Euro Pacific Capital
By: John Browne
Tuesday, July 5, 2011
Last week, the Greek parliament voted by a narrow margin to pass an economically crippling austerity plan of some $40 billion in return for some $159 billon of fresh liquidity injections. Although many hailed the event as a needed first step on a long road to recovery, I believe the austerity program will make a bad situation worse. It is a flawed solution that stems from a false premise: that Greece should continue to be part of the euro zone, and continue to use the euro as its currency.
To return to national economic viability Greece must abandon its use of the euro currency, which has become a financial straight jacket. Nevertheless, Greek politicians may have agreed secretly to accept the austerity in name only, in return for a liquidity bailout that will buy time for European unity to solidify. Once political unity is restored, we should expect more massive financial transfers from northern countries, present day Germany and Britain, to the subsidized southern regions.
As its price to maintain the status quo, central bank lenders, including the IMF and ECB, are demanding that Greece sell off some $72 billion of its national assets. The likely buyers will be international companies based in the EU, U.S. and possibly even China. Such a fire sale can't restore the Greek economy, but it gives the appearance that the Greeks are paying something for their loans, and it provides cover to northern European politicians who are feeling increasing frustration from voters who have been continually asked to foot the bill for southern European profligacy.
In contrast, Greece could have decided instead to abandon the euro and devalue a new Greek currency unilaterally to pay its debts. This is the typical remedy for marginal economies that have gotten into debt quicksand. Most certainly, devaluation would reduce Greece's standard of living by slashing the purchasing power of Greek citizens. But in recompense it would boost exports and improve Greece's balance of payments. The Greeks could then begin the hard work of restoring their economy while maintaining ownership of their national assets.
However, if Greece was to abandon the euro, the shaken confidence could lead to a euro collapse, bringing to an end the idealistic dreams of a unified Europe. Politicians are desperate to avoid this no matter what it costs their increasingly subjugated peoples.
In addition, a Greek debt default would trigger massive losses on the books of EU banks, many of which had been 'persuaded' by their governments to invest in Greek debt. Also, major U.S. banks have profited hugely by selling Credit Default Swaps (CDSs) to insure these loans. Indeed, they have insured some $32.7bn of Greek debt alone. Furthermore, U.S. banks have invested directly in European sovereign debt. In other words, the financial pressure to keep Greece from defaulting is enormous.
The euro is the world's second largest reserve currency. Its dissolution would cause huge shockwaves in a currency system that already is causing some investors to hedge in precious metals. A collapse of the euro could likely send gold, silver and most food commodities skywards in price. As a result, politicians and the bankers share a common interest in saving Greece from debt default and so salvaging the euro, regardless of the effect on the Greek people.
Greece's vote to accept austerity has yet to be enacted in specific cuts and taxes, but when they do, expect public resistance that will dwarf what we have seen thus far. At that point we can expect this debate to be revisited. I believe that when the pressure becomes too intense, Greece may in fact return to the Drachma.
I have consistently argued in these columns that a sovereign debt crisis would develop into a possible currency collapse. The beginnings of this endgame can be seen today on the streets of Athens.
Tuesday, July 5, 2011
John "I reject the word compromise" Boehner Responds to Obama's Fruitless Invitation
Now Remember Grandchildren,
These Are Professionals. Do Not Attempt
Any of This At Home.
Washington (Jul 5) House Speaker John Boehner (R-OH) today issued the following statement after President Obama discussed his request for an increase in the national debt limit:
“The American people are worried about our economy, and our future. More than two years after the start of Washington Democrats’ ‘stimulus’ spending spree, they’re still asking, ‘where are the jobs?’
“We’re not dealing just with talking points about corporate jets or other ‘loopholes.’ The legislation the President has asked for – which would increase taxes on small businesses and destroy more American jobs – cannot pass the House, as I have stated repeatedly. The American people simply won’t stand for it. And their elected representatives in Congress won’t vote for it. I’m happy to discuss these issues at the White House, but such discussions will be fruitless until the President recognizes economic and legislative reality.
“Our focus should be on getting our economy back on track by making the spending reductions and structural reforms necessary to address our nation’s out-of-control debt. We can do so without raising taxes on America’s small business job-creators. I’m pleased the President stated today that we need to address the big, long-term challenges facing our country. Our nation’s long-term future requires presidential leadership to address those challenges.”
The Hill
June 29, 2011
House Speaker John Boehner (R-Ohio) called President Obama "sorely mistaken" that the House will support tax increases in a deal to raise the debt limit.
Boehner was quick to respond to remarks that Obama made in a Wednesday news conference, in which the president suggested that the House would vote for a measure to close so-called tax loopholes.
“The President is sorely mistaken if he believes a bill to raise the debt ceiling and raise taxes would pass the House. ... A debt limit increase can only pass the House if it includes spending cuts larger than the debt limit increase; includes reforms to hold down spending in the future; and is free from tax hikes," Boehner said in a written statement. Complete Article
7 Reasons Why America Needs a Good Depression NOW (Paul Farrell)
On Behalf of Grandchildren Everywhere...
Thank You Mr. Farrell
MarketWatch
By: Paul B. Farrell
July 5, 2011
SAN LUIS OBISPO, Calif. (MarketWatch) — No, do not raise the debt-ceiling. You heard me: Block the debt ceiling vote. Don’t raise it. America’s out-of-control. A debt addict. Time to detox. Deal with the collateral damage before it’s too late.
We need to fix America’s looming credit default, failing economy and our screwed-up banking system. Now, with a Good Depression. If we just kick the can down the road one more time, we’ll be trapped into repeating our 1930’s tragedy, a second Great Depression.
Yes, depression. Spelled: d-e-p-r-e-s-s-i-o-n. Wake up America, recessions do not work. Won’t work in the future. Remember that 30-month recession after the dot-com crash? Didn’t work. Why? Because in the decade since that 2000 peak, Wall Street’s lost an inflation–adjusted 20% of America’s retirement money.
And what about the so-called Great Recession of the 2008 credit meltdown? Didn’t work either. In fact, made matters worse: Wall Street got richer by stealing from the other 98% of Americans, the middle class, the poor. And now their conservative puppets in Washington want to make matters worse, widening the wealth gap further to benefit the Super Rich.
Seems nobody really gives a damn about our great nation any more. America’s now a capitalists anarchy: “Every (rich) man for himself.” Proxy battles are fought by high-priced lobbyists in a broken political system. America needs a 21-gun wake-up call. Yes, that’s why America needs a Good Depression. The economy’s bad now. But kicking the can down the road again will make matters much worse later.
America’s leaders lost their moral compass, lack a public conscience
This is not our first call for a Good Depression. As early as 2005 we began reporting on excessive debt. In November 2007 we warned of a crash dead ahead. The subprime credit meltdown had been accelerating for many months, although for a year our leaders kept misleading Americans: Fed Chairman Ben Bernanke’s “it’s under control.” Treasury Secretary Henry Paulson’s delusional “best economy I’ve ever seen in my lifetime.”
In August 2008 came the original of our seven reasons why America needs a Good Depression. Yes August, just two months before Wall Street banks collapsed into de facto bankruptcy, after many warnings predicting a crisis. This was no Black Swan. In September 2008 we reported on Naomi Klein, author of “Shock Doctrine: The Rise of Disaster Capitalism,” warning of Wall Street’s insidious plan to take over America:
“Nobody should believe the overblown claims that the market crisis signals the death of ‘free market’ ideology.” Then as the meltdown went nuclear, Klein warned: “Free market ideology has always been a servant to the interests of capital, and its presence ebbs and flows depending on its usefulness to those interests. During boom times, it’s profitable to preach laissez faire, because an absentee government allows speculative bubbles to inflate.”
But “when those bubbles burst, the ideology becomes a hindrance, and it goes dormant while big government rides to the rescue. But rest assured,” she predicted, Reaganomics “ideology will come roaring back when the bailouts are done. The massive debts the public is accumulating to bail out the speculators will then become part of a global budget crisis that will be the rationalization for deep cuts to social programs, and for a renewed push to privatize.”
Totally predictable: No Black Swans in 2000, 2008 … nor in 2012
Yes, all was predictable: The events of the past few years were well known in advance. In fact, the events of the entire decade were predictable. The rich got richer off the backs of the middle class and the poor. Why? “There’s class warfare all right,” warns Warren Buffett. “But it’s my class, the rich class, that’s making war, and we’re winning.”
And they are also blind and deaf to the havoc their free-market Reaganomics policies are creating, selfishly undermining America, the world’s greatest economic power.
Lessons learned? Zero. Why? Wall Street, Washington and Corporate America are focused on one narrow-minded short-term strategy: Economic g-r-o-w-t-h, bull markets, megabonuses, tax cuts. In good times they tout “free markets.” But when greed bombs, they throw free-market “principles” under the Reagan Revolution bus and unleash their mercenary lobbyists to go whining to Congress for huge taxpayer bailouts and access at the Fed discount window, to siphon off more taxpayer money. And they’ll do it again soon.
Wall Street and their cronies are doing such a miserable job, America needs a new strategy: First, stop “kicking the can down the road.” Let a good old-fashioned Good Depression do the job that our hapless, happy-talking leaders refuse to do. Take our medicine. Let a new depression clean house and reawaken Americans to core values.
Trust me folks, it’s either a Good Depression now … or a Great Depression 2. Here are seven reasons favoring the do-it-now strategy:
1: Capitalism’s now a lethal soul sickness, needs a reawakening
What’s the real problem? Not the economy, not markets, nor even politics. Yes, our economic pains are real. But they’re just symptoms. Something’s structural wrong. Since 2000 endless bad news: Greed, deceit, stupidity, corruption, unethical behavior, lack of moral conscience.
The real problem’s deep in our character, the “mutant capitalism” Jack Bogle warned of in “The Battle for the Soul of Capitalism.” Sadly, that battle was lost. With it we lost our soul, our moral compass. America’s character is measured by our net worth.
2. We’re already in the early stages of a Great Depression
Comparing today with the Great Depression is common sport. In a Newsweek special “Seeing Shades of the 1930s,” Dan Gross wrote: “Wall Street, after two terms of a business-friendly Republican president, self-immolated on a pyre of greed, incompetence and excessive optimism.” Today’s “new normal” economy means high unemployment for years, inflation driving prices, rising interest rates, more debt, chaos.
We are destroying ourselves from within. Former U.S. Comptroller General David Walker warns that “there are striking similarities between America’s current situation and that of another great power from the past: Rome.” Three reasons “worth remembering: declining moral values and political civility at home, an overconfident and overextended military in foreign lands, and fiscal irresponsibility by the central government.” We are becoming more vulnerable to external enemies.
3. Good Depression exposes our self-destruct bubble-thinking
Before the 2008 crash, “Irrational Exuberance” author Robert Shiller warned in the Atlantic magazine that “bubbles are primarily social phenomena. Until we understand and address the psychology that fuels them, they’re going to keep forming.” Housing inflated 85% in the decade: “Historically unprecedented … no rational basis for it.”
Bubble thinking is an toxic virus that infected everyone. Shiller warns of another coming: “We recently lived through two epidemics of excessive financial optimism … we are close to a third episode.”
Keep Reading
Monday, July 4, 2011
Geithner might be leaving and it took The Onion for Grandpa to realize I have been a bit hard on "The Geithner."
Grandpa wishes Mr. Geithner a speedy departure and I am sure we have not seen nor heard the last of Tim Geithner. Who knows, given the political machine in D.C., Mr. Geithner might end of with Goldman Sachs offering tax advice to the Lord himself, Lloyd Blankfein.
Whooda Thunk It, it took rereading The Onion for Grandpa to realize that maybe, just maybe I have been a bit hard on "The Geithner."
First Grandma, Treasury Secretary Geithner Up
All Night Talking, Laughing
February 11, 2009
ISSUE 45•07
WASHINGTON—Accounts from several White House staffers suggest Treasury Secretary Timothy F. Geithner and the president's live-in mother-in-law, Marian Robinson, have developed an unlikely bond, meeting nearly every night by the Green Room fireplace after Geithner has finished his daily economic briefing and Robinson has put her granddaughters Sasha and Malia to bed.
"They're generations apart, but they've really hit it off," said aide Jennifer Bronner, who often sees the 71-year-old retiree from Chicago's South Side and the 47-year-old overseer of the nation's economy spend hours giggling and whispering together late into the night. "Last night I heard [Robinson] call Secretary Geithner 'Honeybee' when she offered him one of her famous chocolate-chip walnut cookies and a mug of hot cocoa.
They share something that would warm the heart of even the most jaded old cynic." Despite his uphill battle against a worsening recession and failing global markets, Geithner's midnight chats with Robinson have reportedly taught him to take life one day at a time, not sweat the small stuff, and always save old nylons so they can be filled with potpourri and used to freshen sock drawers.
Geithner Refuses To Come Down Off Capitol Dome
February 22, 2010 ISSUE 46•08
WASHINGTON—Three days after a sulking Timothy Geithner climbed to the top of the U.S. Capitol dome, the treasury secretary remained steadfast Monday in his refusal to come down. "You all hate me," said Geithner, his arms crossed as he shouted at the crowd of onlookers gathered on the Capitol lawn below. "What do you care if I stay up here? You'll just make fun of me if I come down anyway. Well, I'm not coming down—not ever!" Federal security teams monitoring the situation said they believed Geithner might be planning an extended stay atop the dome, as evidenced by what appeared to be a burlap sack containing various snacks, a six-pack of root beer, and several copies of The Economist.
Cheney Dunk Tank Raises $800 Billion For Nation
February 2, 2009 ISSUE 45•06
WASHINGTON—Organizers reported Sunday that the 44th White House Carnival was a rousing success, raising a record $800,000,066,845 for the federal government—$800 billion of which came from a dunk tank featuring former vice president Dick Cheney.
According to Secretary of the Treasury and carnival volunteer Timothy Geithner, the 5-foot-deep tank has provided a much-needed boost to the nation's flagging economy.
"We expected a big turn out, but this is unbelievable," said Geithner, adding that it's tradition for the outgoing vice president to work the dunk tank. "More than half the country has already gone, and there's still about 20 million people stretching all the way to Maryland waiting for their chance to sink Cheney. We'll be leaving this booth open for as long as it takes for everyone to get a turn." Peel back more of The Onion.
Sunday, July 3, 2011
Obama (scolder-in-chief) Packs his Bags for a Camp David Vacation
“You need to be here. I’ve been here. I’ve been doing
Afghanistan and bin Laden and the Greek crisis.”
Capitol Hill Blue
By: Doug Thompson
July 1, 2011
After scolding Congressional Republicans for failing to work hard at resolving the debt crisis — and urging Congress to stay in town over the July 4th holiday and act — President Barack Obama packed his bags and headed to Camp David for a vacation.
In an astounding show of political hypocrisy the scolder-in-chief practiced the old Washington art of “don’t do as I do, do as I say.”
Obama flees Washington after issuing a long list of one-liners aimed at the GOP.
He claimed his daughters accomplish more with their homework than Congress does in dealing with the debt crisis, bringing back — to some — visions of former one-term Democratic President Jimmy Carter‘s incredible admission that he once turned to his daughter Amy for advice on nuclear policy.
“There is more activity in a nursing home than there is in the House under the GOP majority,” Obama said.
While no one can claim with a straight face that Congress accomplishes much, hearing one politician claim he is more adult than another is — in itself — childish.
Obama, like everyone else in the messy debt-limit debacle, is posturing and jockeying for position. He knows full well that nothing will happen until the last minute and that the blame for the delay lies as much with his own party as with recalcitrant Republicans.
Governing is not a high priority on either end of the National Mall. Both the White House and Congress play politics while Americans suffer in the worst economic downturn since the Great Depression and that will not stop after August 2 when the debt ceiling is extended — as it most certainly will.
With public approval of both parties in the crapper, voters head into the 2012 election year with more pessimism about the future. Polls show 39 percent of Americans believe the economy will never recover and that it doesn’t matter which party is in control of Congress or living at 1600 Pennsylvania Avenue.
Obama to Congress: Do your Job by Michael Crowley Time Swampland (not to be confused with Swamp People).
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