Greece: The Big Picture Update, And Why Deutsche Bank Thinks Europe Will Fold

Submitted by Tyler Durden  –  ZeroHedge

The Greek situation summaries Greece by Deutsche Bank’s George Saravelos have consistently been among the best in the entire sellside. His latest Greek update, which is a must read for anyone who hasn’t been following the fluid developments out of southeast Europe, which fluctuate not on an hourly but on a minute basis, does not disappoint.

But while his summary of events is great, what is of far greater significance is his conclusion, namely that ultimately Europe will fold: “we consider the most likely outcome to be a Eurogroup offer of a new Third program” and “given that the current program expires this February the offer to negotiate a new Third program may provide political room for the government to sit on the negotiating table. At the same time such an offer is very likely to be attached to strict conditions, with the willingness to accommodate t-bill issuance an open question.Developments overnight suggest that this has become less likely, imposing maximum pressure on the government to reach agreement within a matter of weeks.”

If DB is right, and if Europe folds, the question then is what concessions will the ECB and the Eurozone be prepared to give to Italy, Spain and all the other nations where anti-European sentiment has been on a tear in recent months, and especially in the aftermath of Syriza’s stunning victory.

From Deutsche Bank

Greek Update

Over the last couple of weeks we have framed developments in Greece around three questions:

First, under what conditions would the Troika be willing to continue negotiating with Greece?

Second, does the Greek government accept these conditions?

Third, how does the ECB link Greek bank financing to program negotiation? Continue reading

The Hard Work Of Strong Dollars

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

Even Harley Davidson is against the “strong dollar” at this point, which I think says a lot about how financialism has destroyed even this most basic sense of “money.” For the record, Harley’s profit was down “slightly” with the company of course blaming the “dollar.”

The toothpaste business has also been seriously affected, afflicting Colgate where Latin America is a big part of the revenue stream. The company is making an effort to proclaim that if you take out currency everything is, if not fine, then less troubling.

The consumer products maker, which controls nearly 45 percent of the global toothpaste business, said fourth-quarter organic sales, which exclude the effects of foreign exchange, acquisitions and divestments, rose 6 percent because of higher volumes and better pricing.

That’s one way of looking at the problem and is consistent with an industry (finance, especially equity trading) that no longer adheres much with stringent rules about harmonizing earnings reports. When the “dollar” was “falling” you never heard much about its impact boosting both the top and bottom lines, but now that it hurts so much it “needs” to be taken into consideration. Apples to apples, if it is “in” when it’s good, then it is “in” when it’s bad.

For Colgate, that is a big deal since Latin American sales were actually down 6% in the fourth quarter. As much as the company wants to use last year’s “dollar” rate for comparison purposes, it just doesn’t work like that in any meaningful way except earnings presentations. Europe was down 7.5% and Africa -10%, but Asia was positive at 4.5%. Overall company sales were off by 3% despite that +6% “organic” fakery. Continue reading

PCR Interviewed by the Russian analytical magazine Political Education

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

Russian Interview 2-04-15

What is your viewpoint about the situation in Donbass region? Could you give us some prognosis of further development of the Ukrainian conflict?

For centuries Ukraine was part of Russia and then the Soviet Union.  When the Soviet Union collapsed, Washington insisted on breaking Ukraine apart from Russia.  This separation was required both by the Brzezinski doctrine and by the neoconservative doctrine of US world hegemony.

The creation of an independent Ukrainian state did not in itself succeed in breaking Ukraine from Russia.  The southern and eastern provinces are inhabited by Russians. There is much intermarriage, with relatives in both countries. And long integration within Russia had integrated the Ukrainian economy with Russia. Also, these historic connections resulted in favorable economic standing for Ukraine in trade with Russia.

When the Washington-financed and orchestrated “Orange Revolution” failed to deliver Ukraine into Washington’s hands, Washington spent $5 billion dollars over the next decade cultivating and grooming Ukrainian politicians and creating Washington-funded NGOs capable of organizing mass protests in Kiev.

When Russia used diplomacy to block Washington’s planned invasion of Syria and bombing of Iran, Washington realized that a New Russia had appeared, beyond Washington’s control, that was capable of blocking Washington’s intentions. Consequently, suddenly Washington’s focus shifted from the Middle East to Russia.  The groomed Ukrainian politicians were assembled.  The NGOs put the demonstrators in the streets.  The democratically elected Ukrainian government was overthrown, and Washington’s chosen puppets were put in office as per the intercepted telephone call between Victorian Nuland the US ambassador in Kiev.

Now Russia has an Ukrainian problem, brought to Vladimir Putin courtesy of Washington.
Washington hoped that its grab of Ukraine would result in Russia being evicted from its naval base in Crimea, but this hope was frustrated by the Crimean people, who voted overwhelmingly to reunite with Mother Russia. This enabled Russia to retain its warm water port. Continue reading

Time for #GreekLivesMatter

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

NPC Auto wreck, Washington, DC April 1917 

This is a post by Yves Smith at Naked Capitalism, who shares my worries (and quotes me) – as well as Syriza’s, of course – about what’s happening in Greece. She’s dead on in making the connection between #BlackLivesMatter and #GreekLivesMatter. What’s being done to Greece in this Chicago School style experiment is reprehensible and immoral. Europe is busy creating its own generation of gutter dwellers, first in Greece, and its own Untermenschen, yet again, just 70 years after WWII ended. Shame on them, and shame on you for letting it happen. Don’t!

If you are not part of the solution, you are part of the problem an accomplice.

The Troika’s willingness to turn Greece into a failed state first, as a side effect of its “rescue the French and German banks” operation, and now, as part of its German hegemony protection racket, is killing people and in the longer term will only accelerate the rise of extreme right wing elements in the Eurozone. As Ilargi wrote last week:

In what universe is it a good thing to have over half of the young people in entire countries without work, without prospects, without a future? And then when they stand up and complain, threaten them with worse? How can that possibly be the best we can do? And how much worse would you like to make it? If a flood of suicides and miscarriages, plummeting birth rates and doctors turning tricks is not bad enough yet, what would be?

If you live in Germany or Finland, and it were indeed true that maintaining your present lifestyle depends on squeezing the population of Greece into utter misery, what would your response be? F##k ‘em? You know what, even if that were so, your nations have entered into a union with Greece (and Spain, and Portugal et al), and that means you can’t only reap the riches on your side and leave them with the bitter fruit. That would make that union pointless, even toxic. You understand that, right?

Greece is still an utterly corrupt country. Brussels knows this, but it has kept supporting a government that supports the corrupt elite, tried to steer the Greeks away from voting SYRIZA. Why? How much does Brussels like corrupt elites, exactly? The EU, and its richer member nations, want Greece to cut even more, given the suicides, miscarriages, plummeting birth rates and doctors turning tricks. How blind is that? Again, how much worse does it have to get?

Does the EU have any moral values at all? And if not, why are you, if you live in the EU, part of it? Because you don’t have any, either? And if you do, where’s your voice? There are people suffering and dying who are part of a union that you are part of. That makes you an accomplice. You can’t hide from that just because your media choose to hide your reality from you.

It is time to take action, both here and in Europe. I hope you’ll send this post, and our related posts on the the ECB and Greece (see here for the overview and here on why the Fed is complicit) to people who would be sympathetic to the plight of Greeks, as well as to members of the Greek community themselves. Even if our suggestion is not a fit, it will hopefully spur them to come up with social media and public events to raise the visibility of the damage being done to Greece and other periphery countries in the name of misguided, destructive austerity policies.

Continue reading

The ECB Plays Hardball – Sort Of

Submitted by Pater Tenebrarum  –  The Acting Man Blog

Adios, Toxic Trash Debt from the Hellenic Province

The ECB continues to play the role of “bad cop” in the current back and forth between the Syriza-led government of Greece and the EU. The latest salvo entailed the ECB suddenly rescinding the waiver that made junk-rated Greek debt eligible for refinancing operations with the central bank. Here is the wording of its statement:

Eligibility of Greek bonds used as collateral in euro system monetary policy operations

The Governing Council of the European Central Bank (ECB) today decided to lift the waiver affecting marketable debt instruments issued or fully guaranteed by the Hellenic Republic.The waiver allowed these instruments to be used in euro system monetary policy operations despite the fact that they did not fulfill minimum credit rating requirements. The Governing Council decision is based on the fact that it is currently not possible to assume a successful conclusion of the program review and is in line with existing euro system rules.

This decision does not bear consequences for the counterparty status of Greek financial institutions in monetary policy operations.Liquidity needs of euro system counterparties, for counterparties that do not have sufficient alternative collateral, can be satisfied by the relevant national central bank, by means of emergency liquidity assistance (ELA) within the existing euro system rules.

The instruments in question will cease to be eligible as collateral as of the maturity of the current main refinancing operation (11 February 2015).

(emphasis added


Photo credit: Jonas de Ruytter

This means that by February 11, the ECB will have removed all junk-rated Greek debt from its balance sheet. However, for the moment this will make no difference to the Greek banking system in practice, as the Bank of Greece can still extend “ELA”, i.e., emergency liquidity assistance. So this is essentially just a warning shot.  Continue reading

Hidden Real Estate Gems in Central America

Submitted by William Bonner, Chairman – Bonner & Partners

The Ups and Downs of Wall Street

More ups. More downs. That was our forecast for the stock market. So far, volatility looks like a winner. The investor “fear gauge,” the VIX, is up nearly 70% from its 52-week low, set last July.

The US missed its growth target for the fourth quarter. GDP grew by just 2.6% instead of the consensus forecast of 3%.

lake arenal

Lake Arenal – there is an occasionally active volcano there.

Photo credit: Yaniv Ben Simon

As the Wall Street Journal reports:

“The fourth quarter report means that growth for all of 2014 clocked in at 2.4%, which is the best since 2.5% in 2010. It also means another year, an astonishing ninth in a row, in which the economy did not grow by 3%.”

America’s shale-oil states – the only part of the country where jobs and incomes had really been going up – are now fading. And world trade growth is slowing.

oil and gas extraction employmentUS oil and gas extraction employment – bust and boom, via St. Louis Federal Reserve Research – click to enlarge.

 Speculation and Momentum

Nothing wrong with 2.4% growth… if it was real. We have a feeling it will soon be discovered that this “growth” was fueled by an increase in credit rather than an increase in real output or productivity.

We also have a feeling that Tuesday’s big jump in the Dow will be revealed to be the work of speculators and momentum traders rather than serious long-term investors taking serious long-term positions. But we’ll have to wait to find out.

This is a long movie we’re watching. It began 44 years ago, when President Nixon ended the gold-backed money system. And it seems to have a few more years to run. So, let’s take an intermission…

Continue reading

Something Perturbs ‘Dollar’ Funding

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

Oh Europe. I have a growing sense that US credit markets are repeating the leadup to last October 15, though there isn’t any obvious expression of any such illiquidity (at the moment). For one thing, the eurodollar curve has taken the FOMC’s bluffs in complete stride, in fact doing the exact opposite as you would expect of a very close change off ZIRP. That was evident last week when at the release of the latest policy statement investors bought eurodollars everywhere instead of selling the curve. A week later and the curve remains in such a state.

ABOOK Feb 2015 Illiquid Eurodollars

Again, the only two interpretations are that funding markets are convinced that the economy is already in a worse state or that the Fed will make it so by following through with its threats. The beginning of the bearish trend in credit started with a funding anomaly back on November 20, 2013, a state of illiquidity that was eventually repeated and hugely amplified on October 15, 2014. Continue reading

US: ECB ‘Blackmails’ Greece – Bail-Ins, Bank Runs and “Grexit” Likely

Submitted by Mark O’Byrne  –  GoldCore

  • ECB ‘blackmails’ Greece – “Grexit”, bank runs, capital controls and bail-ins likely
  • Shock announcement yesterday led to volatility in markets; turmoil in Greece
  • Stocks, commodities including oil and Greek investments fall
  • Euro gold surged from EUR 1,104 to EUR 1,126 per ounce or 2 per cent
  • Greek government bonds will not be accepted as collateral in accessing cheap ECB liquidity from February 11
  • Greek banks are believed to be heavily exposed to Greek government bonds
  • Banks in difficulty will have recourse to Emergency Liquidity Assistance (ELA) from Greek central bank but ECB has authority to block ELA
  • Greece now shut out of markets
  • ECB putting interests of banks over those of people … again

The shock ECB announcement that it is to remove vital funding to Greek banks and financial system led to volatility in markets yesterday and demand for safe haven assets – including German bunds and gold.

Euro gold surged from EUR 1,104 to EUR 1,126 per ounce or 2% in minutes after the announcement.

People Versus The Banks

The ECB manoeuvre which came 15 minutes before the end of trading in New York caused the ETF which tracks to Greek stock market to plunge 6%, led by losses in Attica Bank and Piraeus Bank SA. Greek 10-year bond yields rose to 10.8%.

Financial carnage for Greek assets continued today. Greek borrowing costs leapt and bank shares were hammered this morning after. The Athens Stock Exchange FTSE Banks Index plunged 23 percent at the open before recovering somewhat. Three-year government borrowing costs leapt more than three percentage points to nearly 20 percent, leaving Greece utterly shut out of the markets. Continue reading

The Daily Debt Rattle

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

A World Overflowing With Debt (Bloomberg)
A Greek Morality Tale: We Need A Global Debt Restructuring Framework (Stiglitz)
Devaluation By China Is The Next Great Risk For A Deflationary World (AEP)
Pushing on a String? Two Charts Showing China’s Dilemma (Bloomberg)
Petrobras, Now $262 Billion Poorer, Exposes Busted Brazil Dream (Bloomberg)
Central Bank Surprises: Who’s Next? (CNBC)
There’s Nothing Left To Break The Euro’s Fall Now (MarketWatch)
Will the Next Recession Destroy Europe? (Bloomberg)
What You Need To Know About ECB’s Greek Collateral Decision (MarketWatch)
Greece Sticks to Anti-Austerity Demands Following ECB Loan Cut (Bloomberg)
Greek Finance Ministry Says ECB Decision Aimed At Eurogroup (Kathimerini)
What the ECB’s Move on Greek Government Debt Is Really All About (Bloomberg)
Greek Bill-Sale Demand Slumps as Nation Seeks New Debt Deal (Bloomberg)
Greek Austerity Sparks Sharp Rise In Suicides (CNBC)
Greece, Ukraine and Russia: History Lessons (CNBC)
Here’s Why The Oil Glut May Continue (MarketWatch)
Harvard’s Convicted Fraudster Who Wrecked Russia Resurfaces in Ukraine (NC)
One Brit Discovers Why Americans Are So Fat (MarketWatch)
Temperatures Rise as Climate Critics Take Aim at U.S. Classrooms (Bloomberg)

Continue Reading: Debt Rattle February 5 2015 –