself. It then sends this information to the Merchant Services Provider. But all any of the parties to the transaction know so far is the above – no one can yet say which bank (your bank, the bank account for you, the Cardholder) is going to have to make the payment from.

Here is where the “magic” (it isn’t actually all that magical) of where the Card Networks comes in. They know, from the card number (called the PAN or Primary Account Number) which is printed on the card (and also stored in the magnetic stripe and also the card’s Chip, if present) exactly which bank issued the card. The Card Issuer – see item 5 below – agrees to provide the Card Network with at least a daily figure (in the currency which the Card Issuer has denominated the account you have with them) for your line of credit on the card. Sometimes the Card Network has the facility to check in real time what your available funds are on that card. Sometimes not. But as a minimum, it knows what you’ve got that day. Assuming you’ve got sufficient funds to cover the transaction, the Card Network then tells the Card Issuer what you’ve just spent on the card and simultaneously tells the Merchant Services Provider to send a message to the Merchant’s EPoS terminal to authorise the transaction. The EPoS terminal then issues a message to the Merchant that the transaction is authorised and triggers receipt printing (or an equivalent action to create a record of the transaction being complete). This, effectively, marks the end of the Card Network’s involvement in the transaction. Then the action moves to…

5) The Card Issuer. This is your bank, the one who gave you the card. The one who just confirmed you were “good” for the money to the Card Network. When a Card Network told the Card Issuer that you’ve just spent some money, the Card Issuer (usually) earmarks your account to say that your available funds have decreased by the corresponding amount.

But what amount exactly ? If this is, for example, a U.S. dollar denominated account and you’ve just been to the supermarket in Scottsdale, AZ, it’s fairly simple. The Card Issuer needs to send U.S. dollars to the supermarket’s Merchant Services Provider who will then send those dollars to the supermarket’s bank account. Note – this is very important so pay attention here – it is the Card Issuer who sends the money to the Merchant Services Provider NOT the Card Network.

But if instead of going to the supermarket in Scottsdale, you’ve been to the supermarket in Woking, England, the supermarket’s Merchant Service Provider wants settlement in pounds sterling. So your bank, the Card Issuer, has to check the transaction information it was sent by the Card Network and analyse it for the currency it was denominated in. The Card Issuer must, if the transaction was denominated in a currency other than that in which your account with them is denominated in, calculate the (in this case) U.S. dollar equivalent of the sterling amount it must send. It can then debit your account in dollars and send sterling to the Merchant Services Provider. The Merchant Services Provider can then credit the correct sterling amount to the supermarket’s bank account.

So, dear long suffering reader, having read and hopefully digested that glossary of the various actors in the card processing and payments systems hopefully you can now begin to understand why, if any single part of the system changes (such as Greece wanting to re-drachma-ise) the entire system has to be considered. You can’t, for instance, simply say that an EPoS terminal in Greece is now no longer presenting transactions denominated in euros but instead is expecting to settle in drachmas.

The Merchant Services Provider whose terminal it is needs to change the transactions its EPoS terminals are sending to the Card Networks from euros to drachma. But both the Card Services Providers and the Merchant are separate commercial entities and supply / utilise services under contract. They may both be in different jurisdictions (under EU law, I can buy that PayPal EPoS terminal in the U.K. — I can buy one that is natively denominated in sterling, euros or even U.S. dollars — and I can take it and use it in any EU country).

Greece could introduce legislation to the effect that its sovereign currency was now the drachma not the euro. But who would actually be liable to make changes to their products and services to abide by that legislation? The Merchants and their banks in Greece would obviously have to then legally denominate their transactions in drachma, but that would not change the configuration of those thousands, more likely hundreds of thousands, of EPoS terminals installed in Greece.

Merchant Services Providers who were domiciled in Greece would have to make changes (ones like PayPay would not be bound by Greek law as they operate in a different, centralised, jurisdiction, which is Luxembourg in the case of PayPal in Europe but would probably start to do so for commercial reasons but it would take time to either produce and distribute new EPoS terminals for use in Greece or upgrade the firmware in existing terminals, if this is even feasible) but it would be no use them starting to fire off transactions to the Card Networks saying “drachma” if the Card Networks (who are definitely not Greek) didn’t also make changes to know what to do with them. And the Card Issuers would have to be prepared to remit funds to the Merchant Services Providers in drachma. But they too would have to change their systems to be able to handle that currency type.

Note too that each of these parties are entirely different and run different sub-systems which interface to each other but are not tightly coupled under a single codebase or managed under a single change management system.

And what of cryptocurrency, dual running of euros and drachma, or other similar bright idea? As readers can deduce from the explanations above, the payments system outside of cash is just that — a SYSTEM. You cannot simply change one component in it in isolation. Either a cryptocurrency is designed to the same specification as a card licensed by a Card Network and so can use the existing infrastructure (in which case it is a proprietary product issued under licence from the Card Network and as such production can only by authorised by them — meaning that a cryptocurrency was really just another version of an existing Card Network’s card) or else it is something new and thus requires new EPoS terminals and Merchant Service Providers capable of handling cryptocurrency payments.

To those who might suggest that Greece could revert to a cash only society for a time until the card payments system was modified it is worth noting that for some industries – notably lodging, rail travel, car hire (all of which are important sectors in Greece because they are part of the tourist industry) – have a very high percentage of settlement via card payments. This is because customers do not carry sufficient cash to cover these larger bills or even, for vacations especially, do not actually have the cash available and need to tap a line of credit. And for car rental, for example, some sectors have evolved to become entirely dependent on card payments. It is very difficult to hire a car without a card being used to pre-authorise the likely bill and to allow the car rental company to get an irrevocable deposit should you damage the car. If you don’t have a card to use, you need a huge cash deposit, often $1000+.

And cash societies are very susceptible to regressing to a black market economy with the predicable implications for a government’s ability to secure tax receipts.

[Demeter]

19. What's It All About Then?

http://www.eschatonblog.com/2015/07/whats-it-all-about-then_4.html

Greece's Euro "membership" isn't about using the currency, it's about having access to various loan facilities and support from the ECB, which it already doesn't have.

Bloomberg reports that Bulgaria, which is not a Euro member but backs its currency with Euro reserves, has just been allowed to borrow from the ECB at the same rate as Euro members, thus enabling it to firewall its banks from Greek contagion. This is a privilege normally only accorded to Euro members – and it has been WITHDRAWN from Greece. If this is true, then Bulgaria (non-Euro member) can obtain Euros from the ECB while Greece (Euro member) cannot. It is hard to see what benefit Greece’s Euro membership confers, apart from redistribution of seigniorage receipts.

And finally someone gets the logical endpoint of central bank "independence."

For the central bank of a currency union to deliberately restrict the money supply in regions within the currency union is bizarre. No other currency union central bank on earth does this. It would, for example, be unthinkable for the Bank of England to deny liquidity to Scotland’s banks. But the ECB has denied liquidity to Greece’s banks, not because they are insolvent (which is a reasonable reason to deny liquidity to banks) but because the sovereign won’t toe the fiscal line. It has taken on a political role that it should not have.

Of course, the ECB’s shareholders are the member state governments. But those governments have bound themselves by laws and treaties that prevent them interfering with or in any way controlling the ECB. So the Eurozone is in reality a financial dictatorship run by bankers. I struggle to see why anyone would voluntarily join it, let alone want to stay in it. But that’s democracy for you.

Whatever it is, it ain't democracy. It's banksterocracy. The concept of central bank independence was, once upon a time, thought to be necessary to prevent irresponsible governments from doing, or being perceived as doing, irresponsible things with the money supply. Now the point of central bank independence is to hand immense power to a bunch of unelected unaccountable people engaged in revolving door careers with the banking system. Let's continue laughing at the silly Greeks and their silly corruption.

[corkhead]

25. wow, excellent post. At first glance you would think it would be relatively easy to switch back to

the Drachma compared to when all the individual Eurozone currencies were consolidated into the Euro. At that time if I recall, there was a transition period where they ran parallel currencies for a little while and had locked in fixed exchange rates. It will be interesting to see if Greece will be allowed any time to run parallel currencies while they transition. Thats where it seems we will see a relatively soft landing or a straight vertical auger in.

[MattSh]

11. Will Greece, Or Won’t Greece Be Destroyed To Save Her From Russia, Like Ukraine?

Nudelman’s New War, Nuland’s Nemesis – Will Greece, Or Won’t Greece Be Destroyed To Save Her From Russia, Like Ukraine? | Dances With Bears

A putsch in Athens to save allied Greece from enemy Russia is in preparation by the US and Germany, with backing from the non-taxpayers of Greece – the Greek oligarchs, Anglo-Greek shipowners, and the Greek Church. At the highest and lowest level of Greek government, and from Thessaloniki to Milvorni, all Greeks understand what is happening. Yesterday they voted overwhelmingly to resist. According to a high political figure in Athens, a 40-year veteran, “what is actually happening is a slow process of regime change.”

Until Sunday afternoon it was a close-run thing. The Yes and No votes were equally balanced, and the margin between them razor thin. At the start of the morning, Rupert Murdoch’s London Times claimed “Greek security forces have drawn up a secret plan to deploy the army alongside special riot police to contain possible civil unrest after today’s referendum on the country’s future in Europe. Codenamed Nemesis, it makes provision for troops to patrol large cities if there is widespread and prolonged public disorder. Details of the plan emerged as polls showed the ‘yes’ and ‘no’ camps neck and neck.” Greek officers don’t speak to the Murdoch press; British and US government agents do.

“It was neck to neck until 3 pm,” reports the political veteran in Athens, “then the young started voting. “

Can the outcome — the 61% to 39% referendum vote, with a 22% margin for ??? (No) which the New York Times calls “shocking” and a “victory [that] settled little” – defeat Operation Nemesis? Will the new Axis – the Americans and the Germans – attack again, as the Germans did after the first Greek ??? of October 28, 1940, defeated the Italian invasion?

The Kremlin understands too. So when the State Department’s Victoria Nuland visited Athens to issue an ultimatum against breaking the anti-Russian sanctions regime, and the Anglo-American think-tanks followed with warnings the Russian Navy is about to sail into Piraeus, the object of the game has been clear. The line for Operation Nemesis has been that Greece must be saved, not from itself or from its creditors, but from the enemy in Moscow. The Russian line has been to do nothing to give credence to that propaganda; to wait and to watch.

As the head of State’s Bureau of European and Eurasian affairs, Nuland is the official in charge of warmaking in Europe. Her record in the Ukraine has been documented here. Almost unnoticed, she was in Athens on March 17 to deliver two ultimatums. The communique released by the US Embassy in Athens was headlined, “we want to see prosperity and growth in Greece.”

Complete story at - http://johnhelmer.net/?p=13712

My note: I'm not so sure about the "Greek Church" part. My understanding is that each country's majority religions, the Greek Orthodox and the Russian Orthodox, see themselves as brother religions. But I'm no religion scholar.

[Demeter]

12. Dopn't stop there--it gets even better!

What Nuland (above, left) was doing with her hands is in the small print of the release. She told Greek Prime Minister Alexis Tsipras (right) not to break ranks with the NATO allies against Russia. “Because of the increasing rounds of aggression in eastern Ukraine” she reportedly said the US is “very gratified that we’ve had solidarity between the EU and the U.S., and that Greece has played its role in helping to build consensus.”

Nuland also warned Tsipras not to default on its debts to Germany, the European Central Bank, and the International Monetary Fund (IMF). Tsipras was told “to make a good deal with the institutions”. The referendum Tsipras called on June 27 was a surprise for Nuland. The nemesis in Operation Nemesis is the retribution planned for that display of Greek hubris.

Having thundered for a year on the illegitimacy of the March 2014 referendum in Crimea, saying yes to accession to Russia, the State Department ignored the Greek referendum for forty-eight hours. On June 29, asked what the US government was thinking of doing if the outcome “is a no vote”, Nuland’s spokesman, Mark Toner, said the US would ignore it. “We’re focused on, frankly, the opposite, which is finding a path forward that allows Greece to continue to make reforms, return to growth, and remain in the Eurozone.”

The only other official Washington reference to the Greek referendum came on June 30 when the question at the State Department daily briefing was: “what are you doing within the International Monetary Fund, of which the U.S. is the largest shareholder, to try to also press from that side for more leniency with the Greeks?” The official reply: “we’re carefully monitoring the situation…we continue to believe that it’s important that all sides work together to get back to a path that’s going to allow Greece to resume reforms and to return to growth within the Eurozone. But again, we’re monitoring this very closely.”

The last concerted attempt the US government made to overthrow an elected Greek government was against Prime Minister Andreas Papandreou between 1987 and 1989...

AND STILL, THERE'S MORE MEDDLING BY US IN GREECE!

[Demeter]

13. BANG UP CONCLUSION

"... all you need to know is who the Greeks must be saved from. If the Greeks have voted more demonstratively than the Ukrainians against sacrificing themselves to this idea, the experts are confident that’s not democracy, as the Axis understands it, but hubris, for which there’s Operation Nemesis. Natch!"

[Ghost Dog]

17. The Economist on Greek Church-State relations, last November:

"... At full stretch, severing the connection between church and state would presumably mean: i) stripping the Orthodox church of its constitutionally guaranteed role as the "prevailing religion" in Greece; ii) ending the arrangement where priests and many other people who work for the church are on the state pay-roll; iii) tidying up and in some cases sequestering the church's vast and ill-defined property portfolio; iv) putting a stop to the prayers and confessional instruction which are part of the daily diet for almost all pupils at state schools; v) ending all tax exemptions for religious institutions. Certainly there are plenty of secular leftists in Greece who would love to do all that. At a time when Greece's old left-right fissures are widening again, there is lots of anti-clerical feeling among socialists who suspect the church leadership of colluding with the political right or even far-right. But in reality, say people close to the world of church-state relations, the old ties are loosening already and this process might not accelerate all that much under a hard-leftist government.

Already, under a conservative-led government, the rate at which priests are being ordained, and hence joining the state pay-roll, has slowed to a trickle—not for any ideological reason but because of internationally-mandated budget cuts. And the old practice of inculcating school-children with Orthodox Christian doctrine is giving way to something more like "religious studies" as classrooms fill up with migrants from places ranging from Albania to China.

And for several reasons, a Syriza-led government would hold probably hold back from a head-on confrontation with the church. One is that the church has played a big role in providing food, medicine and other basics to victims of the economic crisis who would otherwise be desperate; Syriza might not like that state of affairs, but it can't be changed overnight. Another is that changing any part of the Greek constitution is a burdensome procedure—it can't be done in the lifetime of a single parliament—and stripping out all the provisions which privilege the church and various monasteries would take an enormous amount of political energy and time. Yet another is that Greece has a small but modestly flourishing tradition of "religious leftism"—people who combine religious faith with radical political ideas—and that is one of the many impulses that Syriza seeks to harness..."

[Demeter]

22. Very imprtant, useful post

First mention of the religious aspect I've seen. Thanks!

[Demeter]

14. Don Quijones: Wikileaks Exposes How TISA Will Gut Financial Regulations All Over the World

http://www.nakedcapitalism.com/2015/07/don-quijones-wikileaks-exposes-how-tisa-will-gut-financial-regulations-all-over-the-world.html

By Don Quijones, Spain & Mexico, editor at Wolf Street, who also writes at Raging Bull-Shit. Originally published at Wolf Street

It’s almost impossible to keep anything secret these days – not even the core text of a hyper-secret trade deal, the Trade in Services Agreement (TiSA), which has spent the last two years taking shape behind the hermetically sealed doors of highly secure locations around the world. According to the agreement’s provisional text, the document is supposed to remain confidential and concealed from public view for at least five years after being signed! But now, thanks to WikiLeaks, it has seeped to the surface.

The Really, Really Good Friends of Services

TiSA is arguably the most important – yet least well-known – of the new generation of global trade agreements. According to WikiLeaks, it “is the largest component of the United States’ strategic ‘trade’ treaty triumvirate,” which also includes the Trans Pacific Partnership (TPP) and the TransAtlantic Trade and Investment Pact (TTIP).

“Together, the three treaties form not only a new legal order shaped for transnational corporations, but a new economic ‘grand enclosure,’ which excludes China and all other BRICS countries” declared WikiLeaks publisher Julian Assange in a press statement. If allowed to take universal effect, this new enclosure system will impose on all our governments a rigid framework of international corporate law designed to exclusively protect the interests of corporations, relieving them of financial risk, and social and environmental responsibility. Thanks to an innocuous-sounding provision called the Investor-State Dispute Settlement, every investment they make will effectively be backstopped by our governments (and by extension, you and me); it will be too-big-to-fail writ on an unimaginable scale.

Yet it is a system that is almost universally supported by our political leaders. In the case of TiSA, it involves more countries than TTIP and TPP combined: The United States and all 28 members of the European Union, Australia, Canada, Chile, Colombia, Costa Rica, Hong Kong, Iceland, Israel, Japan, Liechtenstein, Mexico, New Zealand, Norway, Pakistan, Panama, Paraguay, Peru, South Korea, Switzerland, Taiwan and Turkey. Together, these 52 nations form the charmingly named “Really Good Friends of Services” group, which represents almost 70% of all trade in services worldwide.

As WOLF STREET previously reported, one explicit goal of the TiSA negotiations is to overcome the exceptions in GATS that protect certain non-tariff trade barriers such as data protection. For example, the draft Financial Services Annex of TiSA, published by Wikileaks in June 2014, would allow financial institutions, such as banks, to transfer data freely, including personal data, from one country to another – in direct contravention of EU data protection laws. But that is just the tip of the iceberg. According to the treaty’s Annex on Financial Services, we now know that TiSA would effectively strip signatory governments of all remaining ability to regulate the financial industry in the interest of depositors, small-time investors, or the public at large.

1. TiSA will restrict the ability of governments to limit systemic financial risks. TiSA’s sweeping market access rules conflict with commonsense financial regulations that apply equally to foreign and domestic firms. One of those rules means that any governments that seeks to place limits on the trading of derivative contracts — the largely unregulated weapons of mass financial destruction that helped trigger the 2007-08 Global Financial Crisis — could be dragged in front of corporate arbitration panels and forced to pay millions or billions in damages.

2. TiSA will force governments to “predict” all regulations that could at some point fall foul of TiSA. The leaked TISA text even prohibits policies that are “formally identical” for domestic and foreign firms if they inadvertently “modif[y] the conditions of competition” in favor of domestic firms:

For example, many governments require all banks to maintain a minimum amount of capital to guard against bank collapse. Even if the same minimum is required of domestic and foreign-owned banks alike, it could be construed as disproportionately impacting foreign-owned banks… This common financial protection could thus be challenged under TISA for “modifying the conditions of competition” in favor of domestic banks, despite governments’ prerogative to ensure the stability of foreign-owned banks operating in their territory.

3. TiSA will indefinitely bar new financial regulations that do not conform to deregulatory rules. Signatory governments will essentially agree not to apply new financial policy measures which in any way contradict the agreement’s emphasis on deregulatory measures.

4. TiSA will prohibit national governments from using capital controls to prevent or mitigate financial crises. As we are seeing in Greece right now, capital controls are terrible. But for a government facing the complete breakdown of the financial system, they serve as a last resort for restoring some semblance of order. Even the IMF, which urged countries to abandon capital controls in the Washington Consensus years of the 1990s, recently endorsed capital controls as a means of maintaining the stability of the financial system. But if TiSA is signed, the signatory governments will be prohibited from using them: The leaked texts prohibit restrictions on financial inflows – used to prevent rapid currency appreciation, asset bubbles and other macroeconomic problems – and financial outflows, used to prevent sudden capital flight in times of crisis.

5. TiSA will require acceptance of financial products not yet invented. Despite the pivotal role that new, complex financial products played in the Financial Crisis, TISA would require governments to allow all new financial products and services, including ones not yet invented, to be sold within their territories.

6. TiSA will provide opportunities for financial firms to delay financial regulations. If signed, TISA will require governments to address financial firms’ criticism of a regulatory proposal when publishing a final version of the regulation. Even then, governments would be obliged to wait a “reasonable time” before allowing the new regulation to take effect. In the United States, such requirements have produced delays sometimes lasting years in the enactment of urgently needed financial and other safeguards. If the same process is applied across the globe, it would make it almost impossible for government to constrain the activities of the world’s largest banks.

What that would likely mean is that when (not if) a new global financial crisis takes place in the not-too-distant future, the banks will once again be on hand to lead efforts to clean up and rebuild with taxpayer money the very sector that they themselves have destroyed. Lather, rinse, repeat. Only this time, on an even grander scale.

[Demeter]

15. FROM THE COMMENTS

This has to be understood as a desperate rear-guard defense of America’s ability to skim off the cream, an ability that has been in effect since 1945 and which our economy is based on. It is not about Obama, per se: this is a last-gasp effort to keep our corporations and banks “on top”. With a narrow industrial base and a fading advantage in most technologies, this round of economic agreements is crucial to lock in existing advantages for as along as possible. America preaches competition, but its big players have no interest in competition. They have enjoyed all the advantages of scale, of massive government investment and subsidy, of controlling the worlds reserve currency, and of the muscle and guile of the US Intel racket and the US military. Now they need to completely rig the rules of “trade” in order to maintain their spectacular profitability and inflated stock prices. Any but the most radical of presidents would have seen this as being a “vital national interest” and pushed hard for it. Given the power of the players behind it, it was inevitable that we would get it. The only questions left are: How much damage will it do? How long will it endure? What will inevitably replace it?

[Demeter]

16. EU accounting rules could mask onset of another financial crisis

http://www.ft.com/intl/cms/s/0/238d8b00-20b7-11e5-aa5a-398b2169cf79.html?siteedition=intl#axzz3f5bSNK3g

European regulators have come under attack from investors over proposed accounting rules they fear would mask the onset of another financial crisis. The rules, which are under discussion in Brussels, would require financial institutions to second guess whether the loans they have made to companies could default. The rule change means that if a bank lends to a company over 30 years, the risk of that loan defaulting would only be assessed over the first 12 months. Investors believe much longer-term analysis of potential defaults needs to be applied in order to prevent a repeat of the collapse of Lehman Brothers, the defunct US bank, in 2008.

Tim Bush, head of governance and financial analysis at Pirc, the shareholder consultancy that advises investors with total assets of £1.5tn, said: “The proposal does not reflect economic reality.”

Syed Kamall, a Conservative MEP and a member of the influential Economic and Monetary Affairs Committee of the European Parliament, has urged regulators to change their thinking.

He said: “I have never been given a satisfactory answer as to why Brussels is pursuing this inadequate measure.” He said banks’ failure to assess the true risks of their loans played a significant role “in causing the financial crisis”.

The proposal, known as International Financial Reporting Standard 9, is intended to strengthen previous rules that allowed banks to book profits from loans when they were made, without making any allowances for expected losses...

[Demeter]

18. GEEKS RULE!

To recap our story...Dilbert created an app for cell phones to stymie hackers, and the government wanted to kill him to protect its interests...Dilbert fled off the grid (in a much less effective way than Ed Snowden), wandered around, ate a poisonous berry, and was about to die...

[Demeter]

20. The Broker Who Saved America, OR: THE MAN WHO FUNDED THE REVOLUTION

FASCINATING BIT OF HISTORY, A BIT LATE FOR THE HOLIDAY, BUT STILL RELEVANT TO OUR STUDY OF ECONOMICS

LONG, WORTHY READ

http://thereformedbroker.com/2015/07/04/the-broker-who-saved-america-3/

[Demeter]

21. TAKE A HUMOR BREAK, GO SEE:

http://www.democraticunderground.com/10026943788

[MattSh]

24. Hey, if it takes cats to illustrate what's at stake...

well then, serve up the cats!

[bread_and_roses]

27. Too funny - even if

I'm not a fan of Sparta and besides, hope that the Greeks don't end up in a futilely heroic Thermopylae .... (but that's my persnickety compulsion toward exactitude .... the kitties are hilarious, and i particularly love the "you needs to starve for your own good" - it's PERFECT (on edit I should of course say PURRRRfect)

What amazes me is how many people buy into it .... around here, as elsewhere, the cultural indoctrination that the vampire Banksters must be protected at all costs.

I look across the road ... my neighbor has four cows, some chickens .... if the Dow crashed to zero today, he'd still have four cows and some chickens.

[Demeter]

28. Until a bankster came and stole them, or the government

I was not born cynical...I was made so.

[DemReadingDU]

23. Unions planning 24-hour strike on London underground

7/6/15 Unions planning 24-hour strike on London underground

London's transportation system could face widespread disruption beginning Wednesday afternoon if Transport for London (TFL) and union members do not reach a deal, which could lead to the biggest tube strike in over a decade. Tube drivers are threatening to strike over a proposed all-night service shift that would require them to work an unlimited number of weekends and overnight without a significant pay increase.

http://bnonews.com/news/index.php/news/id521

[Demeter]

29. Diane Rehm and her guests indulged in an hour of Greece-bashing this morning

The things they were saying that weren't true, and the insults casually tossed at Yanis and Tsipras, I had to turn it off.

The propaganda machine is in full voice--even if they have nothing true to say.

[MattSh]

30. Hey, they've got to keep doing their propaganda practice!

It's won't be too long before they turn back to Russia, and they must be at the top of their game for that!

[bread_and_roses]

31. breathless establishment tool on "Here and Now" irritated me today as well

Was in the car - was the woman host on "Here and Now" who oh-so-tentatively-and-breathlessly-as-if-it-were-the-most-daring-notion-ever asked if just possibly "austerity" was NOT the best way forward for Greece .... and interviewee did actually acknowledge some truth to the notion ....

I will say the next segment the interviewee (different than one above) did reference Greek unemployment level and that people were burning their furniture for heat last winter ....

But it seems to me these nuggets were lost in the rest of the utterly conventional narrative

so i guess in retrospect it was not as bad as what you heard, though there was plenty to irritate in the rest of the segment