"The history of fiat money is little more than a register of monetary follies and inflations. Our present age merely affords another entry in this dismal register."
Hans F. Sennholz
The mainstream media has now pretty much adopted
the line that Greece in the Eurozone is history, and economic think tanks and
the economic gurus that write papers for the too big to fail banks, are all now
publishing estimates of what it will cost the rest of us after they leave the
Eurozone. The estimates are not comfortable reading, but unless Euroland and
especially Germany start acting responsibly and fast, contagion is likely to
infect all of Club Med, plus Belgium and France. The situation in Europe is
about as dire as it gets without disintegration, yet Euroland’s politicians and
central banksters are drifting along, dithering, prevaricating, and just
waiting for something to turn up.
Below that state of Europe as the ECB bails on
Greece. Stay long precious metals we are only in the middle stage of the death
of fiat currency.
"With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people."
F.A. von Hayek
ECB Stops Loans to Some Greek Banks as Draghi Talks Exit
By Jeff Black and Jana Randow
- May 17, 2012 12:00 AM GMT
The European Central Bank said it will temporarily stop lending to some
Greek banks to limit its risk as President Mario Draghi signaled the ECB won’t
compromise on key principles to keep Greece in the euro area. The Frankfurt-based ECB said yesterday it will push the responsibility for lending to some Greek financial institutions onto the Greek central bank until they have sufficiently boosted their capital. “Once the recapitalization process is finalized, and we expect this to be finalized soon, the banks will regain access to standard Eurosystem refinancing operations,” the ECB said in an emailed statement.
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Euroland's €1 trillion question: after Greece goes, can Spain stay in?
Everyone knows Greece is leaving the euro, the real challenge is preventing the fall-out extending to Spain.
Luckily
SunGard APT doesn’t make films. Pretty much nothing happens in its version of
that great euro drama Acropolis Now.
The
specialist in “multifactor risk models” popped up yesterday to tell us that a
Greek exit from the euro would take 3pc off the UK stock market and see the oil
price fall 5pc. The euro itself would strengthen 5pc against the dollar. And
Greek equities would get away with a 20pc drop.
On that
basis, can someone kick Greece out right now? Really, if that’s all that’s
going to happen, let’s get on with it.
Annoyingly,
SunGard appears to have overlooked quite a few factors, if not multi ones. Not
least the fact that Greece is no longer the main event. Everyone knows it’s a
matter of when, not if, ouzoland leaves the euro. Not least the Greeks
themselves, who are pulling euros out of local banks at a right lick in
preparation for the glorious return of a cheapo drachma.
Bank
deposits, already down from €244bn (£195bn) at December 2009 to €171bn at the
end of March, are now being withdrawn at the rate of around €3bn a week. In the
real world the exit is underway, as another dive in Greece’s benchmark 10-year
bond also indicated. It dropped for the 10th day running to just 14.4 cents on
the euro.
----No, rather than trying to keep Greece in, Europe’s politicos, the ECB and the IMF should be focusing on how to contain the impact of its inevitable exit. And, if IMF chief Christine Lagarde, really is “technically prepared for anything”, she must have a solution for Spain.
Madrid
continues to look the biggest nasty for the eurozone. Ten-year bond yields
spiked to 6.5pc yesterday, their highest level since the ECB put some financial
morphine into the system late last year with the first of its cheap loans to
banks. Totalling €1 trillion, it was dubbed a long-term refinancing operation
but has proved anything but.
Spain’s
banks took the cheap money and bought Spanish sovereign debt, the latest lot on
yields averaging 5pc. Now the banks are sitting on losses they may have to crystallise,
making a bad situation worse.
In fact,
LTRO merely disguised the main problem – the state Spain’s in – while blurring
the lines between whether it’s facing a banking or a sovereign crisis. Both, as
it happens, plus a rabid real economy where austerity cuts have led to a
vicious circle of recession, rising unemployment and falling property prices.
If the banks were provisioning properly, they’d probably have to set aside
another €300bn, which Spain can’t exactly find just now.
More
Appetiser cost of Greek exit is €155bn for Germany, France: trillions for meat course
Economics Last updated: May 15th, 2012
Eric
Dor's team at the IESEG School of Management in Lille has put together a table
on the direct costs to Germany and France if Greece is pushed out of the euro.
These
assume that relations between Europe and Greece break down in acrimony, with a
full-fledged "stuff-you" default on euro liabilities. It assumes a
drachma devaluation of 50pc.
----They
conclude:
The total
losses could reach €66.4bn for France and €89.8bn for Germany. These are upper
bounds, but even in the case of a partial default, the losses would be huge.
Assuming
that the new national currency would depreciate by 50 per cent against the
euro, which is realistic, the losses for French banks would reach €19.8bn. They
would reach €4.5bn for German banks.
----Needless to say, the real danger is contagion to Portugal, Ireland, Spain, Italy, Belgium, France, and the deadly linkages between €15 trillion in public and private debt in these countries and the €27 trillion European banking nexus.
This is
where any further errors by EU leaders could take the world into full
depression.
More
May 16, 2012, 8:37 a.m. ET
Portugal Unemployment Rises to 14.9%
LISBON—Portugal's jobless rate jumped to 14.9% in the first quarter as the government slashed spending to narrow its budget deficit and fulfill the conditions of its €78 billion ($99.29 billion) bailout.Unemployment through March rose from 14% in the fourth quarter and 12.4% in the first quarter of last year, the national statistics agency said Wednesday.
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"When paper money systems begin to crack at the seams, the run to gold could be explosive."
Harry Browne
At the Comex silver depositories Wednesday final figures were: Registered 35.73
Moz, Eligible 105.98 Moz, Total 141.71 Moz.
Crooks and
Scoundrels Corner.
The bent,
the seriously bent, and the totally doubled over.
While we
wait for Greece to exit the euro, most likely in July just before the start of
the London Olympics, China waits for the outcome of the biggest scandal to hit
the Chinese Communist Party since the Gang of Four was arrested in the mid 70s.
The generational transfer of Communist Party power later in the year might even
get delayed.
May 16,
2012, 9:37 p.m. ET
Bo's Ties to Army Alarmed Beijing
BEIJING—In early February, Bo Xilai,
then Communist Party chief of Chongqing city, visited a military complex in
Kunming, some 400 miles from his political base. It was home to the 14th Group Army,
a direct descendant of guerrilla forces his father led in the 1930s.
A waxwork
model of his father, Bo Yibo, is on display at the base. State media noted that
Mr. Bo was there to "cherish the memory of revolutionary ancestors."
But China's top political leaders saw it as something more alarming, according
to Communist Party and military officials.
Mr. Bo was in severe political trouble. On Feb. 2
he had fired his police chief in Chongqing, Wang Lijun. On Feb. 6, Mr. Wang had
fled to the U.S. consulate in Chengdu. Mr. Bo had breached his authority by
dispatching his police far outside their jurisdiction in a failed effort to
retrieve him. Mr. Wang wound up in Beijing, making allegations against the Bo
family to state security officials, including that Mr. Bo's wife was involved
in the murder of a British businessman.
By visiting the military base in Yunnan province,
Mr. Bo appeared to be flaunting his revolutionary ancestry and courting
political support from the People's Liberation Army at a time when his career
was in crisis, according to Communist Party and military officials. "Bo's
trip to Yunnan caught people at the highest level off guard," said one
high-ranking military officer.
Mr. Bo's
ties to the military and his irregular use of his police forces are now key
elements of the investigation at the heart of China's worst political crisis in
more than two decades, the officials said. The saga also could affect the
contours of a planned leadership succession in the fall.
At least two prominent army generals have been
questioned about their connections to Mr. Bo and other senior officers are
under scrutiny, said officials, military officers and diplomats briefed on the
situation.
Because of the turmoil, Hu Jintao, who is expected
to step down as China's party chief this fall and president in March, is more
likely to continue for another year or two as head of the Central Military
Commission, which controls the armed forces, analysts said.
China said last month that Mr. Bo—once a
front-runner for a position on the Politburo Standing Committee, the nation's
top decision-making body—had been dismissed from his party posts and placed
under investigation for unspecified "serious disciplinary
violations." The government also said his wife was in custody as a suspect
in the murder of Neil Heywood, a British businessman who was close to the Bo
family.
One party official at an influential government
think tank said that when he attended a party meeting at which Mr. Bo's
dismissal as Chongqing Party chief was announced, his visit to the military
base was listed as one of the main causes for concern.
More
The monthly
Coppock Indicators finished April:
DJIA: +89 Down. NASDAQ: +97 Down. SP500: +63 Down. All
three indicators remain down but downward momentum is stalling.
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