Bold highlight added for emphasis of what irks me most. A reminder of the hierarchy which has the extreme wealthy on top and ALL government underneath and the 99% of the rest of us crushed below that.Despite the never ending assurances of the Federal Reserve that happy days are almost here again -- the same tune the Fed has sung for nearly seven long years -- there is mounting evidence that the U.S. is headed for another economic crash. It will be more terrible than the last.
The Washington Post headlined, "U.S. economic growth slows to 0.2 percent, grinding nearly to a halt."
Fox News reported the real story of unemployment: the official, good news government figure of 5.4 percent is a fiction, achieved by not counting the millions who have given up looking for work, and those who can find only part-time work.
Fox was playing catch-up. That story has been out there for years, but ignored by the corporate media and clueless politicians.
Tyler Durden reports in his blog, Zero Hedge, that year-on-year sales at the big retailers have taken a precipitous drop. Most Americans have no disposable income to dispose of, after they pay the food bill, mortgage, rent and utilities.
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Wholesale trade has fallen like a stone, dropping more than $100 billion over four months. Wholesalers provide the goods that retailers sell. If retail demand is off, wholesale trade is off. The last time it dropped like that was in 2008-2009. Post crash. Then it took seven months to go from the high to the low; now, only four.
New manufacturing orders indicate the future. Not good. In only one of the last seven months has there been growth in new orders. Things were not that bad during the 18-month-long credit crunch of late 2008 through 2009.
Poverty in the U.S. is off the charts. The number of children living in poverty is nothing less than shocking.
For almost seven years, seniors have seen their savings and pensions eaten alive.
Public and private debt are at record levels.
Durden reports that the median net worth of the American people is down 40 percent from where it was before the last collapse.
Tens of millions of Americans who are far worse off today than they were seven years ago will be brought to their knees in the next crash, while the wealthy will rest easy on an even greater cushion of wealth.
The people who know are running scared.
Former Fed Chairman Ben Bernake -- now cashing in as an adviser to a couple of hedge funds -- has sounded the alarm which he failed so spectacularly to sound before the last crash.
Apparently, Fed chairs may speak the truth only after they have done their bit for Wall Street and the 1 percent.
The root cause of this terrible distress is the failure of Congress to do what everyone in Washington promised to do, talks endlessly about doing, but never gets around to actually doing: creating good paying jobs in the obvious place -- infrastructure.
The need was obvious in 2008. It was obvious in 2012. It is obvious today. Jobs at a good wage are everything and infrastructure is the obvious place to start.
This is what the suddenly alert Bernake now urges: ""a well-structured program of public infrastructure development, which would support growth in the near term by creating jobs and in the longer term by making our economy more productive."
But it is not going to happen. The Fed, which pumped upwards of $20 trillion into Wall Street after the last crash, has steadfastly refused to make even a fraction of that available to state and municipal governments -- a move that could have stopped the "Great Recession" in its tracks seven long years ago.
And the GOP Congress will do nothing that might make President Obama and the Democrats look good before the next elections -- like improve the lives of more than 300 million Americans by putting the nation back to work..
The American people are trapped between a Fed that works for Wall Street and a GOP Congress that can't decide who it works for: Wall Street, the American people or itself.
dnmun said:no it is not.
dnmun said:there was no reason for the recession in 2008 to be so severe except for the actions of congress that allowed them to grandstand on this public excoriation of how they would not bail out wall street as they liked to say because it sells so many papers to the illiterates. the stock market itself did not collapse until congress refused to pass the TARP legislation when it was first voted on then they finally passed the TARP and the markets recovered.
2/6/15: Greece: Back to the [Groundhog Day] Future
Posted by Constantin Gurdgiev
Couple of weeks back I posted a detailed list of ECB ELA hikes since February 2015. So here's an updated table:
- Feb 5, 2015 = EUR59.5 bn
- Feb 12, 2015 = EUR65.0bn
- Feb 18, 2015 = EUR68.3 bn
- Mar 5, 2015 = EUR68.8bn
- Mar 12, 2015 = EUR69.4bn
- Mar 18, 2015 = EUR69.8bn
- Mar 25, 2015 = EUR71.0bn
- Apr 1, 2015 = EUR71.7bn
- Apr 9, 2015 = EUR73.2bn
- Apr 14, 2015 = EUR74bn
- Apr 22, 2015 = EUR75.5bn
- Apr 29, 2015 = EUR76.9bn
- May 6, 2015 = EUR78.9bn
- May 12, 2015 = EUR80.0bn
- May 21, 2015 = EUR80.2bn
- May 27, 2015 = EUR80.2bn
- Jun 2, 2015 = EUR80.7bn
Now, that implies 3 weeks cumulative ELA rises of EUR700mln and reserve cushion on ELA below EUR2.5bn by my estimate. And for all that, Greek Central Bank recoverable assets are currently at EUR41 billion. Ugh… Oh… the proverbial nose is tightening… but on who's neck?
The neck is somewhere in here - within the Greek Target 2 liabilities debate, liabilities that continue to rise, prompting a fine, but esoteric debate:
Sinn on his perpetual obsession, Target 2 liabilities an default: http://www.project-syndicate.org/commentary/varoufakis-ecb-grexit-threat-by-hans-werner-sinn-2015-05
Bershidky (really - Karl Whelan) on Sinns perpetual misunderstanding of Target 2: http://www.bloombergview.com/articles/2015-06-02/does-greece-have-a-diabolical-plan-b-
I side with Karl Whelan on this. What is material is Sinn's assertion that the Greek residents' "stock of money sent abroad and held in cash having already ballooned to 79% of GDP". And Greece is facing big bills on debt redemptions and wages and pensions in the next 3 months (see timeline here: http://trueeconomics.blogspot.ie/2015/04/24415-greek-debt-maturities-through-2016.html) or:
One thing is clear from all of this: Credit Swiss estimate of 75% chance of a deal being done this month on Greek 'programme', while the CDS markets are pricing in 75% probability of Greek default over the next 5 years:
And we have equally conflicting 'proposals' on how such programme might be arranged: http://www.zerohedge.com/news/2015-06-02/greece-troika-submit-conflicting-eleventh-hour-deal-proposals which can be summarised as "the bottom line seems to be that, fed up Syriza's unwillingness to concede its election mandate, the troika will now write the agreement for Greece and Tsipras can either sign it or not. Apparently, the IMF has scaled back its demands for EU creditor writedowns (another loss for Athens) but remains skeptical of the entire undertaking."
If this is true, the entire 'new deal' being offered to Greece amounts to a new can being kicked down the same road.
Map of the road? [note: the below table excludes short-term debt]
h/t to @NChildersMEP
So to sum up today on the Greek front:
ELA is running tight, just as deposit flights goes on;
Target 2 liabilities continue to mount;
Probability of default remains material at present;
Choices available to Greek authorities are Plan A: horrible and Plan B: terrible; and
Absent debt write down, even the best case scenario still leads to high risk of a political crisis in the short run and a default in the medium (3 years) term.
It's Back to the Future, in a Groundhog Day-like sorts of the Future...
With respect to our various national and global economic messes, we are all likely morons. Since the profession of solutions is the job of ... just another group of morons...Joseph C. said:dnmun's appears to be a fundamentalist ... and go against his ideas and you're a moronic loon in his eyes.
http://trueeconomics.blogspot.ie/2015/06/2615-greece-back-to-groundhog-day-future.html
...Choices available to Greek authorities are Plan A: horrible and Plan B: terrible; and
Absent debt write down, even the best case scenario still leads to high risk of a political crisis in the short run and a default in the medium (3 years) term...
First, politicians are still talking about limits to global warming to below two degrees. Which is not considered a "safe" limit by the climate science community. Not even one degree of global heating is "safe", never mind twice that. We have likely already passed the threshold where feedbacks like the the release of arctic methane and carbon kick in.Merkel has ensured that the communique at this summit will include a long-term aim to limit global warming to below two degrees. Merkel wants countries to commit to the Green Climate Fund, which is aiming for $100bn by 2020. Germany recently doubled its contribution to $8bn and Merkel has personally called on all industrial countries to contribute.
19/6/2015: Greek ELA and ECB... What's the Rationale?
Posted by Constantin Gurdgiev
The price of getting Greece ejected or pushed out of the euro has now risen once again as ECB added to the ELA provided to Greek banks amidst a bank run that is sapping as much as EUR800mln per day.
In basic terms, ECB is allowing lending via Eurosystem to Greek banks to fund withdrawals of deposits. Once deposits are monetised and shifted out of Greek banks, Eurosystem holds a liability, Greek depositors hold an asset and the latter cannot be seized to cover the former. ECB was very unhappy with doing the same for Ireland at the height of the crisis, resulting in a huge shift of ELA debt onto taxpayers' shoulders via Anglo ELA conversion into Government bonds.
But ECB continues to increase Greek ELA. Why? We do not know, but we can speculate. Specifically there can be only three reasons the ECB is doing this:
Reason 1: increase the cost of letting Greece go. If Greece crashes out of the euro zone, the ELA liabilities will have to be covered out of Eurosystem funds, implying - in theory - a hit on member-states central banks. In theory, I stress this bit, this means higher ELA, greater incentives to keep member states negotiating with intransigent Greece. Why am I stressing the 'in theory' bet? Because in the end, even if Greece does crash out of the euro area, ELA liabilities can be easily written off by the ECB or monetized (electronically) without any cost to the member states.
Reason 2: keep Greece within the euro area as long as possible, thus allowing the member states to hammer out some sort of an agreement. In theory, this implies that the ECB is buying time by giving cash to Greek depositors so they can run, in hope that they continue to run at a 'reasonable' rate (at, say, less than EUR2 billion per day or so). In practice, however, this is a very short-term position.
Reason 3: ECB is monetizing Greek run on the banks in hope that Greece does crash out of the euro. Here's how the scheme might work: increasing ELA for Greece weakens Greek banks and, simultaneously, strengthens the incentives for Greece to exit the euro once deposits left in the system become negligible and the economy is fully cashed-in. On such an exit, Greek residents will be holding physical euros that cannot be expropriated by the Eurosystem, and thus Greece can launch drachma at highly devalued exchange rate, while relying on a buffer of cash in euros held within the economy.
I am not going to speculate which reason holds, but I will note that all three are pretty dire.
Take your bets, ladies and gentlemen.
arkmundi said:Its the future of "global economies" that it would be good for everyone to take notice of. One nation defaulting on its debt is just another story to ignore, as most probably are. But what we're talking about goes far, far beyond that. Its widespread unsustainable debt that is a contagion to even more relatively healthy economies that is part of this on-going tragedy. What we're seeing is an unravelling of the bond markets, now going from bad to worse. Leading to the very likely scenario of another financial crisis, larger, more endemic than the last, that another round of "quantitative easing" is unlikely to solve. When the central banks no longer have any magic rabbits to pull out of their bag of tricks, the show is over.
Punx0r said:Greece has gone bankrupt five times already since 1826...
The Greek people have started withdrawing cash from their banks, their government is playing brinksmanship with the EU money-lenders while having no real plan for managing the country's finances. I can only think they're hoping for a huge write-off of their debt.
This isn't going to end well. The only question is whether Greece really is the "beginning of the end" for the EU.
As an European exchange-rate mechanism, it worked. As common-market, it worked. As an ideology of a United Federal States of Europe, it was doomed to fail.
The EU's disgraceful treatment of Greece
Whatever happens on Monday, Greece the country will survive this crisis – and the Greeks know it. The same can’t be said of the euro project – and we know it.
Could it be the case that in order to save the euro, the European elite destroys the EU? What is happening – and we are deeply involved – is quite shocking.
Last Thursday, by telling the world that he and others are preparing for a Greek exit from the euro, Michael Noonan – for some reason the most vocal finance minister on this issue – made certain that the Greek banks would experience a massive run on Friday.
Why is the rest of Europe trying to destroy the Greek banking system, which has already been made fragile by successive pro-European governments borrowing hand over fist and hoping to use the subsequent IOUs as collateral for the Greek banking system?
Why are we jumping on the bandwagon set in motion by the German media which relentlessly pursues the line that feckless lazy Greeks are only looking for debt forgiveness to make legitimate their idleness?
Are we so craven in our willingness to do someone else’s bidding that we forget historical facts?
I can understand that the German politicians looked their people in the eye and told them we will get all your money back from Greece, but why is Ireland faithfully being Germany’s greatest cheerleader?
Have we forgotten about Germany’s own history as the greatest European beneficiary of debt forgiveness? Or do our guys simply not know?
German memory – and that of its Irish supplicants – is very selective. There is no mention of the 1953 London Debt Agreement in their debates on Greece.
Why doesn’t someone remind Germany that in 1948 the introduction of the Deutsche Mark (backstopped by American capital) wiped out most of Germany’s domestic debt?
Or what about the fact that in 1953 half of Germany’s external debts, including their interest payments, were wiped out at the behest of a bankrupt Britain?
And furthermore, are we not aware that the Americans insisted the remaining debt payments could be spread out over a term of three decades?
Why doesn’t someone remind the Germans – and those in Ireland who want to be the best boys in the Teutonic class – that in the 1950s Germany’s debt was less than 20 per cent of their GDP, while much of the rest of western Europe in the 1950s struggled with debts of about 200 per cent of GDP?
How else do you think Germany could have rebuilt itself?
Albrecht Ritschl, an economic historian at the London School of Economics, estimated that the total debt forgiveness West Germany received from 1947 to 1953 was more than 280 per cent of Germany’s 1950 GDP.
This compares to 100 per cent of GDP that Greece has been pledged in aid since 2010. So the frugal Germans – who destroyed Europe, in case you had forgotten – got almost three times more debt forgiveness than the Greeks, who didn’t kill anyone!
Why doesn’t someone also point out that a clause in the London Agreement of 1953, which wiped out half of Germany’s debts determined that West Germany should only pay for the debts out of its trade surplus? This is exactly what the Greeks have put on the table, but they are rebuked by the likes of Christine Lagarde for not being credible.
Do our Department of Finance legates (who are playing a sleeveen role in this shameful piece of political theatre) not know that Germany’s debt repayment was limited in any one year to 3 per cent of West Germany’s export revenues?
What did this mean?
It meant that Germany’s creditors had to buy West German exports in order to be paid. Therefore, Germany did not have to resort to the Ponzi scheme of issuing new debt to pay for old debt.
Imagine if Greece asked that a certain percentage of Germans were obliged for the next ten years to take their holiday in Greece in order to give Greece the hard currency to pay back German banks?
It sounds strange, but that’s exactly the type of deal that Germany was given after World War II.
These are the overlooked facts. They have been replaced by the usual stereotypes that the Greeks – and by extension Italians, Spanish, Portuguese – are lazy Mediterraneans who want a German lifestyle but aren’t prepared to work for it.
We are witnessing a pathetic and shameful reinvention of history going on. Tomorrow there will be a Versailles Treaty-style conference, where the rest of Europe will dictate terms to the Greeks. By talking about the Greek exit from the euro on Thursday, the mainstream of Europe, who are supposed to do everything to make the euro an irrevocable system, have enfeebled the Greeks by forcing a bank run.
The Greeks are on their knees now – all the better to bully.
If the ECB turns off the taps, the banks in Athens will fold. Rather than protect the Greek banking system, the European Union has done everything in its power to crush it.
The Greeks are not innocent in this drama, but the crucial aspect to understand is that Syriza is the consequence not the cause of the crisis. The crisis was caused by German banks (and others) lending money to successive corrupt Greek governments.
None of these governments were ever described as radical when they were being feted in Berlin and Brussels, yet they were radically reckless.
Now the government that is charged with trying to sort everything out is labelled radical! How does that make you feel?
History is on the side of the Greeks. Whatever happens, Greece will survive, but if the euro system is based on selective interpretations of economic history, what hope has it in the next crisis?
Punx0r said:Well, AFAIK the EU "no bailout clause" is still in effect. Also, Germany's economy was destroyed by war, the Greek by greed.
It's a valid argument to suggest the Greeks could be given similar leniency as Germany received after WW2, but that supposes that circumstances haven't changed since then and the action taken back then was correct. That's kinda asking that for previous actions to be taken as strict precedent for future ones.
Resorting to stereotypes never helps, but the charges of corruption and endemic tax avoidance in Greece appear to be at least mostly true.