Financial Market report for Monday February 13, 2012
1) … Stocks rose today as Greece approved austerity measures and structural reforms …. yet charts suggest a market top is being achieved.
Volatility TVIX,VIXY,VIXM, seen in this combined ongoing Yahoo Finance chart traded lower from last week’s rise, as World Stocks, ACWI, ACWX, VT, VSS, EEB, EEM, EPP, VGK, traded up as Business Week reports European Leaders Confident Greece Meeting Bailout Demands, being led so by financials, NBG, EUFN, IXG, XLF, KRE, RWW, and recent rally leaders, PSCT, PSCI, EWX, EMIF, PKB, EMMT, MXI, and countries GREK, and EWI. The Euro, FXE, rose, but closed under last week’s high.
Nick Beams of WSWS writes Greek Parliament Votes For sweeping Cuts.
Clearly a coup d etat is underway in the Eurozone as Bloomberg reports Greek Parties Expel Rebel Deputies After Austerity Vote. The two Greek parties supporting the government of technocrat Prime Minister Lucas Papademos expelled more than 40 deputies on Monday for failing to back an austerity bill needed to avoid the country’s chaotic default. The conservative New Democracy party said it had expelled 21 out of its total 83 deputies. The Socialist PASOK party expelled about 20 of its 153 lawmakers.
This as Open Europe reports German Finance Minister supports Greek default, but Merkel does not. Der Spiegel reports that the German government is keen to avoid Greece leaving the euro, and is seeking a plan B which could allow the country to default but remain in the eurozone. And Open Europe reports Nicolas Sarkozy is expected to officially announce his candidacy for the upcoming French presidential elections this week, as the March 16 deadline for the nomination approaches. In an interview with Le Figaro on Sunday, Sarkozy said that he would campaign on a hard-right platform of restricted immigration, Christian values and welfare cuts.
Zero Hedge reports German Foreign Minister Guido Westerwelle saying “I am more than dissatisfied with the political impasse in Greece in recent weeks. I’m also addressing the German opposition when I say this: You can’t solve a debt crisis by constantly incurring new debts.” And yet that is precisely what Bailout 2 is doing as we have patiently explained over and over. Yet Guido said something else which may be of interest to everyone else in Europe: “I don’t want a German Europe. Q. What do you want? A. A European Germany.” Aaaand, enter lost in translation interpretations.
The Sovereignty of God was revealed in today’s chaos in Greece. Zero Hedge reports Athens destroyed by rioting; city is left in shambles by rioters; the scene is like that of a war zone. The Morning After: 48 Buildings On Fire, 150 Looted, Hundreds Arrested. The EU debt trade of the last thirteen years, ever since Greece went off the Drachma to the Euro, transformed Greece from a pony and cart economy to one that the Economist described as characterized by pork and patronage. Greek socialism provided a socialist utopia comparable to other European Socialist nations of greater productivity like Switzerland and Norway. Now, Greek culture, Greek identity, Greek morality, have all passed into the flames of devolution. In as much as all things of God, 2 Corinthians 5:17-18, this is simply the foreordained will of God. John the Revelator, wrote the Book of the Seven Seals, which foretells in Revelation 2:26-27, that the Son of God is intervening so as to introduce His sovereignty over humanity by stimulating a Beast Regime of statism and totalitarian collectivism to rise from the Mediterranean Sea, Revelation 13:1-4.
Wolfgang Münchau writes in FT that Greece will default within 3-6 months, and it would better to recognise it now and allow Greece to default inside the eurozone.
Reuters reports that the Troika arrives in Portugal to give its latest assessment of the Portuguese reform program, as hundreds of thousands demonstrate in Lisbon against the policies.
Neo liberal finance is failing to provide ongoing seigniorage, that is moneyness to fiat assets.
Oil, USO, is trading down from its early January 2012 high.
Apple, AAPL, rose 1.8% to close at $502.60.
The end of the rally in safe haven value stocks, is communicated in the chart of RZV:RZG now trading lower, having manifested a hanging man lollipop candlestick, and the chart of Dividend Payers, DVY, and US Preferreds, PFF, showing a rounded top. Today’s raise in small cap value shares, RZV, such as SAVE, illustrate Neoliberalism’s grand finale finish.
The end of the ECB LTRO financed rally in growth stocks, is communicated by Shipping, SEA, Airlines, FAA, Emerging Markets EEM, Copper Mining, COPX, Solar, TAN, Semiconductors, XSD, Biotechnology, XBI, Metal Manufacturing, XME, trading down from recent their highs.
Chinese Financials, CHIX, fell lower today, deleveraging China Industrials, CHIX, China Minerals, CHIM, and Vietnam, VNM. Mike Mish Shedlock writes China Instructs Banks to Roll Over $1.7 Trillion in Debt to Avoid Mass Default.
US Central Bank, ECB, and China Central Bank monetary policies, complemented by financial deregulation and securitization of all kinds of financial instruments, have fueled a global debt trade, but it is now exhausting.
The debt economy of capitalism is coming to an end. And out of creative destruction, regional global governance will establish a totalitarian collective in the Eurozone, and regional public private partnerships to manage the rest of the world’s ten regions. This ten toed kingdom of regional global governance, Daniel 2:31-33, and Revelation 13:1-4, will provide diktat to replace Milton Friedman’s Free To Choose Script, that governed global finance and trade for the last forty years.
Political capital will command economic transactions as the dynamos of regional security and stability gain traction providing order out of chaos. Investment capital that fueled growth and profit will literally be washed away into the pit of financial abandon.
Banks will be nationalized, better said regionalized, and integrated into the government, and become known as the government bank, or gov banks for short. In Europe, leaders will meet in summits and waive national sovereignty, and announce that the European Financial Institutions, such as Ireland’s IRE, will be integrated into the Bundesbank or the ECB, which will become known as the Euro’s bank. Regional monetary cardinals, will complement the work of budget commissioners; these sovereigns will work in private public partnerships for regional security and stability, as they oversee the region’s resources and economic production. In Japan, MFG, MTU and SMFG will be merged into the Bank of Japan. In each of the world’s ten regions, diktat will serve as both money and credit.
2) … The EU, ECB, IMF troika policy cannot command democratic consent over time … Fears of Greece insolvency will commence the great delveraging … and regional global governance will emerge out of creative destruction to replace capitalism.
Ambrose Evans Pritchard writes The (EU, ECB, IMF Troika) policy cannot command democratic consent over time. The once dominant Pasok party has collapsed to 8pc in the polls. Support is splintering to the far Left and far Right, just like Weimar Germany under the Bruning deflation.
The next Greek parliament will be packed with “anti-Memorandum” fire-breathers, and any attempt by Greek elites to prevent elections taking place must push street protests towards revolution. In a sign of things to come, the Hellenic Police Federation has called for the arrest of Troika officials on Greek soil for attacks on “democracy and national sovereignty”.
Since nothing has gone to plan since Europe’s austerity police began to administer shock therapy eighteen months ago, even this grim promise seems too hopeful. The Greek economy was expected to contract by 3pc in 2011 under the original EU-IMF Troika plan. In fact it shrank by 6pc, and is now entering what the IMF fears could become “a downward spiral of fiscal austerity, falling disposable incomes, and depressed sentiment.” Manufacturing output fell 15.5pc in December. The M3 money supply crashed at a 15.9pc rate. Unemployment jumped to 20.9pc in November, up from 18.2pc the month before, and is already above the worse-case peak pencilled in by the Troika. Some 60,000 small firms and family businesses have gone bankrupt since the summer, the chief reason why VAT revenues dropped 18.7pc in January. The violence of the slump is overwhelming the effects of fiscal retrenchment. So much Sisyphean effort for so little gain. You can argue that Greece has dragged its feet on EU-IMF demands – though the IMF is careful not make such a crude claim, offering mixed praise in its last report.
Greece must cut 150,000 public sector jobs by 2015 under the latest accord, and fiscal policy will tighten by an extra 1.5pc of GDP beyond the squeeze already under way. “There are another 50,000 shops and small businesses hanging on for dear life that are expected to collapse over the next six months,” said Prof Varoufakis. Premier Lucas Papademos pleaded for national unity the weekend. “We are just a breath away from ground zero. A disorderly default would set the country on a disastrous adventure. Living standards would collapse and it would lead sooner or later to an exit from the euro.” Well, perhaps, but remaining in EMU is also a disastrous adventure, and living standards will certainly collapse, which is why it ultimately makes no difference whether or not the Greek parliament backs the latest accord (I write before knowing the outcome of Sunday’s vote).
It is certainly arguable Greece has no hope of clawing back viability within monetary union and should therefore return to the Drachma. While Ireland has pulled off an “internal devaluation” inside EMU by deflating wages, it has an open economy, a high trade gearing, and a current account surplus: Greece has a deficit of 9.4pc of GDP after four years of slump. Greece’s “equilibrium real exchange rate” is overvalued by 33pc according to IMF data. But that is not the argument made by Mr Schäuble. As high priest of the “household fallacy” – the false equation of macro-economics with the budget of a Schwabian Hausfrau – he thinks Greece is in trouble because it spends too much, not because it is trapped in debt deflation with a badly over-valued currency. From there he progresses to the next fallacy of thinking that Portugal, Spain, and Italy will pull through as long as they cut, cut, and cut again. If Portugal spirals down in much the same fashion as Greece once austerity bites in earnest – and therefore misses target after target – it is likely that Mr Schäuble will turn on Portugal with equal fury, because that is how he sees the world. Each failure is ascribed to lack of moral fibre, not to the design flaws in the currency project that he himself helped create and foist on the German people against their wishes. Belief that EMU fall-out from Greek exit – or “Grexit” in market slang – can be contained by firewalls and more fiscal austerity assumes that Greece is a special case, alone brought low by turpitude.
If you think, as I do, that Greece did indeed commit a host of sins but is also the first of several victims of a mad ideological experiment that shackled together economies with different growth rates, wage bargaining systems, productivity patterns, sensitivity to interest rates, and inflation proclivities – without fiscal transfers or sufficient labour mobility to cushion the effects – and that this disaster was compounded by Germany’s (beggar-thy-EMU-neighbour?) wage squeeze, and compounded yet further by sharp monetary and fiscal contraction at the wrong moment in the states most at risk, then you will expect the crisis to grind on whatever happens in Greece.
The EMU end-game is harrowing for Greece, but it is also ghastly for Germany. Berlin has accumulated ruinous liabilities without yet solving anything, and is fast squandering sixty years of diligent statecraft.
By demanding a budget viceroy for Greece, and now an escrow account to seize Greek revenues at source, the Merkel-Schäuble government has crossed a diplomatic line and brutalised EU politics. “Memorandum Macht Frei”,“ [memorandum makes you free], as one Greek newspaper splashed.
Greece has lost its debt sovereignty, and its debt sustainability; it cannot sustain debt of any kind. It’s pork and patronage infrastructure, together with its non existent tax collection policies, are anachronism’s of Neoliberalism fiat money and fiat wealth age. These will be replaced by Neoauthoritarianism’s diktat and technocratic age. The Automatic Earth writes Greece burned a German flag while the Greek daily paper Dimokratia adorned its front page with the headline “Memorandum Macht Frei”. What is perfectly clear, though, is that the continuously shape-shifting complex of bailout, haircut and austerity measures advocated for Greece have been destined to fail since they were first conceived.
Conservative MP John Redwood writes Greece Should Leave The Euro. And Ashvin Pandurangi writes in The Automatic Earth Crossing the Greek Dead Lines, Greece will default on its loans in March, its economy will continue to shrink dramatically and its public debt situation will never become sustainable. It will be forced to revert to its own national currency, most likely sometime between one month and change from now and the end of the year, at the latest.
Berlin, Brussels and the European bankers have an interest in keeping Europe whole. If one is allowed to exit, all may exit, an undesirable scenario seen from the global banking perspective. The groundwork of a EU debt brake, will soon be followed by the foundation and structure of a European Super State, a Federal Europe encompassing Greece.
Greek Crisis provides the Bloomberg report EU’s Barroso Says This Is the Decisive Moment for Greece. EU’s Barroso Says This Is the ‘Decisive Moment’ for Greece European Commission President Jose Barroso said this is the “decisive moment” for Greece and an agreement on a debt swap and second rescue package is close. “We want Greece to remain in the euro,” Barroso said in Brussels today, after EU Digital Affairs Commissioner Neelie Kroes told Dutch newspaper De Volkskrant that there would be “absolutely no man overboard” if a country exited the euro.
Greek Crisis relates the FT report Merkel Makes Case For Painful Reform. Angela Merkel spoke Angela Merkel last night swore eurozone partners to a long and painful process of structural reform to restore the economic growth the eurozone needed to overcome its debt crisis. Germany’s chancellor also stressed that reforming Greece outside the eurozone was not an option. “I will not participate in pushing Greece out of the eurozone,” she said. A eurozone exit was “not an issue”. In a speech in Berlin about the future of Europe, Ms Merkel harked back to the labour-market reforms of her predecessor Gerhard Schröder, which cut German unemployment from more than 5m in 2003 to under 3m today. While the reforms were unpopular at the time, this trend showed that “change can bring something good” and make things better even for those initially opposed. With her emphasis on structural reform, the chancellor was trying to counter criticism of her handling of the eurozone crisis.
An inquiring mind asks, will Greece become a client state? The definition of a client state is a bankrupt country that once had sovereign authority and debt sovereignty, is assigned technocratic government by regional leaders, and is given diktat, which is used for both money and credit. It accepts currency in exchange for submitting to the sovereignty of regional monetary cardinals, and budget commissioners, who work in private public partnerships for regional security and stability. A client state is a subservient country, one that has ceded its sovereignty to regional sovereign leaders and sovereign bodies such as the EU ECB and IMF Troika.
While it is possible that Greece may be forced out of the EU, it is in no way assured that it will be able to secure debt of any type, public or private, at any time in the near future outside of a Bailout agreement hopefully be reached this week, the week of February 13, 2012, to February 18, 2012.
It is possible that Greece will come to exist as the EU’s first client state, within a Euro zone of regional global governance, where a fiscal union is established, austerity measures imposed, and structural reforms mandated, as EU leaders meet in summits and waive national sovereignty.
Germany rules sovereignly over other Eurozone countries as the lead partner in the EU ECB IMF Troika, and has laid the groundwork for a Federal Europe. The groundwork of a debt brake, will be followed by the foundation and structure of a European Super State. WSWS recently reported EU Summit Agrees To German Plan For Austerity Straitjacket. And now WSWS reports Europe Placed Under The Dictatorship Of The Banks. The EU has already succeeded in imposing two unelected governments in Greece and Italy, whose sole purpose is to loyally implement the demands of the financial oligarchy against the express wishes of the electorate. The summit has now agreed to a fiscal compact further curtailing the ability of national governments to frame economic policy. The pact forces the 25 signatory states to enact a “golden rule” legally requiring a balanced budget. Countries failing to pay their debts on time will be subject to punitive sanctions imposed by the European Court of Justice. Germany, Austria, Italy, Spain, Poland and Estonia have already implemented such balanced budget requirements. The two governments that did not sign, Britain and the Czech Republic, did so out of tactical political considerations, while agreeing fully with the drive for austerity. There is no intention to put such measures, which will impact massively on the lives of millions, to a popular vote. Indeed, these measures are intended precisely to remove critical financial decisions from any oversight or influence by the population. Merkel boasted, “The debt brakes will be binding and valid forever. Never will you be able to change them through a parliamentary majority.”
Fate is working through creative destruction to pass the baton of sovereignty to new sovereigns. Angela Merkel and the EU ECB and IMF Troika now have sovereign authority in the EU, Revelation 6:1-2.
Bible prophecy foretells that Euroland will become a type of revived Roman Empire. A New Charlemagne, a seemingly Little Authority, Daniel 7:7-8, will rise to power through the scheme of regional framework agreements, Daniel 8:22-23. Teaching Hearts provides scriptural insight into The Identity Of The Little Horn. This one is known as the Sovereign, Revelation 13:5-10 He will be accompanied by the Seignior, the top dog banker who takes a cut, Revelation 13:11-18.
The dynamos of profit and growth that empowered capitalism have been exhausted through US Central Bank and ECB monetary policy.
The First Horseman of the Apocalypse, Revelation 6:1-2, is powering up the dynamos of regional security and stability. In the EU, public private partnerships led by monetary cardinals will provide credit, and oversee natural resources and production, under the authority of the monetary pope, Mario Draghi. Also, budget commissioners will oversee government budgets implementing strategic reforms and austerity measures. These new sovereign authorities will work together to mature regional global governance; their efforts will described as regionalization.
3) … News of the day
Marketwatch reports BHP and Rio invest more than $4 bln in copper output. BHP Billiton Ltd. BHP -0.17% and Rio Tinto PLC RIO +0.41% , two of the world’s biggest mining companies, Tuesday laid out plans to invest more than US$4 billion beefing up their copper output. Most of the money will be invested in the Escondida mining operation southeast of the city of Antofagasta in Chile, and BHP also plans to resume operations at its idled Pinto Valley mine in Arizona by the end of the year. (Hat Tip to Between The Hedges) … Chart of BHP and of RIO and SLX, … combined, SLX, BHP, RIO,
4) … Conclusion: Greek culture, Greek identity, Greek morality, have all passed into the fires of devolution.
We are witnessing the death spiral of Greece’s economy, the breakdown of its law and order, and the evaporation of its civility, as the Cradle of Civilization, yes the Cradle of Democracy, has passed into the fires of devolution. Greece social capital has been destroyed in the fires of rioting. All, Greek culture, Greek identity, and Greek morality have been consumed by the fires of rioting.
The rise of the beast regime, known as Neoauthoritarianism,is causing not only financial upheaval but cultural tumult as well. John the Revelator, wrote the Book of the Seven Seals, which foretells in Revelation 2:26-27, that the Son of God is intervening so as to introduce His sovereignty over humanity by stimulating a beast regime of statism and totalitarian collectivism to rise from the Mediterranean Sea, Revelation 13:1-4.
Tyler Durden writes What Lies In Store For The “Cradle That Rocks The World As Coxe says: “Today, the Mediterranean is two civilizations in simultaneous, rapidly unfolding crises. To date, those crises have been largely unrelated. That may well be about to change.” Coxe bases part of his argument on the same Thermidorian reaction which we have warned about since early 2011, namely the power, social and economic vacuum that is unleashed in the aftermath of great social change. But there is much more to his argument, which looks much more intently at the feedback loops formed by the divergent collapsing economies that once were the cradle of civilization, and this time could eventually serve as the opposite.
To wit: “The eurocrisis has been front and center for nearly two years, during which time the economic and financial fundamentals have continued to deteriorate. “The Arab Spring” came suddenly, in a series of outbursts of optimism. It may have come at the worst possible time for the beleaguered nations of the North Shore.
The Mediterranean has entered one of the stormiest periods in recorded history. It is the major contributor to risk in global equity markets. It is too soon to predict how these crises will end. The Cradle of Civilization is rocking amid an array of winds and storms.
David Blanchflower writes on the pork and patronage economic of Greece in Guardian article Greece And The Return Of The Economic Death Spiral. During the latter part of 2008, central bankers around the world worried secretly that the death spiral was approaching. The concern was that it was too late to stop economies crashing. In the event, concerted international action on both monetary and fiscal policy prevented collapse, although they did get pretty darn close to the precipice.
Interest rates were cut to zero. Banks and even car companies were rescued. Massive amounts of liquidity were made available. There were tax cuts, cash for clunkers and even fridges, along with schemes to help the young unemployed. Plus the collapse came very quickly.
In the UK, then Chancellor Alistair Darling had only a few hours notice that the Royal Bank of Scotland was about to fail. The fear was that cash machines around the world would close, banks would fold and stock markets would tank within hours. This was a once-in-100-year shock: in my view, without such unprecedented intervention, unemployment rates in the US and Europe could well have risen to over 24%, which is where they are already in Greece and Spain.
Stimulus worked, simple as that. The lesson of 2008 was that stimulus prevented a new Great Depression. Without similar drastic help, Greece will now default.
The major problems in Greece that are constraining growth have still not been addressed. According to the United Nations, Greece ranks 100th in the world in terms of the ease of doing business, just beaten out by Yemen, in 99th place, and Vietnam, in 98th place. It ranks 135th in terms of the ease of starting a business and 158th in terms of paying taxes, below Uzbekistan in 157th place. Without reforms to its product and labor markets, alongside the introduction of a fully-functioning tax system with enforced compliance, Greece has no future and is headed to inevitable default.
The only issue is, how disorderly will it be? It’s not so much that the Greeks won’t pay, it’s that they can’t. Greece remains uncompetitive.
For all the deals being signed in Athens and Brussels, the Greek people have worked out that they have no hope; protest and social unrest now looks a rational option to the ordinary people who are bearing the cost to bail out European banks. Cuts in the minimum wage right now are probably not very smart politics.
Greece does still have a card to play, which is “one down, all down”. An exit from the euro would result in a depreciated drachma, which would potentially give a much needed boost to tourism. And that sounds better than all other alternatives currently on offer. There is still time for Germany’s Angela Merkel to get out her cheque book; but otherwise, it’s all over, and quite possibly very quickly.
This really is what a death spiral looks like.
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