Tag: banks

Abject surrender is never easy

The tide of national opinion appears to be turning against the sovereignty sell-outs of Syrizia:

The Greek leader is fighting for political survival after abandoning his opposition to austerity earlier this month with his country on the brink of financial collapse. He’s trying to hold off elections long enough to steer the country through the bailout negotiations, Michaelides said.

The plenary debate began at about 9 a.m. in Athens with the vote in the Greek parliament scheduled for around midnight. The bill under consideration includes the transposition of the European Union’s Bank Recovery and Resolution Directive into national law, as well as an overhaul of Code of Civil Procedure.

“There is a risk of the number of rebels growing,” said Michael Michaelides, a fixed-income strategist at Royal Bank of Scotland Group Plc in London. “It will be a question of whether Tsipras can maintain the party under control to prevent unwanted political developments.”

Considerable risk, I should think. But I think it’s cute that they call what is little more than an unconditional surrender veiled by a modicum of trivia to help the sell-outs save face “negotiations”.

The more interesting thing is the word that Tsipras had intended to go back to the drachma, but neither Russia nor China would come through with the $10 billion they needed to print drachmas. But I’m not sure I buy that, as they could have simply declared they were back on the drachma with or without the notes.

Don’t laugh, it will happen everywhere

Greeks don’t appear to be inclined to provide their banks with any more unsecured loans:

President of Greek Banks Association Louka Katseli appealed at the citizens to return their money to the banks. “Banks are absolutely trustworthy,” Katseli told Mega TV “as guaranteed by the ECB and the Bank Association, but they would have been even more powerful if 40 billion euros had not been withdrawn in the last months.

Katseli, a former PASOK Minister, appealed to citizens to return their deposits  to the banks “now that the banks are open” after a three-week holiday and capital controls.

“Let’s all help our economy,” Katseli urged Greeks and added “If you take your money out of your chests and houses – which are not safe in any case – and deposit at banks, this will enhance liquidity.”

Katseli’s appeal triggered laughter among Greeks and one stressed with hint to capital controls “Oh yes! I will bring my money back to the bank and get it back 60 by 60 euro.”

Another one noted “Ah sure! Banks will never see my money again, I prefer to buy tonnes of peanuts with it.”

A third commented “Certainly. And the banks will go bust after a while…”

A fourth reckoned a very unfortunate incident in 2010 and busted into tears and laughter. Back then Finance Minister Evangelos Venizelos had appealed to the Greeks to buy Greek bonds. The man invested 10,000 euro to help Greece. Two years later, his investment underwent a 53%-Haircut due to the PSI. Now the nominal value of his investment is … “I don’t even open the envelopes coming from the bank anymore, too frustrating,” he told me.

We are witnessing the slow death of the global financial system. While the elites fantasize about the idea of electronic money that can be controlled at all times, everywhere, they had better remember that their whole plan depends upon keeping the masses fat and happy.

Because these days, no one is untouchable.

Another kick of the can

The EU and the IMF managed, with extreme difficulty, to kick the can one more time than anyone thought they would be able to. But the cans keep getting bigger and heavier. And in the meantime, Paul Craig Roberts points out that the financial powers’ savage treatment of the Greeks, and determination to wring them dry in order to avoid paying out on the losing derivative bets by their banks, is teaching countries outside the system that there is nothing in it for them.

When a member of the EU itself is being looted and driven into the ground by its compatriots, how can Russia, China, and Iran expect better treatment? If the West has no good will toward Greece, where is the West’s good will toward Russia?

The Greek government was forced to capitulate to the EU, despite the support it received from the referendum, because the Greeks relied on the good will of their European partners and underestimated the mendacity of the One Percent. The Greek government did not expect the merciless attitude of its fellow EU member governments. The Greek government actually thought that its expert analysis of the Greek debt situation and economy would carry weight in the negotiations. This expectation left the Greek government without a backup plan. The Greek government gave no thought to how to go about leaving the euro and putting in place a monetary and banking system independent of the euro. The lack of preparation for exit left the government with no alternative to the EU’s demands.

The termination of Greece’s fiscal sovereignty is what is in store for Italy, Spain, and Portugal, and eventually for France and Germany. As Jean-Claude Trichet, the former head of the European Central Bank said, the sovereign debt crisis signaled that it is time to bring Europe beyond a “strict concept of nationhood.” The next step in the centralization of Europe is political centralization. The Greek debt crisis is being used to establish the principle that being a member of the EU means that the country has lost its sovereignty.

The notion, prevalent in the Western financial media, that a solution has been imposed on the Greeks is nonsense. Nothing has been solved. The conditions to which the Greek government submitted make the debt even less payable. In a short time the issue will again be before us. As John Maynard Keynes made clear in 1936 and as every economist knows, driving down consumer incomes by cutting pensions, employment, wages, and social services, reduces consumer and investment demand, and thereby GDP, and results in large budget deficits that have to be covered by borrowing. Selling pubic assets to foreigners transfers the revenue flows out of the Greek economy into foreign hands.

Unregulated naked capitalism, has proven in the 21st century to be unable to produce economic growth anywhere in the West. Consequently, median family incomes are declining. Governments cover up the decline by underestimating inflation and by not counting as unemployed discouraged workers who, unable to find jobs, have ceased looking. By not counting discouraged workers the US is able to report a 5.2 percent rate of unemployment. Including discouraged workers brings the unemployment rate to 23.1 percent. A 23 percent rate of unemployment has nothing in common with economic recovery.

Even the language used in the West is deceptive. The Greek “bailout” does not bail out Greece. The bailout bails out the holders of Greek debt. Many of these holders are not Greece’s original creditors. What the “bailout” does is to make the New York hedge funds’ bet on the Greek debt pay off for the hedge funds. The bailout money goes not to Greece but to those who speculated on the debt being paid. According to news reports, Quantitative Easing by the ECB has been used to purchase Greek debt from the troubled banks that made the loans, so the debt issue is no longer a creditor issue.

And so the world spirals closer to widespread violence. Having repeatedly ruled out the possibility of change through the ballot box, what else does that leave? Frankly, I’m a little surprised that the Greeks haven’t resorted to politics by other means yet.

ISIS has already brought the War in Iraq home to America. It seems highly unlikely that they will be the only ones to do so.

These actions by the global financial community smack of either desperation or provocation. I can’t tell if they actually want war – as Gen. Butler would say they do – or if their position is so precarious that they are willing to run the risk of war just to buy a little more time before the crash.

Either way, it doesn’t bode very well for the rest of us.

Daneistocracy in Europe

The abject surrender of the Greek government demonstrates the growing irrelevance of democracy, not only in Europe, but across the West:

Less than a week after they triumphantly gave international creditors a bloody nose by rejecting a harsh austerity plan, angry and bewildered Greeks are left wondering how they now find themselves swallowing an even worse deal.

In a nationwide referendum just last Sunday, nearly 62 per cent of voters rejected an austerity deal that had been offered by the European Commission, International Monetary Fund and European Central Bank.

There were scenes of wild jubilation across the country.

In Athens’ Syntagma Square, the Greek answer to Trafalgar Square, thousands of joyous ‘No’ voters hugged and kissed each other, waved Greece’s national flag and swigged cans of beer.

“It was an expression of the will of the people,” Manos Agelidis, 27, a biomedical engineering PhD student, told The Telegraph as he celebrated with friends.

Fast forward just a few days, however, and Alexis Tsipras, the prime minister, did the unthinkable.

On Thursday, with a deadline imposed by the creditors looming, he buckled.

His radical Left-wing Syriza government, which came to power in January on the unrealistic promise of putting an end to austerity and the country’s six-year long economic nightmare, put forward a plan that promises spending cuts of €12 billion in return for a third international bail-out, this time worth €53.5 billion (£38.4bn).

The European Union is not only post-democratic, it is openly and avowedly anti-democratic. It has continued to override the expressed will of the Irish, French, British, Italian, and Greek people by putting pressure on the elected representatives to subvert the will of the people.

This is why direct democracy is the only form of democracy that may still be considered viable. The idea of representative democracy is that the limits it places on democracy will be in the long term interests of the nation, but the way it has easily been subverted in the interests of the financial powers demonstrates that representative democracy is actually more susceptible to corruption and subversion than direct democracy.

Mob rule has its own flaws, but it is certainly to be preferred to creditor rule, or daneistocracy. And that is what representative democracy now amounts to, as the elected representatives of countries such as Greece agree to give up their national sovereignty just to keep the credit money spigot flowing.

Zerohedge add that the Eurozone is no longer a voluntary union:

Despite the euphoria in global equity markets, The FT’s Wolfgang Munchau – once one of the keenest euro enthusiasts – warns regime change is coming in Europe. The actions of the creditors has “destroyed the eurozone as we know it and demolished the idea of a monetary union as a step towards a democratic political union,” Munchau exclaims, fearing they have “demoted the eurozone into a toxic fixed exchange-rate system, with a shared single currency, run in the interests of Germany, held together by the threat of absolute destitution for those who challenge the prevailing order.” He concludes rather ominously, “we will soon be asking ourselves whether this new eurozone, in which the strong push around the weak, can be sustainable.”

The EU doubles down

It’s not a huge surprise. They have never had any respect for democracy anyhow:

The European Central Bank has tightened liquidity conditions for the Greek banking system following the landslide victory for the Leftist government in Sunday’s referendum.

The central bank continued its freeze on emergency liquidity assistance (ELA) after Germany issued a humiliating ultimatum to Greece, warning that the country would be cast adrift and left to go bankrupt unless it agreed to much deeper concessions than anything offered so far.

Sigmar Gabriel, the German vice-chancellor, said the landslide rejection of EU austerity demands in the Greek referendum changed nothing, demanding that the Left-wing Syriza government must accept further belt-tightening without any prospect of debt relief if it wishes to remain in the eurozone.

“The final bankruptcy now appears imminent,” he said. The Greek leaders have been told that they have a deadline of Tuesday afternoon to come up with far-reaching proposals.

And before any morons pop up and start blathering about “those lazy Greeks should pay their debts”, understand that it is mathematically impossible for them to do so. Not difficult, not hard, impossible. It is never going to happen. And note that the IMF, which has been continuing to loan them money, has known this since 2011.

Keep in mind that the USA was actually more indebted than Greece until just a few years ago. The difference is that the USA can always print more credit dollars. The Greeks cannot, not until they get rid of the Euro and go back to the drachma. The core problem is not that the Greeks were profligate, although they were, but that they chose to join the EU and the Euro.

Don’t forget that wherever there are large sums of money involved, there is always quite a bit going on behind the scenes:

“the European Central Bank said it can’t release files showing how Greece may have used derivatives to hide its borrowings because disclosure could still inflame the crisis threatening the future of the single currency.”

Considering the crisis of the (not so) single currency is very much “inflamed” right now as it is about to be proven it was never “irreversible”, perhaps it is time for at least one aspiring, true journalist, unafraid of disturbing the status quo of wealthy oligarchs and central planners, to at least bring some closure to the Greek people as they are swept out of the Eurozone which has so greatly benefited the very same Goldman Sachs whose former lackey is currently deciding the immediate fate of over €100 billion in Greek savings.

Because something tells us the reason why Mario Draghi personally blocked Bloomberg’s FOIA into the circumstances surrounding Goldman’s structuring, and hiding, of Greek debt that allowed not only Goldman to receive a substantial fee on the transaction, but permitted Greece to enter the Eurozone when it should never have been allowed there in the first place, is that the person who oversaw and personally endorsed the perpetuation of the Greek lie is none other than Goldman’s Vice Chairman and Managing Director at Goldman Sachs International from 2002 to 2005. The man who is also now in charge of the ECB.

Mario Draghi.

A man of honor

It would be remarkable if the USA had a single political leader who cared as much about his nation and as little about his career as Greece’s newly ex-finance minister, Yanis Varoufakis, who resigned after successfully leading Greece’s campaign to reject the Eurogroup’s ultimatum:

The referendum of 5th July will stay in history as a unique moment when a small European nation rose up against debt-bondage.

Like all struggles for democratic rights, so too this historic rejection of the Eurogroup’s 25th June ultimatum comes with a large price tag attached. It is, therefore, essential that the great capital bestowed upon our government by the splendid NO vote be invested immediately into a YES to a proper resolution – to an agreement that involves debt restructuring, less austerity, redistribution in favour of the needy, and real reforms.

Soon after the announcement of the referendum results, I was made aware of a certain preference by some Eurogroup participants, and assorted ‘partners’, for my… ‘absence’ from its meetings; an idea that the Prime Minister judged to be potentially helpful to him in reaching an agreement. For this reason I am leaving the Ministry of Finance today.

I consider it my duty to help Alexis Tsipras exploit, as he sees fit, the capital that the Greek people granted us through yesterday’s referendum.

And I shall wear the creditors’ loathing with pride.

We of the Left know how to act collectively with no care for the privileges of office. I shall support fully Prime Minister Tsipras, the new Minister of Finance, and our government.

The superhuman effort to honour the brave people of Greece, and the famous OXI (NO) that they granted to democrats the world over, is just beginning.

I don’t agree with Mr. Varoufakis on much, but his defense of Greece’s national sovereignty in the face of tremendous pressure from the banks and the European political class was as magnificent as it was astonishing. I hope that he soon realizes that Greece no more needs the European Union or the Euro weighing it down than it needed to pay the odious debts demanded by the Eurogroup.

The Eurofascists lost

Live updates here:

BREAKING: Greek interior ministry projection says ‘no’ camp will get more than 61 percent of vote.

17 25 31 40 50 percent reported, 61 percent NO, 39 percent YES. Now, the bankers will double-down, threaten, and promise economic apocalypse if they aren’t bailed-out. Or bailed-in. They always do. But the people are finally beginning to realize that the bankers are serving only themselves.

But how is that possible? After all, we were told that the Greeks are desperate to stay in the EU and in the Euro. June 28: In a poll conducted by Alco for the Greek newspaper ‘Proto Thema’, 57%
of the participants said they would vote yes in the upcoming referendum,
favoring a deal.

What an amazing 18-point turnaround in only one week! Or, you know, perhaps the media is not to be trusted.

UPDATE: Heh. Glenn Reynolds is the master of pith:

TIME.com @TIME
‘No’ campaign likely to win tight referendum vote in Greece

Instapundit.com ‏@instapundit
Not that tight.

Bail-ins are partial bank defaults

Or if you prefer, involuntary borrower-declared debt relief:

Greek banks are preparing contingency plans for a possible “bail-in” of depositors amid fears the country is heading for financial collapse, bankers and businesspeople with knowledge of the measures said on Friday. The plans, which call for a “haircut” of at least 30 per cent on deposits above €8,000, sketch out an increasingly likely scenario for at least one bank, the sources said.

Three things. First, as predicted, the bail-ins weren’t limited to Cyprus, and they won’t be limited to Greece. Second, notice that the amount of deposits immune to bail-ins has fallen from €100,000 to €8,000. Third, this is now entirely legal in most jurisdictions; banks around the world are preparing for just this scenario in your country, everywhere from Australia to the USA.

Remember, a deposit is just an unsecured loan to a bank. So, a bail-in is simply the bank unilaterally telling you that it is not going to pay back a percentage of the loan and will no longer be paying interest on the portion that it will not be paying back.

Why anyone would want to loan to such a borrower without collateral for the paltry amount of interest available, knowing that the borrower can decide at any time how much they want to pay you back (if they want to pay you back at all), is an interesting question to contemplate.

Coming to a nation near you

Greek shuts down its banks:

Banks in Greece and the country’s stock exchange will be shut all week in a sign of the deepening financial crisis. The drastic move comes after people rushed to withdraw their cash amid panic ahead of the referendum on bailout terms. Under the controls, there will be a daily €60 limit on withdrawals from cash machines, which will reopen on Tuesday.

Any fractional-reserve system is doomed as soon as people realize that there are more claims on each piece of paper than can be exercised at any given time. As with everything they do, the banks took something that worked, more or less, and pushed it well beyond the breaking point.

It was eye-opening when I realized that the “ten-percent” reserve system about which we’d learned in college was actually a “less-than-one-percent” reserve system. That was the point when I realized that the global financial system was bound to fail eventually; it simply doesn’t have a sufficient margin of error for predictable events, such as the Greek inability to continue servicing their external debt, much less genuinely unexpected and exogenous shocks.

As awful as bail-ins sound, they are actually much more fair than bail-outs. After all, whether you realize it or not, your “deposits” are actually unsecured loans you have made to the bank. Why you would want to make such a high-risk loan to such an irresponsible borrower without collateral or much in the way of interest is, of course, your business.

UPDATE: It’s official. Greek default tomorrow:

Greece will not pay a 1.6 billon euro loan installment due to the
International Monetary Fund on Tuesday, a Greek government official
confirmed on Monday, highlighting the depth of the financial crisis
facing the country.

This should help settle the debate. The answer is “deflation”.

Holiday

And not the fun kind, in Greece:

Bank of Cyprus, Cyprus’s largest lender, is preparing for an extended bank holiday in Greece as continuing deposits outflows may force authorities to take this type of step and impose capital controls.

“We are preparing to facilitate our customers with operations in Greece with additional liquidity,” a Bank of Cyprus source with knowledge of the situation said on condition of anonymity. “This is something we don’t want to see happening”.

The source said that in recent days the bank saw an increase in deposits inflows, both from Cypriot and Greek depositors, amounting “hundreds of million euros”. Reuters reported on Thursday that European Central Bank Executive Board member Benoit Coeure told euro area’s finance ministers that he was not sure whether Greek bank will be able to open on Monday.

The Bank of Cyprus source also said that the bank cannot be ruled out that a bank holiday in Greece could also affect the Cypriot banking system via the units of Greek banks operating on the island in the form of deposits outflows. The source was not in position to name the amount in additional liquidity the bank will need in the case of a bank holiday in Greece nor the number of its customers that would be affected.

“In that case, a bank holiday in Greece could also prompt Cypriot authorities to also impose a bank holiday in Cyprus,” the Bank of Cyprus source said.

To say nothing of Spain, then Italy…. I strongly suspect we are witnessing the slow unwinding of first the Euro, then the European Union. As untenable as the Euro now is, the EU is even worse off due to its immigration policies that nearly everyone except the EU Commission, the media, and the invaders hate.

UPDATE: Phoenix Capital Research explains that the Greek bailouts had little to do with Greece per se:

The Greek situation actually had nothing to do with helping Greece. Forget about Greece’s debt issues, or protests, or even the political decisions… the real story was that the bailouts were all about insuring that the EU banks that were using Greek bonds as collateral were kept whole by any means possible.