Europe’s Banks Uptick, Though It’s Not Clear What That Means

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

For the first time in thirty-five months, overall lending in Europe was higher year-over-year. Not since January 2012 had that been the case, as shrinking in lending was a de facto monetary limit on where the ECB wants the European economy to go. And while one month is not necessarily the start of a durable trend, indications had been for some time that total lending activity had at least been flattening out after the long decline.

ABOOK Feb 2015 Europe Lending

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The High Cost of Capitalism

Submitted by Dr. Paul Craig Roberts – Institute for Public Economy

In my book, The Failure of Laissez Faire Capitalism , I explain the concept of external or social costs. These are the costs associated with production that are not incurred by the producer but are inflicted on outside third parties, most often the environment, such as land, air, and water resources on which humanity is dependent. In models demonstrating the efficiency of capitalism in allocating resources, economists include assumptions that move external costs out of the picture.

Finian Cunningham describes external costs associated with fracking. and

If the cost of earthquakes to homeowners and owners of commercial buildings and damaged and ruined water resources had to be covered by the fracking companies, the total cost of production would exceed the value of the oil and gas recovered. As long as the oil price was high, the frackers made money by imposing what could well be the largest production costs on people who do not participate in the profits of the enterprise. Continue reading

Is It Socialism or Just Failure?

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

Harris&Ewing House-Capitol tunnel, Washington, DC

Feb 3 1939 It’s all still about Greece, and that makes sense, if nothing else Syriza is a breath if not a tornado of fresh air. But those too pass. The question at the end remains: did anything really change? It’s quite possible, don’t get me wrong, but Tsipras and Vanoufakis are busy looking out for the people who voted for them, not the rest of the Europe, or the world for that matter. And neither should they.

They’ve already gotten good response from Obama, from France and Britain, and if only for that reason they will get more. But you have to understand what they are trying to do: getting a better life for their own people, and that’s hard enough all by itself. The best they can do for now, hopefully, is that. But Greece is merely a symptom of something bigger and deeper that is going wrong.

There’s an ideological battle happening between money and wellbeing, between people and banks. Western leaders have so far chosen to protect money and banks, instead of people and their wellbeing, and that’s why we find ourselves where we do. Choosing money before people can only end in the demise of the system that makes such a choice. That, however, is apparently terribly hard to comprehend.

And that got Greece where it is. That’s why Europe set up a ‘union’ that shares a currency but that has no provisions to transfer funds from – even temporarily – weak regions from stronger ones. Even the US has that, or it would have imploded long ago. It’s the kind of thing that makes you wonder if maybe the EU wasn’t set up from the start so Germany could exploit the Mediterranean. Continue reading

How Much Smaller Is The Economy Now?

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

The dissection of the economy as it exists right now is usually limited to a narrow cross section of only GDP and the unemployment rate. As long as both are moving in the “right” direction, even if relatively sluggishly, the mass conclusion is that a recovery is in force and will remain so absent any “shock.” Theoretically, that owes to both Milton Frieman’s “plucking model” (which suggests that an economy will of its own accord move toward its potential once “shocks” are removed) and the idea of “aggregate demand.” In the latter case, all that matters is that some economic activity takes place with no regard to how or why.

ABOOK Feb 2015 Economy Recovery

So the majority view of the current economy is as presented above. There was a nasty recession that ended sometime in the middle of 2009, and everything has been gaining ever since. Of course even the FOMC has admitted intermittently that the pace of “recovery” has been unsatisfactory, but that hasn’t changed the overall interpretation.

While the direction is nice and plays well in a limited role in terms of media dissemination of that narrative, it literally does not add up. Just viewing the labor market in a wider context shows that “recovery” has been absent as only the direction conforms to the idea. A true recovery is not just advancing, but doing so in a manner that rather easily attains prior levels of economic expansion (the plucking model has a great deal of validity).

It is that second criterion that invalidates the idea of recovery, and thus the current narrative about the economy. As I noted last week, the entire purpose of an economic system is labor specialization, so rising GDP may seem better than the alternative, if it doesn’t correspond to fulfilled labor advancement there is something very wrong.

ABOOK Feb 2015 Economy Hours Worked

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Greece Changes Strategy: No Longer Demands Debt Write Off, Proposes Debt Exchange Instead

Submitted by Tyler Durden  –  ZeroHedge

Over a week after the new Greek government came to power, it has presented its first actual proposal of how it hopes to negotiate with Europe that does not involve the infamous “debt write off”, which as both Germany and the ECB have made clear, is a non-starter as it impairs the ECB’s balance sheet and leads to a loss of “faith” in the money printer, the legacy monetary system and so on. So instead of yet another debt restructuring, the FT reportsthat Yanis Varoufakis “would no longer call for a headline write-off of Greece’s €315bn foreign debt. Rather it would request a “menu of debt swaps” to ease the burden, including two types of new bonds.” Actually he still does, only he is not calling it as such.

The first type, indexed to nominal economic growth, would replace European rescue loans, and the second, which he termed “perpetual bonds”, would replace European Central Bank-owned Greek bonds.

Of course, the problem immediately emerges when one considers what we explained a long time ago: namely that a distressed debt exchange, such as what Greece is proposing, is what the rating agencies have always deemed an Event of Default, and thus something which the ECB will never agree with as once again impairs an ECB-held security. To be sure, the Greeks realize that this proposal is nothing but a debt haircut under a different name. To wit: “[Varoufakis] said his proposal for a debt swap would be a form of “smart debt engineering” that would avoid the need to use a term such as a debt “haircut”, politically unacceptable in Germany and other creditor countries because it sounds to taxpayers like an outright loss. This would mean that in order for such a deal to be successful, the Troika would have to bribe Moody’s and S&P to keep their mouths shut and to “exclude” Greece from their traditional event of default definition (something which the recent DOJ “settlements” could provide assistance with).

Another aspect of the proposal is the Greek desire to link debt, or rather interest, to GDP, which begs the question: what happens if Greek GDP continues to decline – does Europe pay the Greeks a negative interest? Sarcasm aside, there are two problems with the Greek GDP-linked proposal. The first, and most important one, is that it won’t work. Continue reading

Gold and Silver Surge Over 8 Per Cent In January On Reignited Global Risks

Submitted by Mark O’Byrne  –  GoldCore

In January, gold surged 8 per cent in dollar terms, 11 per cent in pound terms and a very large 16 per cent in euro terms. January’s 8.4% gain for gold in dollar terms was the best month in terms of price gains in three years.

Thus once again, gold bullion performed its role as a hedging instrument and a safe haven asset in January as the outlook became decidedly more uncertain – particularly in the Eurozone.

Gold in Euros – 1 Month (Thomson Reuters)

Gold’s 8.4% gain in January is its largest single month rise since 2012. Figures released on Friday indicate that US GDP was down sharply to 2.6% in the fourth quarter of 2014, following a 3rd quarter surge at 5% as low oil prices begin to take their toll on the shale oil industry and the sectors that depend on it.

Unless the U.S. economy begins to grow more robustly, it is unlikely that the Federal Reserve will be able to raise rates any time soon. This should support sentiment towards gold and lead to further demand.

Meanwhile, this morning came further confirmation that Europe as a whole has sunk into deflation – year on year prices declined by 0.6%. The chronically fragile European banking system cannot afford a prolonged bout of deflation. Continue reading

Tsipras Does Not Rule Out Russian Aid As UK Chancellor Calls Greece “Greatest Risk To Global Economy”

Submitted by Tyler Durden  –  ZeroHedge

“It is clear that the stand-off between Greece and the eurozone is the greatest risk to the global economy,” warns UK Chancellor George Osborne adding that he hopes Greece’s new finance minister “acts responsibly,” as Varoufakis toured Europe to discuss Greece’s ‘demands’. Mainstream media’s attention, however, is not focused on this warning (remember, Greece is small and contained is the meme to pay attention to), but instead proclaimed Greece’s pivot to Russia over when in fact, Tsipras words did anything but ‘rule out’ Russian aid as he said – specifically – “we are in substantial negotiations with our partners in Europe and those that have lent to us,” adding that with regards Russia, “right now, there are no other thoughts on the table.” Hardly the definitive “ruling out” that US media spins.

As Reuters reports, Varoufakis also met British officials, seeking more European allies, although Britain is not a member of the euro zone.

It is clear that the stand-off between Greece and the euro zone is the greatest risk to the global economy,” Britain’s finance minister, George Osborne, said after their meeting.

“I urge the Greek finance minister to act responsibly but it’s also important that the euro zone has a better plan for jobs and growth,” Osborne said.

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Greece Under Attack — Pray For Yanis Varoufakis

Submitted by Dr. Paul Craig Roberts – Institute for Public Economy

Greece’s new Finance Minister is a highly intelligent person. His likes are not to be found in any Western government. As he stands in the way of those who are determined to complete their looting of Greece, the Western looters are out to get him.

The BBC, as the interview in the link below demonstrates, was sicced on him. Much more is to come. Moreover, if the new Greek government is able to stand its ground and to prevent the continuation of the horrific looting of the Greek people, assassination of its leading members is not unlikely. Washington will not permit any independent governments to arise in Europe. If a Greek government succeeds in standing up for the Greek people and actually representing them, the idea might spread to Italy, Spain, Portugal, and Ireland, and then into Eastern Europe. Washington’s control over Europe would unravel.

The BBC presstitute substituted a deposition for an interview. She reeked with hostility toward the minister, an indication of the fury that foreign financial institutions and their vassal governments feel toward the new Greek government. As I wrote the other day, if western elites hate something more than they hate democracy and truth, it is accountability for themselves. You can bet your life that presstitutes like the BBC will do the elite’s hatchet work on the new Greek government just as they do on the Russian government, the Chinese government, and the Iranian government, and just as they did on the Serbian, Iraqi, Libyan, and Syrian governments and on the Taliban.

Apocalypse Now and Forever

Submitted by James Howard Kunstler  –

As a political psychoanalyst I find the Super-bowl halftime show the best concise index of how psychotic American culture is becoming from year to year, and the 2015 version signaled a complete break from reality, a nightmare of twerking robots in a hall of mirrors, as if America had completely surrendered its tattered soul to some rogue motherboard pulsing deep within Dr. Evil’s subterranean palace of sin. Hence it is the perfect analog for understanding otherwise incomprehensible happenings such as the USA’s role in fomenting further chaos and mayhem in Ukraine.

How otherwise to explain things like this morning’s New York Times report that the USA “now supports providing defensive weapons and equipment to Kiev’s beleaguered forces, and an array of administration and military officials appear to be edging toward that position….”

Earth calling New York Times readers: I regret to inform you that this decision was already reached over a year ago when we paid for the coup d’état against the elected President, Viktor Yanukovych after the poor sap decided to not sign up with EU but rather The Russian-backed Eurasian Customs Union. Whoops! You’re so out of here, Bub, State Department Under Secretary Victoria Nuland burbled in a clandestinely recorded phone call to the American ambassador. Will somebody please find Yats! Yes Yats! [UKR politician Arseniy Yatsenyuk] and plug the Bluetooth earpiece of power into his skull! Continue reading

Mr. Varoufakis Arrives In London

Submitted by Tyler Durden  –  ZeroHedge

The new Greek PM has a thing against ties; The new Greek finmin, on the other hand, has a thing for boots and barbour jackets as seen in this series of photos of him arriving from Paris (where he secured French support for the Greek debt “renegotiation“) for a meeting with UK chancellor George Osborne.

Economy Class – A man of the people!

Spot the suit…….

What did they talk about? Here is the UK side of things via the FT:

Mr Osborne said: “We had a constructive discussion, and it is clear that the stand-off between Greece and the eurozone is the greatest risk to the global economy. I urge the Greek finance minister to act responsibly but it’s also important that the eurozone has a better plan for jobs and growth.

“It is a rising threat to the British economy. And we have got to make sure that in Europe as in Britain, we choose competence over chaos.”

Mr Varoufakis, who was wearing a wax jacket over his suit and sporting the trademark tieless look of the new Greek cabinet, met George Osborne, the chancellor, in Downing Street, where he was told that the UK expected Athens to honour its obligations.

Downing Street had earlier said that Mr Osborne would tell his Greek counterpart the UK would not be sympathetic towards a wholesale restructuring of Greece’s debt.


Buckle Up! Accidents Ahead …

Submitted by William Bonner, Chairman – Bonner & Partners

A Moment of Pause

We don’t know whether US stock prices are going up or down. They usually go up and down. But we suspect they are going up and down even more. From Bloomberg:

Equities trading has become more volatile amid signs that the plunging price of crude and a stronger dollar are eroding corporate profits.

The S&P 500 dropped 1.4% Wednesday, bringing its slide this month to 2.8%, the most since January 2014. The Chicago Board Options Exchange Volatility Index jumped 32% in the previous two days, its biggest gain in almost seven weeks.

The Fed is no longer buying bonds to prop up financial assets. It doesn’t have to. The Europeans and Japanese are on the case. Between them, they’re set to pump the equivalent of $1.5 trillion into financial markets in 2015.

Why? Never mind. It’s all nonsense. But it is not without real-world consequences – some foreseeable and others not. And here a moment of pause is appropriate. We take our cap off to Mr. Market and salute him. There must be 100,000 full-time economic and financial analysts in the world. They are all watching, studying and forecasting. But how many saw the price of oil falling below $50?


Photo credit: Brady Holt

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The Daily Debt Rattle

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

EU’s Juncker Wants To Scrap Troika’s Mission To Greece (Reuters)
Croatia Just Canceled The Debts Of Its Poorest Citizens (WaPo)
Greece’s Problems Result From Eurozone Having No Fiscal Policy (Guardian)
Greece Asks ECB to Keep Banks Afloat as Debt Deal Sought (Bloomberg)
Greece Wants Special ECB Help While Going ‘Cold Turkey’ on Aid (Bloomberg)
My Friend Yanis, The Greek Minister Of Finance (Steve Keen)
Obama Expresses Sympathy for New Greek Government (WSJ)
France Open to Easing Greek Debt Burden (Bloomberg)
Eurozone Alarm Grows Over Greek Bailout Brinkmanship (FT)
Syriza’s Cleaners Show Why Economics Needs A New Broom (Guardian)
Americans Are Failing To Pump Gas-Price Savings Back Into The Economy (WSJ)
Oil Workers in US on First Large-Scale Strike Since 1980 (Bloomberg)
Falling Prices Spread Pain Far Across The Oil Patch (WSJ)
Oil Companies Draw on Creative Financing to Stay Afloat (Bloomberg)
BP To Follow Shell In Cutting Spending (Guardian)
China’s Feeling the Pressure to Join Global Easing (Bloomberg)
ECB Bond-Buying Plan Has Investors Questioning How It All Works (Bloomberg)
Automakers Can’t Make Air Bags Work (Bloomberg)
Currency War Claims Another Casualty: Denmark (Bloomberg)
Is Reserve Bank of Australia The Next Central Bank To Ease? (CNBC)
US Companies Face Billions In Venezuela Currency Losses (Reuters)
Fleeing Capital Clips Wings On US Yields (CNBC)
Obama Targets Foreign Profits With Tax Proposal (Reuters)

Continue Reading: Debt Rattle February 2 2015 –