Greece Is Back: Germany, France, Creditors Hold Secret Meeting Due To Greek Bailout “Mounting Concerns”

There was a time – roughly between May 2010 and the spring fall of 2011 – when all the world had to worry about was Greece. Then the realization finally dawned that since a Grexit from the Eurozone would kill the EUR and the European integration dream with so much “political capital” invested, crush Deutsche Bank, and bring back the much dreaded (by German exporters) Deutsche Mark, it became clear that there is no fear that Greece, which is now a decrepit shell of a country with a collapsed economy and society in shambles, has now become a slave state to European bureaucrats, business and banks (in Nigel Farage’s words), will never be formally kicked out of Europe and only an internal coup would allow it to finally break free from the clutches of unelected European tyrants. And then the world moved on to more important things: like Japan, China Emerging Markets and how they are all enjoying the Fed’s taper. Sadly, we have to report, that Greece is once again baaaaack.

According to the WSJ, “top officials peeled away from colleagues after a euro-zone finance ministers meeting in Brussels Monday evening for a secret meeting to discuss mounting concerns over Greece’s bailout.

WSJ adds:

High-level officials from the International Monetary Fund, the European Commission, the European Central Bank, senior euro-zone officials and the German and French finance ministers were present, according to people with direct knowledge of the situation. They spoke on condition of anonymity because they aren’t authorized to talk to the press.

 

They were trying to figure out how to tackle two issues threatening to unsettle the fragile economic recovery in Greece and the broader euro zone.

 

They discussed how to press the Greek government to forge ahead with unpopular structural reforms; and second, how to scramble together extra cash to cover a shortfall in the country’s financing for the second half of the year, estimated at €5 billion-€6 billion ($6.81 billion-$8.17 billion).

Of course, this being Europe, nothing was decided: “The meeting was inconclusive, the people familiar with the situation said. Talks with the Greek authorities continue remotely—though representatives of the three institutions, known as the troika, have put on hold their plans to travel to Athens. Concerns are growing because Greece faces a large maturity of government bonds in May of €11 billion. The IMF hasn’t disbursed any aid to Greece since July and is €3.8 billion behind in scheduled aid payments. The IMF insists on having a clear view of the country’s finances 12 months ahead, and this condition hasn’t been met.”

And so the posturing resumes, with the Troika pretending it won’t hand over the funds unless Greece “reforms”, and Greece promising the “reform” as soon as it gets the funds. Nothing new here. What is new, is that finally the facade of Greek sovereignty and independence was stripped away as decisions regarding Greece took place… without
Greece: “Greek Finance Minister Yiannis Stournaras, who was briefing the
press in the same building at the time, wasn’t invited.”

Which is right – after all when a nation is enslaved and has no sovereignty, it doesn’t deserve to have a voice in its future.


    



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Greece Is Back: Germany, France, Creditors Hold Secret Meeting Due To Greek Bailout "Mounting Concerns"

There was a time – roughly between May 2010 and the spring fall of 2011 – when all the world had to worry about was Greece. Then the realization finally dawned that since a Grexit from the Eurozone would kill the EUR and the European integration dream with so much “political capital” invested, crush Deutsche Bank, and bring back the much dreaded (by German exporters) Deutsche Mark, it became clear that there is no fear that Greece, which is now a decrepit shell of a country with a collapsed economy and society in shambles, has now become a slave state to European bureaucrats, business and banks (in Nigel Farage’s words), will never be formally kicked out of Europe and only an internal coup would allow it to finally break free from the clutches of unelected European tyrants. And then the world moved on to more important things: like Japan, China Emerging Markets and how they are all enjoying the Fed’s taper. Sadly, we have to report, that Greece is once again baaaaack.

According to the WSJ, “top officials peeled away from colleagues after a euro-zone finance ministers meeting in Brussels Monday evening for a secret meeting to discuss mounting concerns over Greece’s bailout.

WSJ adds:

High-level officials from the International Monetary Fund, the European Commission, the European Central Bank, senior euro-zone officials and the German and French finance ministers were present, according to people with direct knowledge of the situation. They spoke on condition of anonymity because they aren’t authorized to talk to the press.

 

They were trying to figure out how to tackle two issues threatening to unsettle the fragile economic recovery in Greece and the broader euro zone.

 

They discussed how to press the Greek government to forge ahead with unpopular structural reforms; and second, how to scramble together extra cash to cover a shortfall in the country’s financing for the second half of the year, estimated at €5 billion-€6 billion ($6.81 billion-$8.17 billion).

Of course, this being Europe, nothing was decided: “The meeting was inconclusive, the people familiar with the situation said. Talks with the Greek authorities continue remotely—though representatives of the three institutions, known as the troika, have put on hold their plans to travel to Athens. Concerns are growing because Greece faces a large maturity of government bonds in May of €11 billion. The IMF hasn’t disbursed any aid to Greece since July and is €3.8 billion behind in scheduled aid payments. The IMF insists on having a clear view of the country’s finances 12 months ahead, and this condition hasn’t been met.”

And so the posturing resumes, with the Troika pretending it won’t hand over the funds unless Greece “reforms”, and Greece promising the “reform” as soon as it gets the funds. Nothing new here. What is new, is that finally the facade of Greek sovereignty and independence was stripped away as decisions regarding Greece took place… without
Greece: “Greek Finance Minister Yiannis Stournaras, who was briefing the
press in the same building at the time, wasn’t invited.”

Which is right – after all when a nation is enslaved and has no sovereignty, it doesn’t deserve to have a voice in its future.


    



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Third Banker, Former Fed Member, “Found Dead” Inside A Week

If the stock market were already crashing then it would be simple to blame the dismally sad rash of dead bankers in the last week on that – certainly that was reflected in 1929. However, for the third time in the last week, a senior financial executive has died in what appears to be a suicide. As Bloomberg reports, following the deaths of a JPMorgan senior manager (Tuesday) and a Deutsche Bank executive (Sunday), Russell Investments’ Chief Economist (and former Fed economist) Mike Dueker was found dead at the side of a highway in Washington State. Police said the death appeared to be a suicide.

 

Via Bloomberg,

Mike Dueker, the chief economist at Russell Investments, was found dead at the side of a highway that leads to the Tacoma Narrows Bridge in Washington state, according to the Pierce County Sheriff’s Department. He was 50.

 

He may have jumped over a 4-foot (1.2-meter) fence before falling down a 40- to 50-foot embankment, Pierce County Detective Ed Troyer said yesterday. He said the death appeared to be a suicide.

 

Dueker was reported missing on Jan. 29, and a group of friends had been searching for him along with law enforcement. Troyer said Dueker was having problems at work, without elaborating.

 

Dueker was in good standing at Russell, said Jennifer Tice, a company spokeswoman. She declined to comment on Troyer’s statement about Dueker’s work issues.

But as Michael Snyder noted recently, if the stock market was already crashing, it would be easy to blame the suicides on that.  The world certainly remembers what happened during the crash of 1929

Historically, bankers have been stereotyped as the most likely to commit suicide. This has a lot to do with the famous 1929 stock market crash, which resulted in 1,616 banks failing and more than 20,000 businesses going bankrupt.

 

The number of bankers committing suicide directly after the crash is thought to have been only around 20, with another 100 people connected to the financial industry dying at their own hand within the year.

Dueker had also been a research economist at the St. Louis Fed:

He published dozens of research papers over the past two decades, many on monetary policy, according to the St. Louis Fed’s website, which ranks him among the top 5 percent of economists by number of works published. His most-cited work was a 1997 paper titled “Strengthening the case for the yield curve as a predictor of U.S. recessions,” published by the reserve bank while he was a researcher there.

So, with stocks a mere 4% off their highs, are so many high ranking and well respected bankers committing suicide?


    



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Third Banker, Former Fed Member, "Found Dead" Inside A Week

If the stock market were already crashing then it would be simple to blame the dismally sad rash of dead bankers in the last week on that – certainly that was reflected in 1929. However, for the third time in the last week, a senior financial executive has died in what appears to be a suicide. As Bloomberg reports, following the deaths of a JPMorgan senior manager (Tuesday) and a Deutsche Bank executive (Sunday), Russell Investments’ Chief Economist (and former Fed economist) Mike Dueker was found dead at the side of a highway in Washington State. Police said the death appeared to be a suicide.

 

Via Bloomberg,

Mike Dueker, the chief economist at Russell Investments, was found dead at the side of a highway that leads to the Tacoma Narrows Bridge in Washington state, according to the Pierce County Sheriff’s Department. He was 50.

 

He may have jumped over a 4-foot (1.2-meter) fence before falling down a 40- to 50-foot embankment, Pierce County Detective Ed Troyer said yesterday. He said the death appeared to be a suicide.

 

Dueker was reported missing on Jan. 29, and a group of friends had been searching for him along with law enforcement. Troyer said Dueker was having problems at work, without elaborating.

 

Dueker was in good standing at Russell, said Jennifer Tice, a company spokeswoman. She declined to comment on Troyer’s statement about Dueker’s work issues.

But as Michael Snyder noted recently, if the stock market was already crashing, it would be easy to blame the suicides on that.  The world certainly remembers what happened during the crash of 1929

Historically, bankers have been stereotyped as the most likely to commit suicide. This has a lot to do with the famous 1929 stock market crash, which resulted in 1,616 banks failing and more than 20,000 businesses going bankrupt.

 

The number of bankers committing suicide directly after the crash is thought to have been only around 20, with another 100 people connected to the financial industry dying at their own hand within the year.

Dueker had also been a research economist at the St. Louis Fed:

He published dozens of research papers over the past two decades, many on monetary policy, according to the St. Louis Fed’s website, which ranks him among the top 5 percent of economists by number of works published. His most-cited work was a 1997 paper titled “Strengthening the case for the yield curve as a predictor of U.S. recessions,” published by the reserve bank while he was a researcher there.

So, with stocks a mere 4% off their highs, are so many high ranking and well respected bankers committing suicide?


    



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Lavabit Appeal to Set Email Privacy Precedent

Secure email provider Lavabit failed to surrender its encryption
keys to the government in 2013. It’s been paying the price. In what
some
call a landmark privacy case, the Virginia-based 5th U.S. Circuit
Court will decide whether or not Lavabit sufficiently
complied
with the lower court’s orders last year. Three judges
listened to opposing arguments Tuesday.

The feds presented a search warrant to the company in the summer
2013, in what many believe was a hunt for the emails of NSA whistle
blower Edward Snowden. In response, encrypted email service Lavabit
suspended operations in August 2013.

The company faced a tough decision. If Lavabit had relinquished
its Secure Sockets Layer (SSL) private keys, it would have provided
the government unrestricted access to 400,000 users’
communications, not just the one user the FBI was looking for.
Since users expected privacy—whether from governments or
corporations—making the private key accessible undermines the point
of Lavabit’s privacy service. Rather than comply with court’s
orders, Lavabit founder owner Ladar Levison decided to halt
Lavabit’s operations completely.

Levison told BBC that
if he wins the appeal he filed last August, Lavabit could rise from
the dead. It would also set a precedent for future privacy
communication cases.

Brian Hauss, a legal fellow for the American Civil Liberties
Union (ACLU) told BBC News:

Mr Hauss hopes the case can “establish a principle that
governments can’t use a hammer when it should be using a
scalpel”.

“If the court does not find in Lavabit’s favour, technology
companies will look for new ways to protect user data,” he
added.

But judges seem to disagree about the focal point of the case.

PC World
explains:

For the proceedings, the judges actively listened to and
questioned the arguments of both sides, though they seemed wary of
turning the case away from the specifics of why Lavabit did not
comply with court orders to turn over data on one of its users, and
towards the larger issues that Lavabit raised in its
highly publicized defense
of what scope the government should
have over those parties who hold SSL (secure socket layer) keys to
encrypted data.

Last year, U.S. government meddling led to the closure of
privacy services like Silent
Circle
and
CryptoSeal
. Faced with a government hostile toward privacy
services, innovative, secure communication products are opening
outside of the United States.

Reason‘s J.D. Tuccille
argued
in August:

Unfortunately, the government’s position seems to be
the same as that of the Mafia: If you’re told to do business with
the mob, you don’t get to decide otherwise.

We’ll see if the government continues down that path. A decision
could take a few weeks.

Read more on Lavabit here.

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Here’s What It’s Like to Work for the TSA

Politico magazine is running
a long personal essay by Jason Harrington
, a former
Transportation Security Administration worker, about his time
working the security lines at Chicago’s O’Hare airport. The tone is
confessional, and apologetic, and he reveals a lot about the
ugliness of the job. A few lowlights below:

The job was demoralizing: “It was a job that had me
patting down the crotches of children, the elderly and even infants
as part of the post-9/11 airport security show. I confiscated jars
of homemade apple butter on the pretense that they could pose
threats to national security. I was even required to confiscate
nail clippers from airline pilots—the implied logic being that
pilots could use the nail clippers to hijack the very planes they
were flying.”

The rules were nonsense: “Once, in 2008, I had to
confiscate a bottle of alcohol from a group of Marines coming home
from Afghanistan. It was celebration champagne intended for one of
the men in the group—a young, decorated soldier. He was in a
wheelchair, both legs lost to an I.E.D., and it fell to me to tell
this kid who would never walk again that his homecoming champagne
had to be taken away in the name of national security.”

Privately, TSA workers knew the agency’s full-body scanning
technology didn’t work:
“We knew the full-body scanners didn’t
work before they were even installed. Not long after the
Underwear Bomber incident, all TSA officers at O’Hare were informed
that training for the Rapiscan Systems full-body scanners would
soon begin. The machines cost about
$150,000 a pop. Our instructor was a balding middle-aged man who
shrugged his shoulders after everything he said, as though in
apology. At the conclusion of our crash course, one of the officers
in our class asked him to tell us, off the record, what he really
thought about the machines. ‘They’re shit,’ he said, shrugging. He
said we wouldn’t be able to distinguish plastic explosives from
body fat and that guns were practically invisible if they were
turned sideways in a pocket.”

The body scanning machines may not have been able to catch
terrorists. But they provided TSA agents with plenty of fodder for
jokes about the passengers they were scanning:
“Just as the
long-suffering American public waiting on those security lines
suspected, jokes about the passengers ran rampant among my TSA
colleagues: Many of the images we gawked at were of overweight
people, their every fold and dimple on full awful display.
Piercings of every kind were visible. Women who’d had mastectomies
were easy to discern—their chests showed up on our screens as dull,
pixelated regions. Hernias appeared as bulging, blistery growths in
the crotch area. Passengers were often caught off-guard by the
X-Ray scan and so materialized on-screen in ridiculous, blurred
poses—mouths agape, à la Edvard Munch. One of us in the I.O. room
would occasionally identify a passenger as female, only to have the
officers out on the checkpoint floor radio back that it was
actually a man. All the old, crass stereotypes about race and
genitalia size thrived on our secure government radio
channels.”

Read the whole thing
here

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UMich Confidence Drops Most In 3 Months

Previous month's epic miss and hurriedly revised expectations from UMich confidence was 'baffled with schizophrenic bullshit' when the Conference Board printed at near record post-crisis highs earlier in the week. It is perhaps not unexpected that despite a drop MoM, following the huge miss last month that UMich confidence would very modestly beat expectations. As in the last 2 cycles, we saw an echo surge in confidence and that has now (just as in the last two cycles of confidence) begun to fade. Both current conditions and economic outlook fell MoM.

 

The cycle is once again echoing – 4year 4 month rise, echo bounce and now fade…

 

Of course, confidence remains crucial in the reflation of market multiples and hope-fueled exuberance but – as we reiterate below – the cycle once again appears to have peaked…

 

As a gentle reminder, as we have noted previouslyUMich Confide – this move in confidence is key…

But, it's all about confidence… investors will not be willing to pay increasing multiples unless they are confident that the future streams of earnings are sustainable and forecastable… And simply put, the current levels of Consumer Sentiment need to almost double for the US equity market tp approach historical multiple valuation levels…

 

 

[18]

 

and the cycle appears to be shifting…

Via Citi,

Is consumer confidence set to turn?

[19]

Consumer Confidence is once again following a dynamic where we see it move higher for 4 years and 4 months before beginning to collapse

  • Moves higher from 1996-2000 with a smaller dip halfway through in October 1998
  • Moves higher from 2003-2007 with a smaller dip hallway through in October 2005
  • Moves higher and so far tops out in June 2013. Also sees a small dip halfway through in October 2011.

 

Higher yields do not help confidence…

[20]

 

A sharp rise in mortgage rates has a negative feedback loop to consumer confidence. For those families and individuals that were now looking/able to enter the housing market, the recent spike in rates acts as a headwind.

 

In addition to the economic backdrop, there is plenty of tail risk as we head into the end of the year. Oil prices have been rising since the summer began (and in reality since the Summer of 2012), partially due to geopolitical risks which are very much “top of mind.” A bigger spike due to a supply shock would choke the economic recovery.(In our view)

In the US, the appointment of a new Fed Chairman and the upcoming budget/debt ceiling debates are likely to bring added volatility. Tapering itself can also induce concern as the “Bernanke put” is being removed from markets.

In Europe, many of the structural problems related to the single currency union have not actually been addressed and the peripheral countries could still create turmoil going forward (see Fixed Income section focusing on Italy in particular for more on this). There has also been little concern with both the German elections and the German Court decision on the constitutionality of the OMT program. A surprise in either of these could be cause for concern.

Emerging Markets are still not out of the woods yet as growth has been weak relative to expectations and countries with current account deficits are beginning to feel pressure in their FX and Bond markets. This is an issue we believe is only starting to develop which we will continue to expand on at later dates.(We have also looked at this in our EM FX section this week)

Overall, the weak economic backdrop, poor housing recovery and potential for tail risk events over the next few months suggest that we have topped out in Consumer Confidence, a warning sign for equity markets.

[21]

 

The relationship between Consumer Confidence is clear, and IF June did mark the high and Confidence continues to decline, then we would expect to see that translate to weakness in the equity markets. The removal of the “Bernanke put” only adds to this concern.

A major turn has taken place in equity markets on average four months after Consumer Confidence turns, which would point to a decline beginning around September-October. As we have previously expressed, we remain of the bias that a correction in equity markets on the order of 20%+ is likely this year/ into 2014 and the current dynamics support such a move.

Should we see a decline of that magnitude, it is almost certain that yields would move lower in a rush to safe assets.

 

For now the mid-year highs are holding as confidence cannot escape its secular downturn.


    



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Chicago PMI 59.6 Beats Despite Decline: Employment Drops Most Since April

The worst news that could happen for stocks today was a Chicago PMI beat – after all it is becoming all too clear that the market is begging for a tapering of the tapering, and any and every bad news will be welcome. Alas, the Purchasing Managers Institute did not get the memo, and moments ago MNI-Deutsche Boerse reported (to subscribers first), that the January print was 59.6, below the revised December print of 60.8 but above the expected 59.0. This was thje third consecutive monthly fall following October’s jump to the highest since March 2011.  The only silver lining for stocks was that the Employment component slipped into contraction for the first time in nine months, printing at 49.2, down from 51.6. Must have been the fault of that horrible polar vortex in January then.. Or Bush of course.

According to the report, “the Employment component fell sharply for the second consecutive month to the lowest since April 2013. The majority of companies said their workforce was unchanged with some of them reporting higher productivity of their employees.” And now we look forward to more baffling with bullshit from both ADP and the BLS, which are sure to also contradict each other in an economy where every print is now certifiably made up by goalseek-o-trons.

The other components of note: price paid modestly higher at 64.9 from 63.3, as well as Production, New Orders and Order Backlogs which also increased slightly, having fallen for the past two months.

Prices Paid rose to the highest level in more than a year as suppliers continued to request price increases.
Commenting on the MNI Chicago Report, Philip Uglow, Chief Economist at MNI Indicators said, “Business activity continued to ease in January but remained at a relatively high level. Production and New Orders remained firm, and while Employment fell back into contraction, this doesn‘t appear to be indicative of current demand conditions.”

“There have been concerns that putting the brakes on monetary easing could damage business. Most respondents, though, thought that the Federal Reserve’s decision to begin tapering their bond purchases in December would not have a significant impact on their business”, he added.

Let’s refresh that in a month or so…


    



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Summing up Ben Bernanke’s reign in four numbers

dishonest ben 150x150 Summing up Ben Bernankes reign in four numbers

January 31, 2014
Sovereign Valley Farm, Chile

First of all, a very Happy New Year to our many Chinese readers.

According to the ancient Zodiac, today we are shedding the coils of the year of the Snake in favor of the Horse.

Given this symbology, it is perhaps a very small irony that today is also the final day in office for Ben Bernanke, chairman of the US Federal Reserve. Let’s review the statistics:

1) When Mr. Bernanke took office in 2006, the Fed had $834.6 billion in assets, the vast majority of which were US Treasuries.

As of Wednesday, Mr. Bernanke’s Fed now counts $4.1 trillion in assets. And the balance sheet is stuffed full of mortgage debt ‘guaranteed’ by insolvent government agencies.

2) When Mr. Bernanke took office, the Fed’s capital ratio (net equity divided by total assets) was 3.22%.

This capital ratio is a hugely important number in banking that represents a sort of ‘margin of safety’. In a severe crisis situation, banks with a higher capital ratio are able to withstand major financial shocks.

Candidly, 3.22% is not high; this means that the Fed would effectively be rendered insolvent if its assets lost more than 3.22% of their value. So the Fed that Mr. Bernanke inherited was not exceptionally healthy.

But today, Mr. Bernanke leaves office with the balance sheet in far worse condition. The Fed’s capital ratio is just 1.34%. And it’s deteriorating rapidly.

Three years ago, the Fed’s capital ratio was 2.17%. A year ago it was 1.82%. Six months ago it was 1.54%. And now today just 1.34%. It doesn’t take a rocket scientist (or a PhD in economics) to see how quickly this is unraveling.

The Fed now has a razor thin margin of safety to guarantee a bloated balance sheet crammed full of questionable assets. This is not exactly the height of responsible stewardship.

Has it helped? I suppose that depends on whom you ask.

3) When Mr. Bernanke took office, the Dow Jones Industrial Average stood at 10,954, and the US government could borrow money for ten years at 4.57%.

Today the Dow is at 15,569, and the 10-year note is 2.65%.

So this has been a pretty good run for folks who have thrown money in the stock market or have heavily indebted themselves.

Yet over 50% of Americans don’t own a single share of stocks. And as of 2010, 10% of Americans own 81% of all stocks.

Then there’s the Federal government, which has been able to pass off trillions of dollars of debt to a willing central banker, as well as generate tax revenue from all the stock investors’ capital gains.

4) Most folks, however, have seen a different side of the Fed’s expansion. The FAO food price index, for example, has increased from 122 to 207, and the labor force participation rate declined to its lowest level in decades under Mr. Bernake’s tenure.

It’s fairly clear if you look at the data objectively that Mr. Bernanke’s policies have left the Fed (and consequently the global financial system) in far more precarious condition than when he started, yet disproportionately benefited the US government and small percentage of society at the expense of everyone else.

This is not to say that Mr. Bernanke is some evil mastermind bent on nefarious ends.

When I listened to him explain his decision-making process at a dinner in Washington a few months ago, it became clear that he is very well intentioned and honestly believes that his policies help.

Unfortunately the road to ruin is almost always paved with good intentions.

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Sheldon Richman Says Obama and Kerry Jeopardize Peace With Iran

President Barack Obama and Secretary of State
John Kerry should make up their minds: Do they want war or peace
with Iran? We should hope for peace, but Sheldon Richman believes
Obama and Kerry make optimism difficult. Ideally, the Obama
administration would simply exit the Middle East, taking all its
military and economic aid with it. The U.S. government cannot
micromanage events there, especially when it is no honest, neutral
broker. But, this doesn’t seem like it will happen anytime
soon.

View this article.

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