Monday, June 27, 2011

June 27 2011: If you can't pay them back, then don't

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"Mulberry Street, Little Italy, New York"

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Ilargi: Tanks in the street of Athens, and people throwing themselves out of windows. It's come to this kind of threatening language, and in the next 48 hours or so it will only intensify, and financial markets will fluctuate because of it as if that's their very and only purpose in life.

The words about the tanks and suicides come from one of Greece's newly fangled fat twin political duo, Theodoros Pangalos, the deputy prime minister who appeared out of nowhere the past few days, as far as that is physically possible for someone his size.

Look, I'm not trying to make fun of fat people here, it’s just the irony that the fact that the "face" of Greece in the international financial media has overnight changed to these two huge guys that no-one outside of the country had ever heard about before. And that they're the ones threatening the Greeks with hell and brimstone if they don't agree to austerity measures that will make a substantial part of the population go hungry. "We all have to tighten our belts now", that sort of thing. Well, those are quite some belts to tighten.

There's Pangalos, and then there's Evangelos Venizelos, poised to be the next PM if and when Papandreou manages to slip out of the building, preferably unseen. Here’s pics of the glimmer twins:

Luckily for the Greek population, there are signs of support for them outside of their parliament buildings, and outside of their borders:

The Guardian in England runs this, from Costas Douzinas and Petros Papaconstantinou:
Greece is standing up to EU neocolonialism
1. The bailout of Greece is not a gift or grant but a loan bearing high interest. Crucially, bailout funds are not used to pay civil servants' salaries and pensions, but to pay off debt held by German and French banks. According to IMF estimates, Greece will pay €131bn in refinancing and interest payments between 2009 and 2014, far more than the initial bailout loan of €110bn.

In a magician-like sleight of hand, German and French workers are forced to bail out their national banks, not directly as in the 2008-9 banking bailouts but through the mediation of Greece, which inevitably becomes the target of populist outbursts. The Greek government, on the other hand, was ordered to provoke an economic and social meltdown unimaginable in western Europe in peacetime in order to receive the loans.

2. This unprecedented punishment led to an increase in debt and to permanent economic depression. The European governments now propose to offer a second loan, if Greece accepts an even more odious set of measures and sells off the family silver. Acceptance of these measures has been made a precondition for the payment of the fifth instalment of the initial bailout.

This is blackmail worthy of a backstreet loan shark. The privatisation plan includes the sale of 17% of the public power corporation, the engineroom of growth, which will remove the state's controlling interest. Under the new plan, foreign emissaries will be assigned to the main ministries and the company set up to privatise public wealth. The market value of this stake is just €400m, because of the stock exchange decline.

But the corporation owns 15 power plants and the budget for a new plant about to be built is €1.3bn. This post-Soviet style privatisation will pass valuable public assets to private hands.

3. The loss of economic sovereignty is accompanied by unprecedented attacks on the political and legal integrity of the country. IMF and EU inspectors visit the country on a regular basis, examine the records and dictate policy. Under the new plan, foreign emissaries will be assigned to the main ministries and will run the companies that will privatise the public wealth. Government capitulation is not enough.

The European authorities demand that all political parties should accept the new austerity measures before the next loan instalment is paid. Surreptitiously, a new type of colonialism is emerging, in which the Brussels elites treat the European south as undeserving poor or colonial subjects to be reformed and civilised.

Ilargi: Stephen Lendman lays it on a bit stronger still:
Banker Occupation of Greece
[..] ... they're entrapped by foreign banker diktats demanding tribute. They call it a "rescue." In May 2010, the Papandreou government agreed to earlier austerity in return for loans. Now they're at it again, demanding more or they'll collapse the entire economy, or so they say. And the same scheme is replicated in Ireland and Portugal. Moreover, it's heading for Spain, and potentially most of Europe and America as representative governments head closer to "financial oligarchy." 

In other words, it amounts to financial coup d'etat authority over sovereign governments unless popular anger prevents it, involving more than street protests or short-term strikes accomplishing nothing. Former Wall Street broker, financial analyst, radio/TV host, and consummate critic Max Keiser calls it "banker occupation" for good reason. They:
  • make the rules; 
  • set the terms; 
  • issue diktats;
  • pressure, bribe or otherwise cajole or force governments to acquiesce; and 
  • burden working households with higher unemployment, wage and benefit cuts, higher taxes, and other austerity measures to assure financial predators profit - always at their expense, forcing once prosperous nations to surrender sovereignty to financial oligarchs, ruling world economies like fiefdoms.[..]

In 2010, in return for a $150 billion loan, Papandreou imposed:
  • large public worker layoffs (around 10% overall);
  • public sector 10% wage cuts, including a 30% reduction in salary entitlements;
  • cutting civil service bonuses 20%;
  • freezing pensions;
  • raising the average retirement age two years; and
  • higher fuel, alcohol, tobacco, and luxury goods taxes, knowing much more lay ahead given Greece's worsening debt problem.

More bailout help is now needed in return for greater austerity, as well as selling off Greece's crown jewels as explained above. On June 24, New York Times writer Stephen Castle headlined, "Europeans Agree to a New Bailout for Greece with Conditions," saying:
The deal "came a day after Greece agreed with international creditors to more austerity measures (requiring parliamentary approval) as part of revised plans for 2011-15 aimed at" assuring bankers are first in line to get paid, popular and national interests be damned. An agreement in principle expects half the funds offered to come from new loans, a fourth from state asset sales, and the remainder from private sector contributions.

An unspecified larger amount (of around 110 billion euros in total) will follow an initial 12 billion euro emergency loan with strings. They include:
  • laying off another 20% of public workers;
  • privatizing public enterprises and assets on the cheap;
  • a one-time personal income levy from 1 - 5%, depending on income;
  • lowering the tax-free income threshold to 8,000 euros annually from 12,000;
  • setting the lowest tax rate at 10%, with exemptions for people up to age 30, over-65 pensioners, and disabled people; and
  • annually taxing the self-employed an additional 300 euros.

In response, public anger is visceral through daily protests. The ruling PASOK party's approval rating is 27%. Over 90% of the public are dissatisfied with Greece's governance. Another 90% say the country is "on the wrong path." About 80% are unhappy with their lives, and 70% are concerned that conditions will keep deteriorating.

Nonetheless, on June 22, Papandreou won a parliamentary vote of confidence ahead of two more steps the IMF and Eurozone leaders require before releasing more funds - agreeing on their demanded austerity plan and enacting measures to implement it.

In fact, acting IMF managing director John Lipsky (a former JP Morgan Investment Bank vice chairman) said no opposition will be tolerated. In other words, Eurozone nations have no option but to obey IMF diktats, Lipsky acting more like a commissar than banker.

Ilargi: See, I’m looking at those two fat blobs above, and the severity of the measures imposed on Greece, and not only do I want to express my support once more for the people who will be in Syntagma Square over the coming days, I also ask myself: what would happen stateside if anything close to this would be imposed in the US?

I'm thinking we would all win if the Greeks do, that they're fighting our fight for us, but that what they‘re fighting against is us, or at least our governments (which we elected). And maybe we should change that.

But yes, do ask yourself: what do you think would happen in New York, LA, Atlanta, Chicago, if those Greek austerity measures mentioned above would fall on the doorsteps of your community? Same question for those of you living in London, Berlin, Amsterdam, Montréal.

Maybe this is a good time to speak up. At least now you still can. Once there are tanks in the streets, that may prove to be not so easy anymore. Look, Greece is not the worst of the lot, or the biggest issue. As Jon Stewart pointed out last week, Greek debt amounts to some $44,000 per capita. In America, it's $45,000.

We're all in this together, believe it or not. US banks have exposure to Greece through credit default swaps to an extent that nobody can define. We do know, though, that it's substantial. And that if the Greek austerity vote fails on Wednesday, those US banks will come looking for more bailouts. From a government that can't even agree on a debt ceiling, because the debt is so monstruously high already there is no way out anymore.

And if Athens manages to push through that vote, nothing will have changed, even is you'll see markets rise: Greece can't pay its debt owed to international financial institutions, not now, and not tomorrow. And you know what? Neither can the US.

It’s time to make a choice. And accept the consequences of that choice. If you can't pay them back, then don't.

Greece is standing up to EU neocolonialism
by Costas Douzinas and Petros Papaconstantinou - Guardian

The usurious conditions of the Greek bailout reveals Brussels' colonial mindset – but Athens is showing citizens can resist

After months of attacks on the supposedly feckless Greeks, the western media, intellectuals such Amartya Sen and Jürgen Habermas and the United Nations have finally woken up to the fact that the catastrophic austerity imposed on Greece is unsustainable. It was about time. This is an unprecedented and morally odious type of collective punishment imposed on a majority of Greeks, who did not see a penny from the profligacy of their rulers and who live close to the poverty line.

The partial acknowledgment of the injustice and unworkability of the austerity measures came only after popular resistance and the peaceful revolt of the indignant scored its first major victory for the anti-austerity and pro-democracy campaign. Syntagma has placed a clear sell-by date on George Papandreou and the elites that ruled Greece for 37 years. The vote of confidence for the reshuffled government bought a limited amount of time, deferring its inevitable collapse.

Offering to resign on Wednesday morning and, when his offer was turned down, offering the de facto leadership of the party and government to Evangelos Venizelos, his bitter party enemy, in the evening, Papandreou is a "dead man walking". While most commentators believe the virtually bankrupt country must default and negotiate a substantial reduction of debt, the government keeps insisting that it will repay every last penny.

Syntagma has become Tahrir Square in slow motion. It is a peaceful, democratic revolt that was easier to start because the fear of brutal repression is smaller, but will be harder to complete as it faces the enormous might of the European Union and global finance capital. Now that the indignant have changed the rules of the political game, it is perhaps time to revisit some basic facts that have been seriously misrepresented.

1. The bailout of Greece is not a gift or grant but a loan bearing high interest. Crucially, bailout funds are not used to pay civil servants' salaries and pensions, but to pay off debt held by German and French banks. According to IMF estimates, Greece will pay €131bn in refinancing and interest payments between 2009 and 2014, far more than the initial bailout loan of €110bn.

In a magician-like sleight of hand, German and French workers are forced to bail out their national banks, not directly as in the 2008-9 banking bailouts but through the mediation of Greece, which inevitably becomes the target of populist outbursts. The Greek government, on the other hand, was ordered to provoke an economic and social meltdown unimaginable in western Europe in peacetime in order to receive the loans.

2. This unprecedented punishment led to an increase in debt and to permanent economic depression. The European governments now propose to offer a second loan, if Greece accepts an even more odious set of measures and sells off the family silver. Acceptance of these measures has been made a precondition for the payment of the fifth instalment of the initial bailout.

This is blackmail worthy of a backstreet loan shark. The privatisation plan includes the sale of 17% of the public power corporation, the engineroom of growth, which will remove the state's controlling interest. Under the new plan, foreign emissaries will be assigned to the main ministries and the company set up to privatise public wealth. The market value of this stake is just €400m, because of the stock exchange decline. But the corporation owns 15 power plants and the budget for a new plant about to be built is €1.3bn. This post-Soviet style privatisation will pass valuable public assets to private hands.

3. The loss of economic sovereignty is accompanied by unprecedented attacks on the political and legal integrity of the country. IMF and EU inspectors visit the country on a regular basis, examine the records and dictate policy. Under the new plan, foreign emissaries will be assigned to the main ministries and will run the companies that will privatise the public wealth. Government capitulation is not enough. The European authorities demand that all political parties should accept the new austerity measures before the next loan instalment is paid. Surreptitiously, a new type of colonialism is emerging, in which the Brussels elites treat the European south as undeserving poor or colonial subjects to be reformed and civilised.

Although a small peripheral country, Greece had from the beginning special symbolic value for the European project. The word "Europe" is Greek, while the classical polis or city-state gave birth to democracy, science and philosophy and gave politics its name. Symbolic significance was an important consideration in the decision to admit Greece to the EU in 1981 despite the chasm between its economy and those of the northern core. But those were the days when the vision of a union of social solidarity and prosperity was still alive. Today's vision promotes a neocolonial disciplining of populations.

The Greek people and democracy have become sacrificial victims similar to Euripides's heroine in Iphigenia in Aulis. Iphigenia must be sacrificed by her father Agamemnon to appease the angry gods and set wind to the sails of the Greek fleet on the way to Troy. In the contemporary setting, the greedy gods are the bond markets with credit-rating agencies as their obscure priests. Saving the banks at the expense of the people is the object of the sacrifice and unfettered capitalism profits the contemporary Troy. Iphigenia eventually survived, miraculously rescued by a mysterious cloud, which replaced her with a deer.

In the modern Greek tragedy, salvation can only come from the magic "cloud" of the protesting demos that has occupied Syntagma and many other squares for a month. Standing below parliament, the Syntagma multitude has become the lower house or the parliament of the common people, confronting the paralysed upper house and adding popular participation to the failing principle of representation.

Athenian laws were prefaced with the statement Edoxe te boule kai to demo, "It is the considered opinion of parliament and the people". On Tuesday and Wednesday, the two will be opposed as the demos, assisted by a two-day general strike, will try to persuade parliament not to enact into law the new tranche of measures. Whatever the outcome, direct democracy has returned to its birthplace and is changing the meaning of politics. The last few days proved that a multitude of free and determined citizens can successfully resist mighty powers. This is the promise and hope Athens offers to Dublin, Lisbon and London.

Ilargi: A 75 minute doc well worth seeing.


For the first time in Greece a documentary produced by the audience. "Debtocracy" seeks the causes of the debt crisis and proposes solutions, hidden by the government and the dominant media.

Banker Occupation of Greece
by Stephen Lendman -

Economist Michael Hudson calls it "Replacing Economic Democracy with Financial Oligarchy" in a June 5 article by that title, saying:

After being debt entrapped, or perhaps acquiescing to entrapment, the Papandreou government needs bailout help to pay bankers that entrapped them. Doing so, however, requires "initiat(ing) a class war by raising its taxes (harming working households most), lowering its standard of living - and even private-sector pensions - and sell off public land, tourist sites, islands, ports, water and sewer facilities" - in fact, all the country's crown jewels, lock, stock and barrel, strip-mining it of everything of worth at fire sale prices.

Why? Because the US-dominated IMF, EU and European Central Bank (ECB), the so-called "Troika," demand it as the price for bailout help that wouldn't be needed if Greece wasn't trapped in the euro straightjacket. Membership means foregoing the right to devalue its currency to make exports more competitive, maintain sovereignty over its money to monetize its debt freely, and be able to legislate fiscal policies to stimulate growth.

Instead they're entrapped by foreign banker diktats demanding tribute. They call it a "rescue." In May 2010, the Papandreou government agreed to earlier austerity in return for loans. Now they're at it again, demanding more or they'll collapse the entire economy, or so they say. And the same scheme is replicated in Ireland and Portugal. Moreover, it's heading for Spain, and potentially most of Europe and America as representative governments head closer to "financial oligarchy." 

In other words, it amounts to financial coup d'etat authority over sovereign governments unless popular anger prevents it, involving more than street protests or short-term strikes accomplishing nothing. Former Wall Street broker, financial analyst, radio/TV host, and consummate critic Max Keiser calls it "banker occupation" for good reason. They:
  • make the rules; 
  • set the terms; 
  • issue diktats;
  • pressure, bribe or otherwise cajole or force governments to acquiesce; and 
  • burden working households with higher unemployment, wage and benefit cuts, higher taxes, and other austerity measures to assure financial predators profit - always at their expense, forcing once prosperous nations to surrender sovereignty to financial oligarchs, ruling world economies like fiefdoms.

Hudson said European central planning concentrated financial power in "non-democratic hands" from inception under European Central Bank (ECB) dominance. Operating like a financial czar over its 17 Eurozone members, it:
  • "has no elected government (to) levy taxes;
  • (t)he EU constitution prevents (it) from bailing out governments," unlike the Fed able to monetize US debt in limitless amounts; and
  • "the IMF Articles of Agreement also block it from giving domestic fiscal support for budget deficits," saying:

    "A member state may obtain IMF credits only on the condition that it has 'a need to make the purchase because of its balance of payments or its reserve position or developments in its reserves.' "

However, despite ample foreign exchange reserves, IMF loans are offered "because of budgetary problems," precisely what it's not allowed to do. As a result, "when it comes to bailing out bankers," said Hudson, "rules are ignored" to save them and their counterparties from incurring losses. And it works the same way in America under the Fed, dispensing open-checkbook amounts to Wall Street on demand.

No wonder Hudson calls finance "a form of warfare," operating like pillaging armies, taking over land, infrastructure, other tangible assets, and all material wealth, devastating nations in the process, causing unemployment, poverty, neoserfdom, "demographic shrinkage, shortened life spans, emigration and capital flight."

Greece's business-friendly fiscal legacy, in fact, caused today's crisis, squeezing public spending in favor of the rich the rich, especially with sweetheart tax policies letting much of their income go undeclared. 

Financial deception followed. On February 8, 2010, Der Spiegel writer Beat Balzli headlined, "How Goldman Sachs Helped Greece to Mask its True Debt," saying:
In 2002, Goldman helped them borrow billions by circumventing Eurozone rules in return for mortgaging assets. Using creative accounting, debt was then hidden through off-balance sheet shenanigans, employing derivatives called "cross-currency swaps in which government debt issued in dollars and yen was swapped for euro debt for a certain period - to be exchanged back into the original currencies at a later date." 

Debt entrapment followed, nations like Greece held hostage to repay it, the usual price being structural adjustment harshness, making a bad situation worse. In 2010, in return for a $150 billion loan, Papandreou imposed:
  • large public worker layoffs (around 10% overall);
  • public sector 10% wage cuts, including a 30% reduction in salary entitlements;
  • cutting civil service bonuses 20%;
  • freezing pensions;
  • raising the average retirement age two years; and
  • higher fuel, alcohol, tobacco, and luxury goods taxes, knowing much more lay ahead given Greece's worsening debt problem.

More bailout help is now needed in return for greater austerity, as well as selling off Greece's crown jewels as explained above. On June 24, New York Times writer Stephen Castle headlined, "Europeans Agree to a New Bailout for Greece with Conditions," saying:
The deal "came a day after Greece agreed with international creditors to more austerity measures (requiring parliamentary approval) as part of revised plans for 2011-15 aimed at" assuring bankers are first in line to get paid, popular and national interests be damned. An agreement in principle expects half the funds offered to come from new loans, a fourth from state asset sales, and the remainder from private sector contributions.

An unspecified larger amount (of around 110 billion euros in total) will follow an initial 12 billion euro emergency loan with strings. They include:
  • laying off another 20% of public workers;
  • privatizing public enterprises and assets on the cheap;
  • a one-time personal income levy from 1 - 5%, depending on income;
  • lowering the tax-free income threshold to 8,000 euros annually from 12,000;
  • setting the lowest tax rate at 10%, with exemptions for people up to age 30, over-65 pensioners, and disabled people; and
  • annually taxing the self-employed an additional 300 euros.

Up to $120 billion in cuts are expected though final figures haven't been announced, depending on amounts raised from asset sales and private contributions.

In response, public anger is visceral through daily protests. The ruling PASOK party's approval rating is 27%. Over 90% of the public are dissatisfied with Greece's governance. Another 90% say the country is "on the wrong path." About 80% are unhappy with their lives, and 70% are concerned that conditions will keep deteriorating.

Nonetheless, on June 22, Papandreou won a parliamentary vote of confidence ahead of two more steps the IMF and Eurozone leaders require before releasing more funds - agreeing on their demanded austerity plan and enacting measures to implement it.

In fact, acting IMF managing director John Lipsky (a former JP Morgan Investment Bank vice chairman) said no opposition will be tolerated. In other words, Eurozone nations have no option but to obey IMF diktats, Lipsky acting more like a commissar than banker.

At the same time, austerity, privatizations, and greater debt amounts are self-defeating. Workers, of course, are hardest hit unless mobilized mass action stops it. Ideally they can do it by general strike, shutting down the country, setting non-negotiable demands, staying out until predatory banker diktats are rejected, and prevailing by letting nations regain their sovereignty and people their rights. 

That's how labor battles are won. It works the same everywhere when rank and file determination stays the course to victory.

ECB keeps lid on Greek bond data
by Gillian Tett - Financial Times

Somewhere in the bowels of the mighty European Central Bank, there is a number that many investors would give a lot of euros to see. It refers to the volume of Greek government bonds that are now sitting in the ECB’s coffers, after being lodged there by European banks through central bank repo operations.

Sadly, the ECB considers this number far too "sensitive" to release, even after a delay. Nevertheless, as fears about sovereign risk rise, those hidden data are assuming ever-greater importance. On Thursday, yields on Greek bonds rose sharply higher, after Moody’s warned that it – like Standard & Poor’s – might soon downgrade Greek debt. The yield on Greek two-year notes, for example, rose 74 basis points on Thursday to 6.4 per cent.

But while that price swing was striking, what was equally notable was that it occurred in secondary markets that have been surprisingly thin in recent days. For notwithstanding all the recent attention on sovereign debt, traders say the liquidity of secondary Greek bond markets – together with other countries such as Portugal – has recently been very thin. And that, in turn, has exacerbated the price volatility, such as the swing that occurred on Thursday after the Moody’s news.

So why is there such low turnover? One obvious reason is that trading in small country eurozone bonds has never been particularly high, even in good times, due to the level of fragmentation across the eurozone debt as a whole. Another key problem is that many investors are currently haunted by a deep sense of uncertainty about how to read the signals emanating from the eurozone.

A couple of years ago, it was impossible for most observers to imagine that the eurozone ever really would let a country such as Greece default. But the financial and banking crisis has shown investors – often for the first time in their lives – that unimaginably horrible things do occasionally occur. Hence, many investors are now sitting frozen, completely lacking in confidence about their ability to predict what might happen next.

I suspect another reason for that illiquidity is the ECB itself. At present it is estimated that Greek banks hold up to €37bn ($50bn) of the outstanding €270bn-odd stock of Greek government bonds and bills. German banks, such as the Landesbank, are thought to hold a slightly lower amount, while French banks also have a significant chunk of Greek bonds.

It is a fair guess that many, if not most, of those bonds are now with the ECB. After all, what the ECB’s repo operations essentially do is let banks turn a risky asset (ie Greek bond) into something safer (euros). And that, in turn, means that banks now have fewer Greek bonds to lend to hedge funds, or other traders. This has several fascinating implications. For one thing, it casts interesting light on the current debate about sovereign credit default swaps. In recent days, German and French leaders have warned of potential curbs on sovereign CDSs, arguing that these markets have sent out distorted – and alarmist – signals.

But while those complaints about distortions in the sovereign CDS world may be correct, the illiquidity of the government bond markets hardly makes those markets such a shining paradigm of price signals. If nothing else, that implies that investors and politicians should keep a close eye on both cash and derivatives markets; both are now distorted.

But another big question raised by the ECB’s holdings of Greek bonds is who might – or might not – be tempted to buy these bonds going forward. In recent years, European banks have been happy to hold Greek bonds since they felt able to use them for repo deals with the ECB. But if the credit rating agencies keep downgrading Greek debt, these bonds may no longer be eligible for that ECB window from the end of this year. That, coupled with the fact that many European banks are now cutting their credit limits to Greece, could damp banks’ appetite.

Some brokers hope – or pray – that asset managers will step in to plug the gap. After all, Greece is mulling over a new €10bn issue next week. And current yields on Greek debt look pretty tempting, at least for investors, which do not need to mark to market, and which do not think that Greece is about to default. (And personally, I think that remains unlikely, not least because so many German banks and life assurance companies hold Greek bonds that there is a strong incentive for a German rescue.)

But with Greece’s future looking uncertain – and secondary market liquidity low – it remains far from clear how many long-term private sector investors will buy Greek bonds. While some fly-by-night hedge funds might bid, these are hardly popular in Europe now. Barring some truly deft sales action next week, in other words, a public bail-out looms. All eyes are on Athens; and, for that matter, on the faceless bureaucrats in Frankfurt too.

Goldman banker criticises Athens swaps
by Megan Murphy and Joshua Chaffin - Financial Times

A senior Goldman Sachs banker has conceded that complex currency swaps used to reduce Greece’s budget deficit "could have and should have" been more transparent, as the investment bank moved to head off mounting criticism of the deals. Goldman is under fire from European regulators and politicians for structuring a series of transactions that helped Greece to trim its national debt figures in 2001, just after Greece was admitted to Europe’s monetary union.

Gerald Corrigan, a former president of the Federal Reserve Bank of New York who joined Goldman in 1994, told a UK parliamentary committee that, "with the benefit of hindsight ... the standards of transparency could have been and probably should have been higher". Mr Corrigan is the first Goldman banker to speak publicly about the swaps as questions over the bank’s role in Greece’s current financial woes continue to swirl.

Goldman posted a short explanation of the transactions on its website, stating that the swaps complied with European Union accounting principles in effect at the time and had had a "minimal" impact on Greece’s overall fiscal situation.

"In December 2000 and in June 2001, Greece entered into new cross-currency swaps and restructured its cross-currency swap portfolio with Goldman Sachs at a historical implied foreign exchange rate," the statement says. "These transactions reduced Greece’s foreign-denominated debt in euro terms by €2.367bn and, in turn, decreased Greece’s debt as a percentage of [gross domestic product] by just 1.6 per cent, from 105.3 per cent to 103.7 per cent."

In his testimony, Mr Corrigan emphasised that countries had sought to control their budget deficits for "centuries", and that Goldman was only one of several banks that had helped governments to "manage" their debt burdens over the past decade.

European Commission authorities have requested information from Greece about the transactions. It emerged on Monday that Athens had missed a Friday deadline to have supplied the information to Eurostat, the Commission’s statistics agency. Athens attributed the delay in part to disruptions caused by a four-day strike at the finance ministry.

Greece's PASOK MPs wavering over support for fiscal plan

Four deputies indicate that they might not support austerity package in Parliament this week

As many as four PASOK deputies are considering not voting for the government’s medium-term fiscal plan in Parliament this week, leaving the ruling PASOK party with the slimmest of majorities to pass the new set of austerity measures through the House.

Greece has been told by its European Union partners and the International Monetary Fund that it has to pass the latest round of spending cuts and tax hikes in order to qualify for a July loan instalment of 12 billion euros and to move a step closer toward agreeing a second bailout with its lenders.

Without the July tranche, Greece will go bankrupt. However, the government and its new Finance Minister Evangelos Venizelos have yet to convince all 155 Socialist MPs that they should back the midterm fiscal plan when Parliament concludes its debate and vote on Wednesday.

Kozani MP Alekos Athanasiadis insists he will oppose the measures. "Nothing has changed for me," he told Skai TV on Saturday. "I want to make it clear that I will not vote for the midterm fiscal plan. I do not disagree with the government on a lot of points but I stick to my view that some public enterprises should not be sold."

On Friday, Thomas Robopoulos, a Thessaloniki lawmaker, also said that he was considering opposing the measures. Robopoulos said he would probably quit Parliament after casting his vote against the PASOK government. Robopoulos’s Thessaloniki colleague Chryssa Arapoglou has also indicated she is reluctant to approve the package and is considering quitting her post.

On Saturday, PASOK deputy Panayiotis Kouroublis also told Skai TV that he was in emotional turmoil over whether to support the government. "For anyone who is an MP, these are the most torturous days of his life," he said. Kouroublis said he sent a note to Venizelos seeking clarification on 15 points and would wait for a response before making a final decision on how he would vote.

If all four MPs oppose the government, PASOK would be left with a one-seat majority unless it received support from another smaller party, such as the centrist Democratic Alliance. Venizelos acknowledged on Saturday that some of the measures are "severe and unfair" but added that "this is the only way at the moment that we can address an urgent national need."

Maybe Greek MPs would be right to say No
by Wolfgang Münchau

The Greek parliament is today scheduled to start the most important parliamentary debate in the country’s recent history. If a majority approves the agreed austerity package in a vote due on Tuesday, all is well. For now. The European Union and the International Monetary Fund will continue to provide credits. If not, Greece might default within days. How should Greek MPs vote?

Until last week, I would have said: definitely Yes. The country is running a large primary deficit. The austerity imposed by the EU and the IMF is mild compared with the austerity that would be required if the country were to be cut off from any source of external finance. A messy default would destabilise the global financial system and could force Greece to abandon the euro.

Such an argument is vulnerable to relatively subtle shifts in circumstances. One such shift may have occurred last week, when EU and IMF negotiators imposed a new tranche of austerity. The measures included a cut in the tax-free allowance, and a tax levy of €100-€300 for the self-employed. The decision triggered angry protests in Athens. I see it as a political provocation and an act of economic vandalism. It could derail the entire crisis resolution process.

There is no doubt that Greece needed a large fiscal adjustment. And, yes, the Greek government backtracked a little on the previously agreed programme to win support for last week’s vote of confidence. The latest slice of austerity was intended to plug this gap. But it would be a mistake to deprive Greece of all means of political manoeuvre.

Politically, the new austerity programme is backfiring already. It strengthens the position of Antonis Samaras, the Greek opposition leader, who opposes it. Fellow centre-right EU leaders last week put pressure on him. He resisted. His argument is that austerity is killing the economy and that Greece now needs a jolt to get it back to a growth path.

By unwittingly strengthening Mr Samaras’s resolve and his public support, the EU destroys any chances of the national unity it so desperately seeks. This is, after all, going to be a programme lasting several years. If the present government were to fall, Mr Samaras would stand a good chance of winning. He is already ahead in the polls. If elected, he would ask the EU to renegotiate. The EU and the IMF might decline. The whole strategy could unravel at that point.

Mr Samaras’s argument against austerity is hard to refute on economic grounds. Austerity was clearly necessary at the start of the programme, but this is the time for the emphasis to shift towards growth, which Greece needs under any scenario – default or no default, exit or no exit. The EU wasted weeks on the silly debate of private sector participation, instead of focusing on the issues that really matter.

The problem is that the entire process remains sensitive to sudden electoral mood swings in the creditor countries. The first priority of German, Dutch and Finnish politicians has been to reduce the costs of the programme as much as possible. They even went so far as to earmark uncertain Greek privatisation receipts as an integral part of the next finance package, rather than for debt reduction.

Under the scheme now likely to be agreed, any shortfall in privatisation receipts would therefore open a finance gap. The creditor countries would then almost certainly ask Greece to plug the gap through even more austerity. Such a strategy is financially reckless and politically irresponsible.

No wonder the Greeks are becoming wary of extreme austerity. They will only ever accept it over long periods if there is a plausible endgame. EU economics officials and their political masters are ideological supply-siders. They misjudged the effects of the Greek austerity programme on growth the first time round. They do so now. They will do it again. And this ruins the endgame for the Greeks.

The combination of a half-hearted financial support programme and dogmatism are reasons why even perfectly rational Greek MPs might end up voting No tomorrow. The programme, as it stands, is politically, economically and morally hard to justify. The only reason to vote Yes would be to delay the default until the Greek public sector achieves primary balance, which will not happen before 2012. The EU’s strategy reduces the choice of the Greeks to defaulting either next month, or next year.

The Greek government has a narrow majority and is putting heavy pressure on its MPs to vote in favour of the programme. The government may yet prevail. If it does, this will be because of arm-twisting more than to the strength of the argument, which is no longer clear-cut.

Greek MPs should be asking both sides for more clarification. The problem with Mr Samaras’s position is that a vote against austerity would trigger more austerity in the very short run. Mr Samaras needs to explain how Greece can fund itself when no outside finance is available. What is his strategy? And the Yes camp needs to explain why austerity can work now when it failed before.

Greek MPs are now facing the choice between a lie and a disaster. Considering what is at stake, the EU and the IMF should never have put Greece in that position.

Greek debt crisis prompts EU 'resolution' talks
by Graeme Wearden - Guardian

EU officials and bankers to discuss ways of resolving Greece's financial crisis including proposal for debt write off

European Union officials and bankers from across the region are meeting in Italy to discuss ways of resolving the Greek debt crisis, as the Athens parliament prepares to debate its austerity package before a critical vote later this week. The talks will take place in Rome on Monday evening and will examine whether private creditors could agree to roll over some Greek debt. Top of the agenda will be a proposal from the French banking industry, under which borrowers would effectively write off a third of their debts.

The meeting is organised by the Institute of International Finance and comes at the start of a crunch week for Greece, and the wider eurozone. If the Athens parliament opposes the austerity bill, then Greece would probably be denied the €12bn (£10.6bn) slice of financial aid due next month, which could force it to default and trigger calamity across the financial markets. Defeat may also scupper the second bailout package, which was agreed in principle last week.

The vote on the package of spending cuts, tax rises and asset sales is due on Wednesday. It is likely to be close, given prime minister George Papandreou's shrivelling majority in parliament. A second vote, on an enabling bill to speed up the pace of reform, is expected on Thursday. The measures remain deeply unpopular in Greece, with demonstrators storming the Acropolis on Monday morning. They hung a banner declaring: "The peoples have the power and never surrender. Organize – Counter attack."

Events in Greece continue to dominate the financial markets, where traders are dogged by fears that the debt crisis could flare up across the region again. The spread between the interest rates on ultra-safe German bonds and their Italian equivalent reached a record high on Monday morning, and the spread with Greek bonds also widened. Stock markets were edgy, while the euro fell against the dollar and hit a new low against the Swiss franc.

"There are ongoing worries that failure to resolve the situation in Greece has the potential to see fallout on a global scale," said Cameron Peacock, market analyst at IG Markets. "It'll be no surprise if we find that the appetite for risk simply isn't there among traders."

The French bank plan
France's banking sector is one of the biggest creditors to Greece, holding about €9bn of debts according to recent data. This makes it particularly vulnerable to the crisis that has been developing over recent weeks.

Under the French banks' proposal, private creditors whose Greek debts mature would agree to invest half the sum back with Greece, by buying new, long-dated bonds with maturities up to 30 years. An additional 20% of the maturing debt would be reinvested in high-quality bonds through a special fund, structured to guarantee repayment. The plan could appeal to European leaders who are taking a hard line against private creditors, as their maturing debts would not immediately be paid off in full. It could also find favour with banks who are unwilling to simply swap all their bonds for new securities.

However, the credit rating agencies could still choose to view the plan as a technical default, triggering a "credit event". France's finance minister Christine Lagarde confirmed this morning that a "first draft" of the plan had been drawn up.

Gary Jenkins, head of fixed income research at Evolution Securities, compared the French proposal to the Brady Plan: used during the Latin America debt crisis of the 1980s. It saw banks agree to swap their loans for bonds that would reduce the debt burdens of countries including Argentina, Brazil, and Mexico. "If widely accepted, this should satisfy Germany's previous call for substantial private sector involvement," said Jenkins.

Europe prepares for a Greek default
by Graham Ruddick, and Philip Aldrick - Telegraph

European leaders have admitted they are preparing for a Greek default as the eurozone debt crisis enters a pivotal week.

Greek politicians will vote on a radical €28.4bn (£25.2bn) austerity package in the coming days that they must pass if the country is to receive the vital fifth tranche of a €110bn bail-out agreed last year. The outcome is expected to go down to the wire as the ruling party's slim majority is pushed to the limit by the opposition's refusal to support the deal, a wave of national strikes, and another round of public protests.

Werner Faymann, the Austrian Chancellor, said on Sunday he "can't rule out" a Greek default and Wolfgang Schaeuble, the German finance minister, revealed that Europe is preparing "for the worst". "We are doing everything we can to prevent a perilous escalation for Europe but must at the same time be prepared for the worst," Mr Schaeuble said. "If things turn out differently than everyone expects that would of course be a major breakdown. But even in 2008, the world was able to take coordinated action agai-nst a global and unpredictable financial market crisis."

If the austerity package is passed, Greece has been promised a second bail-out of up to €120bn. Private sector creditors are being urged to participate on a voluntary basis but evidence is mounting that their involvement will be less than the €30bn officials at the European Union and International Monetary Fund hope.

German banks were reported over the weekend to be pushing for state guarantees in return for voluntarily "rolling over" the debt, but the demands were rejected by Chancellor Angela Merkel as they would increase the German taxpayers' exposure. In Britain, the Treasury said there were "no specific proposals" for the UK private sector to be involved. President Nicolas Sarkozy indicated that French banks were prepared in principle to take part in the programme, but no details have been agreed.

In a show of support for Europe, though, Chinese premier Wen Jiabao yesterday promised that China would continue to buy European sovereign debt. Noting that it had just agreed to buy Hungarian bonds, he said: "That is China lending a helping hand to Hungary at a time when that country is in difficulty. We will do the same thing for other European countries. "[Since the sovereign debt crisis,] China has actually increased the purchase of government bonds of some European countries and we have not cut back on our euro holdings."

Greece's deputy prime minister, Theodoros Pangalos, sought to shore up support, describing talk of Greece quitting the euro as "immense stupidity". However, he warned that although he is optimistic about winning the first round of the austerity vote, he is more wary about securing approval for specific laws to enact fiscal reforms and privatise public companies. "That's where we may have problems. I don't know whether some of our members of parliament will vote against it. It's possible," he said.

George Soros, the hedge fund manager famous for shorting Sterling in the 1990s, added that it is "probably inevitable" that a country will quit the euro. "There are fundamental flaws that need to be corrected," he said. What Europe's leaders are saying about the bail-out.

Greece braces for the toughest week in its euro history
by Fiona Govan and Harriet Alexander - Telegraph

The boardwalks and bars flanking the crystal waters of Athens' marinas were once the leisurely venues of choice for Greece's well-heeled elite. But not any longer.

The Greek government, under huge international pressure to wring every possible cent out of its woefully leaky tax system, has rounded on the country's wealthy residents and demanded they pay their dues, making the rich nervy and in some cases even driving fearful mariners away from the harbour.

In recent months teams of tax collectors have been making spot checks on luxury yachts and upmarket beach clubs in a desperate attempt to boost state revenues and stave off default. They target the marinas as a way of investigating the tax returns of their self-employed residents. High-earning Greeks have been buying expensive yachts which they claim are for a tourist charter business, for which there are large tax incentives. They then declare much of their professional income as if from that business, enabling them to pocket it free of tax.

For the Greek government at the moment, every cent counts. The socialist prime minister George Papandreou has been forced to negotiate a new bail-out worth some €110 billion (£98 billion), as Europe enters a crucial period in the euro crisis.

A knife-edge vote in the Greek parliament on a new package of cuts is expected on Wednesday, with Mr Papandreou desperately needing to convince his reluctant backbench MPs to approve the measures. If Greece refuses to accept more austerity measures, the consequences for Greece, the EU and indeed the global economy could be dire. Yet politicians are struggling to convince their angry constituents that more cuts - and the closing of such tax loopholes - are the only solution.

"It's the biggest money laundering scheme around," said Kostas Tsiplantonis, a businessman with four sailing boats, about the yachting swindle. A third of the vessels moored in the Marina Alimos, one of Greece's largest marinas in the south of Athens, are the property of middle class doctors, lawyers and engineers who are now being targeted for possible tax evasion. "People claim they earn only €20,000 taxable income and that the boats they own are charter enterprises and therefore under the current rules tax free. But it's clearly not the case," he said.

Such practice has been tolerated but now the net is closing in, and daily newspapers carry notices of a new hotline for people to inform on tax dodgers. "Unfortunately tax evasion is so extensive and has been tolerated by society for so long that it is a hell of a job to tackle. But it has to be done with urgency," said Costas Bakouris of the Greek arm of the anti-corruption organisation Transparency International, which estimates that a third of the Greek economy is based on undeclared revenues.

"As well as short term measures to find the rascals who haven't been paying what they should and prosecute them, we need a long term plan to instill the behaviour of a civilised society where everyone takes responsibility – and that could take a generation." Those yacht owners who could, swiftly sailed off into the sunset before the tax man could find them. But many who remained found their vessels confiscated, and a sorry fleet of impounded boats bobs on the quayside – a symbol of how low this great seafaring nation has sunk.

Mr Papandreou's majority in parliament is down to a handful of votes, with one deputy from his ruling PASOK party announcing on Friday he would vote against the measures, joining another party rebel who announced his opposition earlier this month. A poll published last week showed that 73 per cent of the electorate were against the new austerity plan. And if they fail to approve the proposals, then Greece will default on its loans, fail to receive the additional money, and risks spiralling into an economic abyss, unable to pay hundreds of thousands of state employees.

The events have shaken the eurozone to the core, with senior European officials now openly describing it as a calamity on par with the economic woes of the 1930s. Washington has warned it could even drag down the world economic recovery. "We're at a critical point in the most serious crisis since the second world war," warned Olli Rehn, the European commissioner for monetary affairs.

At the heart of the Greek drama is the feeling that the people have profited for far too long from feeble taxation, cushy jobs in the state system, and an excessively-generous work culture which allows many employees to retire at 55. Even before the new bail-out, Greece owes the equivalent of a year-and-a-half of total national economic output: some €350 billion. But the austerity plan, which largely centres on a €50 billion privatisation scheme, is deeply unpopular both within parliament and on the streets.

Notis Mitarachi, shadow finance minister from opposition New Democracy party told The Sunday Telegraph that the austerity package had serious flaws. "If the last programme had met its objectives we wouldn't be here again now but it was unsuccessful and now they are asking to approve another. "The fear is that we will be back here in a year from now asking Europe for a third bail-out package, because this round of measures won't be successful either."

The new finance minister Evangelos Venizelos has been given the unenviable job of convincing the world that Athens is capable of reforming the Greek economy, and persuading those at home that it is in their interest. Described by one parliamentarian as a man who can "sell ice to Eskimos and sand to the Bedouin" he must persuadie Greek society of the need to implement structural reform and crackdown on tax evasion, which is estimated to cost the state up to €50 billion a year.

In his first week in office Mr Venizelos said: "We will spare no effort to collect what is due to the state. We promise to draft and apply a new and honest tax system, one that has been needed for decades, so that taxes are duly paid by those who should pay." Tens of thousands of demonstrators are expected to gather in the capital's Syntagma Square on Sunday to protest against the plan and Greece's two major unions have called a 48 hour general strike on Tuesday and Wednesday.

A rolling strike by workers at the state's electricity company over plans to sell off a 17 per cent stake is causing blackouts across the nation. In Syntagma Square where protesters have been camped out for weeks, many feel Greece should default on its debt and return to the drachma. Rosalia Panagiotopulou, an unemployed graduate, said: "I think we are at the point where it's clear Greece has nothing to gain from being within Europe. We are being persecuted by the richer countries and would do better on our own."

But the idea of Greece leaving the euro would cause huge trauma far beyond the country's borders. Across the entire eurozone governments are uneasily watching proceedings, with officials in fragile Italy, Spain and Ireland especially wary. Irish finance minister Michael Noonan even joked last week that he would make a series of T-shirts proclaiming "Ireland is not Greece" – which he would then sell.

Yet there is a determination in most of Europe that failures in one country cannot cause the whole eurozone to implode. France and Germany are leading calls to support Mr Papandreou – mainly because their financial institutions are so entangled in the web of euro debt. The French foreign minister, Alain Juppe, said: "There is a very strong determination among the member states to save what we have done since 50 years all together."

Without irony even tiny Estonia – the newest member of the eurozone, having joined in January – has pledged its support for the cradle of Western democracy. "It's a question of solidarity," said Andrus Ansip, the prime minister. But he couldn't resist offering a pearl of wisdom – one which will deepen the gloom among the yacht owners in Athens. "If I may give my advice to Greece, it is that you have to cut public expenditure. You have to make structural reforms. And you have to create a really efficient taxation system."

'The German Government Will Pay Up
by Spiegel

In a SPIEGEL interview, leading German economist Stefan Homburg argues that euro-zone members should not bail out Greece, discusses who is making a profit from the crisis and explains why he himself is buying Greek bonds. "I believe in the boundless stupidity of the German government," he says.

SPIEGEL: The European Union and the International Monetary Fund are planning a new bailout package for Greece involving the voluntary participation of banks. What's your take on this?

Homburg: Banks cannot participate voluntarily. An executive board is committed to its company's welfare, and not the public interest. If it waives outstanding debts at the expense of its own company, this is a breach of trust and punishable by law.

SPIEGEL: Banks can only do business if the financial markets function properly. If the banks help make this happen, it certainly can't be a punishable offense.

Homburg: A bank can waive a portion of a debt with the aim of saving the remainder. This occurs in all bankruptcy proceedings. But things are different here, precisely because of the bailout package: If the bank refuses to make its own contribution, taxpayers alone will pick up the tab. This is exactly what a board of directors has to strive to achieve to avoid being accused of criminal breach of trust.

SPIEGEL: So the voluntary participation of private creditors, which German Chancellor Angela Merkel and French President Nicolas Sarkozy have agreed on, will achieve little or nothing?

Homburg: It was all just a big show which was mainly intended to calm the German public. Merkel wanted mandatory participation, Sarkozy wanted none at all. In effect, Sarkozy has prevailed.

SPIEGEL: Do you prefer Merkel's original proposal?

Homburg: That proposal also fell short of the mark. In a market economy, even in the case of a plumber whose customers don't pay their bills, it's never a question of getting creditors "involved" (in helping to deal with a bankruptcy). Instead, when push comes to shove, it is creditors, and creditors alone, who have to write off their loans. Only then do they have an incentive to carefully choose who they lend money to. A market economy with no personal liability cannot function. The government bailout initiatives create misdirected incentives that continuously exacerbate the problems on the financial markets.

SPIEGEL: But the plumber is not, as they say, too big to fail -- his or her bankruptcy wouldn't cause entire banks to collapse. The European Central Bank has warned of a massive new financial crisis if it comes to the compulsory involvement of private creditors or even a restructuring of Greece's debt.

Homburg: The alleged risk of contagion is a myth that doesn't stand up to closer scrutiny. If you share my conviction that all this talk of Greece being too big to fail is simply nonsense, then there is no reason for bailouts …

SPIEGEL: … yes, but only if you're right.

Homburg: No, it also holds true in the reverse situation. If the bankruptcy of little Greece were actually to trigger a global financial crisis, new bailout programs couldn't solve the problem: They would actually exacerbate it. If no more states or banks are allowed to go bankrupt because this might precipitate a financial crisis, then we're finished. Then the problem continuously escalates and leads to a much greater crisis.

SPIEGEL: Europe wants to use the bailouts to buy time. The idea is that during this period the banks can recover and countries like Portugal, Ireland and Spain can get back on an even keel, so the risk of contagion is not so great when the inevitable restructuring takes place in the distant future. That is the strategy.

Homburg: I wouldn't call it a strategy. First, states bailed out their banks, now states themselves are being bailed out. But there is no next level to fall back on beyond this bailout. The bailout packages have merely exacerbated the crisis. Last year, if we had adhered to the Lisbon Treaty, which prohibits assistance payments, Greece would have restructured its debt, just as Uruguay, Argentina, Russia and other countries have done over the past 15 years ...

SPIEGEL: … but none of these countries were members of a monetary union.

Homburg: There is no economic argument that supports the idea that national defaults are worse when they occur in a monetary union. Of greater importance is the size of the country in question, and in this respect there is a clear difference between Greece and Russia.

SPIEGEL: In a monetary union, isn't there a much greater danger that the crisis will spread from one weak member country to another?

Homburg: No. The contagion spreads in precisely the opposite direction, because many banks and hedge funds benefit from the following business model. Step one: They sell the bonds of the country concerned. Step two: They spread negative rumors about the country. Step three: After bond prices have fallen, they buy them back cheaply. And, finally, they take governments for a ride with this nonsense that a default would have devastating consequences. In a zero-sum game, there are not only losers, like us taxpayers, but also winners.

SPIEGEL: And what is the risk of contagion now?

Homburg: After the Greek bonds have been paid back at full value, the gamblers will turn to the next candidate, such as Portugal. If creditors suffered losses in Greece, however, they would renounce this business model. In this sense, the rescue measures are exacerbating the problem.

SPIEGEL: If there were such a business model, a lot of people would be buying Greek government bonds now.

Homburg: In recent days, I myself have invested a considerable sum in Greek bonds. They will mature in one year's time and, if all goes well, produce a 25 percent return on investment. I sleep very soundly at night because I believe in the boundless stupidity of the German government. They will pay up.

SPIEGEL: You are not troubled by moral scruples?

Homburg: Since I involuntarily help finance the rescue packages through my taxes, I have no problem with also receiving a portion of the profits. Why should it only be banks and hedge funds that benefit?

SPIEGEL: You are apparently very confident that Greece will also be bailed out if it fails to implement, or insufficiently implements, the austerity measures that are being demanded.

Homburg: Absolutely. Greece is neither economically nor politically capable of sorting out its finances. It will never be in a position to repay the money that it has borrowed up to now. The German government will pay up all the same.

SPIEGEL: And what will happen next?

Homburg: Many politicians have also come to the realization that the path that we are on ultimately leads to national defaults and currency reforms. This process is already irreversible, but nobody wants to say it out loud and go down in history as the one who triggered the explosion. So we leave the bankruptcy to subsequent German governments and, in the meantime, throw good money after bad. Sooner or later, this much is certain, the system will be blown apart by political and economic factors. And, unfortunately, there is a great danger that, when this happens, it is not only the euro that will fall apart, but also the entire EU.

ECB's Stark Warns on Debt Restructure
by Todd Buell - Wall Street Journal

A debt restructuring isn't an alternative option for Greece as the consequences of such an event on Europe's financial markets could dwarf the bankruptcy of Lehman Brothers, a key member of the European Central Bank's executive board said Monday.

"A restructuring—that is often discussed in the case of Greece—constitutes absolutely no alternative" to adjustment and reform, warned Jürgen Stark, a hawkish German member of the ECB's board, according to the text of a speech given in Berlin. "The effects of a restructuring on the stability of the financial market system in Europe are not foreseeable and could dwarf the impact of the Lehman insolvency. Anyone who claims otherwise, mistakes the complexity of the situation."

Mr. Stark added that the ECB continues to "keenly" warn against any solution to the Greek crisis that results in a so called "credit event," or in Greece being classified as in "selective default or worse."
Furthermore, the central bank rejects any solution that "would carry out any coercion on private creditors."

Ultimately, a restructuring would fail to solve the fundamental problems that Greece faces with its budget, Mr. Stark argued. As long as the Greek public budget features a large primary deficit, a haircut—a cut in the money owed to creditors—would only offer an "interim" improvement, he said. Furthermore, the political pressure to reform in Greece would immediately disappear. "Therefore, the speedy and thorough implementation of the adjustment programs, that the countries in crisis have negotiated with the IMF and the EU is the best path out of the current crisis," he said.

Turning to monetary policy, Mr. Stark reinforced that the ECB is "very vigilant and will do all to safeguard the stability of the euro, also in the future, and anchor inflation expectations at a low level." In April, the bank began raising interest rates after leaving its main rate at a record low of 1% for nearly two years. Experts expect the ECB to raise rates again by 0.25 percentage point in July.

Drachma return talk 'immense stupidity'
by AFP

Greece's Deputy Prime Minister Theodoros Pangalos has blasted suggestions that it would be better for his country to abandon the euro and return to the drachma as an "immense stupidity". "Those who say this are extremely stupid. While they may be analysts, university professors or economists, saying that is an immense stupidity," Pangalos told daily Spanish newspaper El Mundo.

Debt-wracked Greece has been told by European peers that it cannot hope to continue receiving aid from a 110-billion-euro ($148.9 billion) rescue package agreed with the EU and the IMF last year without biting budget reforms and privatisations.

The Greek parliament will vote on an austerity package this week but some economists have argued that Athens needs to restructure its debt and leave the euro to become economically competitive again.

"Returning to the drachma would mean that on the following day banks would be surrounded by terrified people trying to withdraw their money, the army would have to protect them with tanks because there would not be enough police," said Pangalos.

"There would be riots everywhere, shops would be empty, some people would throw themselves out the window ... And it would also be a disaster for the entire European economy."

The austerity measures the Greek parliament will vote on later this week to keep the country's huge debt viable and persuade international creditors to extend additional assistance, are worth more than 28 billion euros for the period 2011-2015. Athens also intends to sell partial or full stakes in a host of state entities, aiming to raise 50 billion euros to reduce the overall Greek debt of more than 350 billion euros.

Eurozone relief as China pledges debt bailout
by Andrew Cave - Telegraph

The Chinese premier, Wen Jiabao, has thrown the eurozone a vital lifeline and pledged to buy billions of euros of European debt to keep the single currency project alive.

The move, which will be a relief to struggling eurozone countries including Greece, Portugal and Ireland, was announced as Mr Wen continues his four-day trip to Europe, arriving in Britain last night from Hungary and going on to Germany on Monday night. China's plan to continue to invest in the continent's volatile sovereign debt market comes as efforts continue to prevent Greece's financial crisis making it the first nation to be forced out of the euro.

"China is a long-term investor in Europe's sovereign debt market," Mr Wen said at a press conference with the Hungarian prime minister, Viktor Orban. "In recent years we have increased by quite a big margin our holdings of government bonds. We will consistently continue to support Europe and the euro." He added: "China is ready to work with Europe to share opportunities, cope with challenges and achieve common development and to make unremitting efforts for stable development of the world economy and an in-depth development of China-Europe ties."

Mr Wen's comments, made before boarding a flight to Birmingham, came after a week in which EU leaders committed themselves to staving off a Greek default provided that the prime minister, George Papandreou, pushes through a package of budget cuts next week. As a signal of China's enthusiasm for doing deals with Europe, Mr Wen signed 12 trade deals with Hungary and agreed to finance more of the country's debt.

His openness in pledging his support will also bolster the UK Government's hopes of strengthening Anglo-China ties during his time in the UK, when he will tour the Chinese-owned MG car factory in Longbridge and attend a UK-China summit at 10 Downing Street tomorrow.

Writing in today's Sunday Telegraph, Jim O'Neill, chairman of Goldman Sachs Asset Management, said that the eurozone should look east for solutions to their continuing debt problems. He said that it is likely that sovereign wealth funds would be keen to invest. Mr O'Neill said: "Perhaps Europe's leaders should try to put some of their differences aside and offer Asia's yield-hungry investors an even bigger kicker to help solve the crisis.

"As Italy has showed for much of the past 30 years, if you can keep growing and keep financing costs below your nominal growth rate, then you can just about cope with a lot of debt. Unless the Club Med countries get their yields down, it is an impossible burden. Europe's leaders have got to really decide whether they want European monetary union or not, and if so, it is time to act big."

Yves Mersch, a member of the European Central Bank governing council, warned yesterday that a Greek sovereign debt default would lead to financial chaos across Europe, adding it was up to the parliament to deliver on its austerity promises. In Athens, Greek ministers urged wavering members of the ruling Socialist party to do their duty in a knife-edge vote in parliament this week and back painful austerity measures that lenders demand as the price for fresh bailout loans.

Finance minister, Evangelos Venizelos, offered to talk to any MP who might have concerns. "I believe that the sense of responsibility will ultimately prevail; the God of Greece is great," he said. A two-day general strike is planned this week to coincide with the votes, following a rolling series of strikes at companies including Greece's dominant electricity producer, PPC, which is slated for privatisation next year.

Treasury urges British banks to take big losses to help Greece avoid meltdown
by Heather Stewart and Toby Helm - Guardian

Britain's banks will be urged by the Treasury to take multimillion pound losses as part of Europe-wide plans to prevent a catastrophic meltdown of the Greek financial system. Despite the assurance of David Cameron that the UK taxpayer will not pay towards the latest EU bailout of Greece, Treasury officials are working behind the scenes to persuade British banks holding Greek bonds to take a "haircut" now as the best way to avert a potential global crisis. Britain's banks hold about £2.5bn of Greek bonds.

One idea, proposed by Germany, is that the banks would be persuaded to swap Greek bonds for loans on less favourable terms when they expire – a so-called "soft restructuring" that would help ease the pain for Athens. Politicians across the EU are battling to secure "private sector involvement" in the Greek rescue alongside government and IMF help in the hope of preventing Athens from defaulting on its debts, a move they fear could start a ripple effect in world markets.

Analysts say even a debt swap, under which Athens would pay its debts over a longer period, would leave bondholders facing a reduction in the value of their investment. But officials argue that only if private banks take a hit now can the damage be limited. The Treasury so far has been on the sidelines of EU discussions about how to ensure private sector creditors play their part, partly because of Cameron's insistence that UK taxpayers will not help to finance a second Greek bailout.

The prime minister's refusal to put money into the latest rescue led to criticism of the UK's stance behind the scenes at a summit in Brussels last week. Senior European figures said London needed to focus more urgently on the potential effect of a Greek default on the UK's banking sector and economy. "The UK has the third largest exposure after France and Germany," said a high-level EU source. "It should be aware of the effect of standing aside from discussions."

But Whitehall insiders have confirmed that chancellor George Osborne's staff are on the case, working on ways to involve British bondholders in rescue moves that will almost certainly involve a short-term hit.

Another worry is that Britain's banks and hedge funds have written multibillion-pound insurance contracts – credit default swaps – that would be triggered if Greece defaults. Erik Britton, director of City consultancy Fathom, said: "It's not the direct exposure, it's the indirect exposure and the implications of an unruly default that I would be worried about. French and German banks bought Greek bonds, and they took out insurance against default. Who did they take out that insurance with? The US and UK banks. There has to be a loser – who's the loser?"

A fresh bailout for Greece will go ahead on condition that its parliament votes for new austerity and reform programmes. It is expected to total about €110bn, with about €30bn coming from bondholders, €30bn from privatisations and the rest from eurozone members and the IMF.

Persuading the private sector to play a part is seen as crucial to the chances of averting a Greek disaster and was a key part of German chancellor Angela Merkel's pitch in Brussels. Without this, EU leaders fear Greece will default, triggering payouts on a web of complex financial insurance products and creating chaos in world markets as investors struggle to work out who owes what. Some analysts fear default could create a "Lehman moment", like the aftermath of the collapse of the giant US investment bank in 2008, when investors lost confidence in each other and the world financial system froze up.

At the inaugural press conference for the Bank of England's new financial policy committee, governor Sir Mervyn King described the deteriorating situation in the eurozone as a "mess" and warned that, although Britain's banks own a relatively small number of Greek bonds – about £3bn worth – there could be dramatic knock-on effects if a default resulted in a loss of confidence throughout the global financial system.

That gives Treasury officials a strong incentive to ensure that the banks sign up. Without a voluntary agreement from investors, the powerful credit ratings agencies will declare that Greece has defaulted, spreading chaos. US Federal Reserve governor Ben Bernanke last week urged European governments to resolve the Greek crisis or risk threatening "the European financial system, global financial system, and European political unity".>

Don't be distracted by Greece: Americans must also face financial facts
by Justin Webb - Telegraph

Forget Greece. Or at least put Greece to one side: the real financial disaster waiting to happen is on the other side of the Atlantic. It is a disaster born of self delusion, in a nation that prides itself on plain speaking and openness.

There is much to be celebrated in the United States. They have Osama bin Laden's scalp. They have a vibrant and open political system. The things, material and intellectual, that people want and admire still tend to be American. But they (and we) face a huge looming crisis. It transcends politics and political candidates – it is much bigger than Michele Bachmann's hair or Barack Obama's thesaurus – and sometime soon they are going to have to face it. It's the debt.

America's federal government debt is growing at $40,000 per second. It has reached $14 trillion, whatever that means. More comprehensible perhaps is this fact: the debt will soon match the entire GDP of the United States. Outside wartime, that has never happened before.

A combination of tax cuts and spending increases, coupled with the war on terror and the financial meltdown, has seen America's fiscal health evaporate. Even the savings implied last week in the surge home of US troops from Afghanistan, count for little more than a drop - a splash, perhaps - in this ocean of debt. The real issue is the future of America's domestic spending.

The projections are appalling: the non-partisan Congressional Budget Office thinks that by 2030 interest payments plus spending on pensions and health will take up all the government's tax income. Everything else, from education to war-fighting, will have to be borrowed for. Or cut out. The thought should send shivers down all our spines.

A nation whose productive capacity, whose support of economic and political freedom plays such a big part in our world could be heading for a period of poverty and introspection. And the poverty could come quite suddenly – brought on by interest rate rises forced on America by world markets, or by foreign powers selling dollar bonds.

While making my BBC Radio Four documentary Analysis: America's Debt I asked Richard Haass, of the Council on Foreign Relations think tank, whether the fiscal crisis might allow the US to be blackmailed. His answer: "Yes, and it is ironic that question would come from someone with your accent. What it brings to mind is 1956... when the US and the Eisenhower administration disagreed profoundly with the British, French and Israeli tri-partite decision over invading Suez.

"Essentially the US took advantage of Britain's sterling problem to exercise some economic leverage over the British government, and that led to a hasty retreat. "So one can imagine a situation nowadays, where say there is a crisis over Taiwan between the US and China - which holds a significant number of dollars - and one can imagine the Chinese might be prepared to threaten the dollar, make some comments to weaken it unless the US backs off some of its support of Taiwan."

So what is to be done? Here is where it gets really tricky. The problem is not primarily economic. Nor is it entirely political. It is wider, deeper: it is a failing at the most basic level of culture.
Americans, it seems to me, have allowed themselves to become fundamentally deluded about the kind of people they are.

Look at Alaska. The Pulitzer prize-winning author Anne Applebaum tells me in the documentary that Alaska is a myth. People who live there (encouraged by a famous former governor) imagine that it is the last frontier where rugged all-American individualists grapple with snow and bears and protected only by their guns, come out on top. In fact Alaska is the most heavily subsidised state in the Union. Social spending and tax breaks are huge – Alaska sucks hard on the teat of the state.

For Alaska, read America. Americans have a weird inability to see themselves for what they are: deeply involved with the federal government and deeply dependent on it. The myth obfuscates and befuddles. It allows Americans – including the Tea Party movement – to have wonderfully vivid rows about public spending and tax but never really to confront the reality that taxes (my taxes!) are going to have to rise and spending on health and pensions (my health, my pension!) is going to have to be cut.

The Republicans have had a go at it recently – encouraged by the Tea Party folks – but came a horrible cropper in a by-election for a previously safe New York State congressional seat where their voters simply melted away after hearing that their entitlements might be cut. Americans like to blame their politicians for the mess but the fault, frankly, is with the people. They will not give up their national delusion. How does it end?

Richard Haass invokes Churchill: Americans will do the right thing but only after all other options are explored. Who am I to argue with Haass and Churchill combined? But it is fair to say that they are leaving it rather late.

Analysis: America's Debt is at 8.30 pm on Monday June 27 on BBC Radio Four.

Bank of England warns lenders over bad loans
by Brooke Masters, Norma Cohen and Chris Giles

The Bank’s new financial policy committee said UK lenders have relaxed mortgage terms and forgiven overdue payments at a much higher rate than in previous economic downturns. The FPC cited evidence showing that for every home loan that has been repossessed or is in arrears, another four have been relaxed or are being renegotiated.

If not for this lenient "forbearance process", which helps keep people in their homes and tides businesses through rough patches, as much as 12 per cent of UK mortgage borrowers could be in arrears. During the last recession in the early 1990s, about 3.5 per cent of mortgages were repossessed or in arrears.

The FPC said it was most concerned that banks had not set aside adequate provisions for this potential new crop of troubled loans. "If provisioning is inadequate, banks’ reported profits and levels of capital may provide a misleading picture of their financial health," said Sir Mervyn King, Bank governor and chairman of the FPC.
Andy Haldane, FPC member and the Bank’s head of financial stability, said: "There is a fog around forbearance and a fog around the provision for those loans.

"It is perfectly legitimate to cut a borrower some slack .... but in doing so, a firm needs to be cognisant of the risk and, [just] as important, set aside money."

Sir Mervyn said UK banking’s "most severe" problems may lie in commercial real estate lending, for which regulators do not have even the most basic data on forbearance. Studies suggest that 30-80 per cent of commercial mortgages may be in forbearance.

The FPC has asked the Financial Services Authority to conduct comparable forbearance studies on all categories of UK bank lending, both at home and overseas. The hidden domestic threats to the UK’s financial sector will add to the concerns of regulators already distracted by the eurozone debt crisis.

Sir Mervyn said the crisis poses the biggest threat to the banking system he oversees. He was also critical of the European Union’s repeated efforts to bail out Greece, Ireland and Portugal: "Providing liquidity can only be used to buy time. Simply the belief, ‘Oh we can just lend a bit more’, will never be an answer to a problem which is essentially about solvency."

The Bank governor argued that the EU must come up with a solution that addresses the underlying causes rather than simply stringing Greece along with more loans. The EU has said it will give Greece its second massive bail-out in as many years if the embattled country’s politicians pass strict new austerity legislation next week.

French Banks Seek Greek Debt Rollover
by Stephen Fidler and David Gauthier-Villars - Wall Street Journal

Ahead of Monday Meeting in Rome, Banks Suggest Rolling Over Some Bonds

Efforts to get private investors to provide help to a new bailout for Greece intensified, as French banks proposed a plan to reinvest half the proceeds from maturing Greek government bonds and key players prepared for a meeting in Rome on Monday aimed at discouraging bondholders from rushing for the exits.

The French proposal, which will feature in the Rome discussions, is the first to come from the private sector as a response to demands that private creditors play a role in resolving Greece's debt problems.
It suggests, for the first time, that private creditors may be ready to contribute significant sums to Greece's financing needs—but it doesn't answer the looming question of whether the price of doing so would be a default on some Greek government bonds.

Rating firms are likely to declare a default if they view investors as being encouraged to take a deal that hurts their interests, even if they are ostensibly doing it voluntarily. The European Central Bank has warned it will turn down Greek debt as collateral for ECB loans in the event of any default, an action that could lead to a collapse of Greece's banking system.

The developments come ahead of critical votes in the Greek parliament this week on an unpopular austerity and privatization program that is the price for more aid from its fellow members of the 17-nation euro zone and the International Monetary Fund. If it goes through, euro-zone governments are set to discuss, and possibly finalize, terms of a new Greek bailout in July—but negotiations could drag on longer.

Germany and other official lenders to Greece have been insisting that if they are going to contribute more money to a new Greek bailout, likely to exceed €100 billion ($142 billion), they don't want large sums going straight out the door to pay off bondholders. In the next three years, some €64 billion of Greek government bonds come due for repayment. After weeks of wrangling over how to limit this risk, governments decided that any private participation should be "voluntary."

Since that agreement, behind-the-scenes talks about how to achieve this have intensified, involving the Institute of International Finance, a Washington-based group comprising more than 400 banks and financial institutions worldwide. Its managing director, Charles Dallara, will be at the meeting Monday, according to a spokesman for the IIF. Expected to attend the meeting, hosted by Italy's largest bank, Intesa Sanpaolo SpA, in Rome, are representatives from banks, insurance companies, and officials from the Greek and other European governments, as well as from the European Union and the European Central Bank.

The French proposal calls for half of the proceeds from maturing Greek bonds to be reinvested in new 30-year Greek bonds. A further fifth of the proceeds would be invested in high-quality bonds—presumably, for French banks, these would be French Treasury bonds—as insurance to guarantee repayment after 30 years. French government officials said the plan drafted by French banks provided an "interesting solution" that was "worth exploring." European governments have said they want private creditors to roll over as much as €30 billion worth of Greek government bonds.

The proposal, which emerged from a meeting Friday of French banks, has echoes of the Brady Plan of the late 1980s, where U.S. Treasury zero-coupon bonds were purchased to provide guarantees of repayment at maturity by government borrowers in Latin America. Under the Brady Plan, however, the borrowing government financed the guarantees: The proposal from the French banks suggests the lenders would provide financing for their own guarantees.

France has a particular interest in finding a solution for Greece because French banks are more exposed to Greek borrowers than are banks of any other country outside Greece. German banks hold more sovereign debt than the French—$23 billion versus $15 billion, according to figures from the Bank for International Settlements. Much of the German exposure, however, is to state-owned banks and funds, while two large French banks—Société Générale SA and Crédit Agricole SA—also have controlling stakes in Greek banks, meaning they are exposed via their subsidiaries.

Someone due to attend Monday's meeting said the French proposal was one of a number of options being looked at for private-sector participation in the new Greek bailout. He said the Rome meeting would try to develop a framework, but agreement on detailed proposals would take more time. He said it is likely that Greek bondholders would be given several options for participation.

Moody's Investors Service earlier this month put the three largest French banks by market value—Société Générale, Crédit Agricole and BNP Paribas SA—on review for downgrade because of their Greece exposure and the possibility that the banks' portfolios might lose value. The banks have all said recently that their exposure to Greece remains manageable, and analysts say they are at risk for only small declines in their capital buffers.

The issue is fraught with legal and accounting complications for participating banks, depending on whether the bonds are held for trading or being held to maturity. Bankers are also concerned that different national accounting and valuation rules could lead to identical bank decisions being treated very differently from country to country, leading to different impacts on profits . Accountants and lawyers will also be represented at the meeting.

One group that won't attend is the rating firms. They were criticized for their active involvement with issuers and investors in structuring products in the U.S. that intensified the financial crisis, and don't want to participate directly in discussions in structuring private-sector participation in a rollover of Greek debts.

That may be significant. Most ways of getting a substantial private-sector contribution in the Greek bailout, even if they are dubbed voluntary, would likely be classified as a default by rating firms because the measures would be deemed to harm creditors. Technically, if this happened, the bonds involved would be declared in default and Greece itself would be classified as in "selective default," because it would still be servicing some bonds.

The ECB has been steadfast in opposing any private-sector deal that would hand Greece a default rating. "No credit events, no selective default," ECB President Jean-Claude Trichet said on June 9. "We exclude all concepts that are not purely voluntarily or that have an element of compulsion."

A top ECB official over the weekend suggested that even agreements officially touted as voluntary may not be acceptable. "The question is also whether [voluntary private-sector involvement] will lead to a credit event on the market for credit default swaps, and whether the ratings agencies will downgrade the rating to selective default or default," ECB board member Jürgen Stark said in an interview published Saturday with Frankfurter Allgemeine Zeitung.

Euro Exit Plan is 'Probably Inevitable': Soros
by Zoe Schneeweiss - Bloomberg

Billionaire investor George Soros said it’s "probably inevitable" that a mechanism will be put in place to allow weaker economies to exit the euro. "There’s no arrangement for any countries leaving the euro, which in current circumstances is probably inevitable," Soros, 80, said at a panel discussion in Vienna yesterday on whether liberal democracy is at risk in Europe. "We are on the verge of an economic collapse which starts, let’s say, in Greece, but it could easily spread. The financial system remains extremely vulnerable."

Concern Greek lawmakers will fail to pass austerity measures to ensure the next installment of the nation’s bailout is roiling global markets and pushed the euro to a record-low against the Swiss franc last week. Greece is one of three euro- region members to have sought international bailouts amid the sovereign debt crisis. "I think most of us actually agree that" Europe’s crisis "is actually centered around the euro," said Soros. "It’s a kind of financial crisis that is really developing. It’s foreseen. Most people realize it. It’s still developing. The authorities are actually engaged in buying time. And yet time is working against them," he said.

The euro was created in 1999, with 11 member states -- Germany, France, Italy, Belgium, the Netherlands, Luxembourg, Finland, Austria, Portugal, Spain and Ireland. Greece was the 12th country to adopt the shared currency in 2001, while Estonia is the newest member of the euro region, joining this January.

Winning Bet
The euro erased its decline versus the dollar to trade little changed at $1.4191 as of 10:14 a.m. in London. The 17- member common currency earlier slid as much as 0.6 percent to $1.4103, the weakest since June 16. Soros is chairman of Soros Fund Management LLC, which has about $28 billion in assets. He’s best known for reportedly making $1 billion in 1992 on a bet that the U.K. would fail to keep the pound in the European exchange-rate system that pre- dated the euro.

He also expressed concern the currency union would dissolve on Jan. 26 at the World Economic Forum in Davos, Switzerland. He said then that European policy makers must address their two- speed economy or risk the euro collapsing, though he added this was unlikely to occur.

'Plan B'
European Union leaders have vowed to stand behind Greek as long as Prime Minister George Papandreou, who won a confidence vote last week, pushes through his 78 billion-euro ($111 billion) package of budget cuts and asset sales. Investors are concerned a default would trigger contagion that would engulf other euro-region members including Ireland, Portugal and Spain.

Europe’s leaders should look for alternative strategies to solve the debt crisis, Soros told the Vienna panel, which also included Former Belgian Premier Guy Verhofstadt. Because the "survival of the EU is of vital interest to us all," there’s a need for a "Plan B," he said, explaining that this could include EU-wide taxes, a "banking system guaranteed by European institutions, not a bunch of national banking systems," or a financial transaction tax.

"You need a Plan B and there’s no Plan B at the moment," Soros said. Instead, "authorities are sticking to the status quo" and not "recognizing that there are fundamental flaws that need to be corrected," he said.

Lloyds has largest exposure to risky loans
by Sharlene Goff and Norma Cohen - Financial Times

Lloyds Banking Group’s exposure to the riskiest kind of mortgages is more than double that of any of its top five rivals in what is potentially a ticking time bomb for Britain’s largest high-street lender. Data published last week by the Bank of England showed that loans representing more than a quarter of Lloyds’ mortgage book are worth at least 90 per cent of the property value they are secured against.

By contrast, up to 12 per cent of loans provided by Royal Bank of Scotland and Santander have a similarly high loan to value, while Nationwide, Barclays and HSBC have a smaller proportion of such risky loans. The danger of these kinds of loans is that home buyers who make insignificant deposits are considered more likely to fall into arrears. High loan-to-value ratios also pose the risk of bigger losses if borrowers default.

Previous analysis from Standard & Poor’s, the credit rating agency, found that a borrower with a 10 per cent deposit was roughly twice as likely to fall into arrears as one putting down 30 to 40 per cent. In total, 60 per cent of Lloyds’ secured debt book – which includes mortgages to individuals and businesses – has a loan to value deemed high or very high by the Bank of England, compared with 38 per cent for RBS, 33 per cent for Santander, and just 6 per cent for HSBC.

About 13 per cent of Lloyds’ £340bn mortgage book – £45bn of loans – exceed the value of the property they are secured upon. The actual number of borrowers in negative equity, where their property is worth less than their loan, is much smaller, at about 5 per cent. The figures show how vulnerable Lloyds is to a further souring of the UK economy, particularly another fall in house prices.

They also illustrate the challenges faced by António Horta-Osório, the new chief executive, who will present his initial strategic review to investors this week. Analysts said the concern was that a riskier loan book would push up funding costs for the bank just as it is attempting to boost returns. "This increases the worry about the quality of Lloyds’ assets and the potential of loan losses to come," said Ronit Ghose, an analyst at Citigroup.

Lloyds emphasised that negative equity only became a real concern for borrowers if they needed to move house and said it had a range of mortgage products to assist these customers. It expected the loan-to-value position to be stable, although it forecasts a 2 per cent fall in house prices this year, as it believes they will rise by the same amount in 2012.

Analysts estimate that as much as three-quarters of Lloyds’ risky mortgage book was inherited from HBOS, which was one of the most aggressive lenders during the property boom.

Protectionism comeback in new anti-EU agenda
by Carol Hunt -

'The euro's dead. Long live Germany!" was the uber-nationalist cry earlier this month from top German lawyer, Markus Kerber. He's currently suing the German government in an attempt to stop it 'bailing out' bankrupt neighbours, starting with Greece and then going on to Ireland, Portugal, Italy, Greece and Spain -- none of which he believes is a 'worthy member' of the Eurozone.

He's not alone. Market analyst and author Michael Mross is among the experts who say the Germans are at boiling point. "If the problems of the euro become more and more, bigger and bigger, higher and higher, it's not excluded [that] German people [will] go on the street and say we don't want to pay any more," he warns.

The Germans are angry. Perhaps rightly so -- as one Frankfurter said: "We're just certainly not responsible for the debts and the deficit run in Portugal, Greece, in the 'PIGS' states." Maybe they are, maybe they aren't, maybe it's a bit of both; but a glance at history shows that Germany still has a debt to pay her fellow Europeans.

In an interview published last Thursday in Spiegel online, economic historian Albrecht Ritschl argued that Germany -- not Greece or Ireland or any of the so-called 'Pigs' -- has been by far the worst debtor nation of the past century, and the one shown most debt forgiveness by its neighbours.

Ritschl reminded his interviewer, "In the 20th Century, Germany started two world wars [okay, the first is debatable], the second of which was conducted as a war of annihilation and extermination, and subsequently its enemies waived its reparations payments completely or to a considerable extent. "For Germany, that was a life-saving gesture, and it was the actual financial basis of the economic miracle (that began in the Fifties). But it also meant that the victims of the German occupation in Europe also had to forgo reparations, including the Greeks."

Ah, the Greeks who reluctantly had to bear gifts. "No one in Greece has forgotten that Germany owes its economic prosperity to the grace of other nations," says Ritschl. So it seems.

When the Germans accuse them of having lied about their deficit and debt, and insist that Greece is well known for corruption and not paying taxes, the Greeks repeat the accusations made by their Deputy Prime Minister Theodoros Pangalos last year when he said (in an interview with BBC): "They [the German government] shouldn't complain much about stealing and not being very specific about economic dealings [from Greece]."

Now, why would that be, Mr Pangalos? Why? Because, says he: "They [the Nazis] took away the Greek gold that was in the Bank of Greece, they took away the Greek money and they never gave it back." Oh dear, wars have been fought for less.

And Mr Pangalos isn't the only one who thinks German policy is destroying the European union. Two weeks ago, billionaire George Soros told German weekly Die Zeit, "German policy is a danger for Europe, it could destroy the European project."

And things really don't seem to be looking too good for the technocratic Euro-philes who hoped that a monetary union (without fiscal union) would prove unworkable (as it has) and inevitably lead to a Federal United States of Europe. Was this -- as some cynics suspect -- their plan all along? If it was, they forgot to factor in a defensive backslide into nationalist politics by countries hit by unemployment, little economic growth and a growing sense of injustice.

As Soros said: "Right now the Germans are dragging their neighbours into deflation, which threatens a long phase of stagnation. And that leads to nationalism, social unrest and xenophobia. Democracy itself could be at risk."

He could very well be right. Protectionism is once again part of the new anti-EU agenda. And of course, it's not just the Germans. In France -- as in much of the rest of Europe -- the far right is appealing to disillusioned citizens, meaning President Nicolas Sarkozy has to adopt a more protectionist, nationalist stance to attract these voters.

Last month, following disputes between France and Italy over Italy permitting North African immigrants to travel through Italy and into France, the European Council of Ministers agreed to debate proposals to restore passport controls to people travelling from one EU country to another. As reported in Marketwatch last week, this strikes at the heart of the whole idea of free movement through the EU. And in Denmark, the Liberal minority government was recently forced to introduce passport checks to maintain its parliamentary majority support from the anti-immigrant Danish People's Party.

What's next? Tariffs? Trade wars? An invasion by men in suits who will conquer and control us with private bank debts? Oh, we've already had that.

The only thing that can save the euro now -- and possibly the entire European project -- is federalisation. And that just ain't going to happen. No one -- certainly not Germany -- wants to pay for a new Marshall Plan. But without it, Greece will default, followed by Ireland, Portugal, Spain... and on and on it will go. And where it will stop, nobody knows.

Ironically, just when Europe needs to pull tighter together to prevent self-serving nationalism and vengeful social unrest occurring, political thinking and public sentiment is set on doing the exact opposite. The sabre-rattling European powers are playing a very dangerous game.

Dollar seen losing global reserve status
by Jack Farchy - Financial Times

The US dollar will lose its status as the global reserve currency over the next 25 years, according to a survey of central bank reserve managers who collectively control more than $8,000bn. More than half the managers, who were polled by UBS, predicted that the dollar would be replaced by a portfolio of currencies within the next 25 years.

That marks a departure from previous years, when the central bank reserve managers have said the dollar would retain its status as the sole reserve currency. UBS surveyed more than 80 central bank reserve managers, sovereign wealth funds and multilateral institutions with more than $8,000bn in assets at its annual seminar for sovereign institutions last week. The results were not weighted for assets under management.

The results are the latest sign of dissatisfaction with the dollar as a reserve currency, amid concerns over the US government’s inability to rein in spending and the Federal Reserve’s huge expansion of its balance sheet. "Right now there is great concern out there around the financial trajectory that the US is on," said Larry Hatheway, chief economist at UBS.

The US currency has slid 5 per cent so far this year, and is trading close to its lowest ever level against a basket of the world’s major currencies. Holders of large reserves, most notably China, have been diversifying away from the dollar. In the first four months of this year, three quarters of the $200bn expansion in China’s foreign exchange reserves was invested in non-US dollar assets, Standard Chartered estimates.

The prediction of a multipolar currency world replacing the current dollar dominance chimes with the thinking of some leading policymakers. Robert Zoellick, president of the World Bank, last year proposed a new monetary system involving a number of major global currencies, including the dollar, euro, yen, pound and renminbi.

The system should also make use of gold, Mr Zoellick added. The results of the UBS poll also point to a growing role for bullion, with 6 per cent of reserve managers surveyed saying the biggest change in their reserves over the next decade would be the addition of more gold. In contrast to previous years, none of the managers surveyed was intending to make significant sales of gold in the next decade.

Central banks have bought about 151 tonnes of gold so far this year, led by Russia and Mexico, according to the World Gold Council, and are on track to make their largest annual purchases of bullion since the collapse in 1971 of the Bretton Woods system, which pegged the value of the dollar to gold.

The reserve managers predicted that gold would be the best performing asset class over the next year, citing sovereign defaults as the chief risk to the global economy. The yellow metal has risen 19.5 per cent in the past year to trade at about $1,500 a troy ounce on Monday, buoyed by the emergence of sovereign debt concerns in the US as well as eurozone debt woes.

Interest rates need to rise globally
by Sakari Suoninen - Reuters

Global interest rates must rise to avoid high inflation becoming entrenched, the Bank for International Settlements said on Sunday. It also warned that delaying deficit cuts could risk intensifying the sovereign debt crisis and have grave consequences were investors to lose confidence in a major economy such as the United States.

"With the arrival of sharper price increases for food, energy and other commodities, inflation has become a global concern," the BIS said in its annual report. "Tighter global monetary policy is needed in order to contain inflation pressures and ward off financial stability risks."

Of the four major central banks, the European Central Bank is the only one which has raised rates since the intensification of the financial crisis in late 2008. Central banks may have to raise rates at a faster pace than previously, BIS said, adding that as long as global growth is robust, food and commodity prices may remain high or even rise further.

The Group of 20 economic powers agreed in Paris on Thursday to tackle high food prices by boosting farm output, food market transparency and policy coordination, after world food prices hit a record high earlier this year.

The deal is another sign that global policymakers are reaching beyond traditional economic policy tools to sustain global growth, which has shown signs of slowdown in recent months. BIS said inflation expectations suggest central banks' long-term credibility has so far survived the inflation surge, but added that rates have to rise to ensure this anchoring.

"The great danger is that long-term inflation expectations will start to climb, and current price developments and policy stances are sending us in the wrong direction." The annual report also said the Bank of England should think about tightening its policy in the face of high inflation. "In the United Kingdom, CPI inflation had exceeded the Bank of England's 2 percent target since December 2009," it said. "As yet, there has been no move by the Monetary Policy Committee, but one wonders how long its current policy can be sustained."

Fiscal Tightening
Turning to fiscal policies, the BIS said that a major economy being drawn into the debt crisis could have catastrophic consequences. "We should make no mistake here: the market turbulence surrounding the fiscal crises in Greece, Ireland and Portugal would pale beside the devastation that would follow a loss of investor confidence in the sovereign debt of a major economy," it said. "The time for public and private consolidation is now."

It added that markets might not continue to view U.S. public debt as favorably as now were it to continue carrying heavy deficits. "The current ability of the United States to easily finance its deficit cannot be taken for granted. Past examples of a number of smaller economies in deficit suggest that market confidence can evaporate quickly, forcing sudden and costly adjustment."

Emerging countries should do their part to reduce global imbalances by easing exchange rate pegs, the BIS said, adding that China should let the yuan appreciate against the dollar. "The large costs of monetary instability mean that adjustment should principally work through more flexible nominal exchange rates," the report said.

"In the case of the United States and China, the costs of that adjustment would probably fall mostly on China." The BIS also said that while extremely low interest rates help commercial banks, they can delay necessary action. "At the same time as ultra-low interest rates have given banks the breathing space to take the necessary actions, they have weakened incentives to pursue the clean-up," the report said.

"When banks are not forced to write down loans, they are actually provided with incentives to "evergreen", i.e.. to roll over non-performing loans to firms that should have been bankrupt."

For Many in Britain, Being a Homeowner Is a Fading Dream
by Julia Werdigier - New York Times

For a large number of young adults in Britain, homeownership has become increasingly difficult to achieve, viewed as a distant goal attainable only later in life, if at all.

That is a significant shift for a country where owning a home remains deeply rooted in the culture. Owners occupy a higher percentage of homes in Britain than in the United States, France or Germany.

But as the pain of government-imposed austerity sinks in, disposable income has shrunk and loan requirements have toughened, forcing more and more Britons into renting rather than buying. The average age of first-time buyers is now 31, up from 28 five years ago, and the number of people renting has increased sharply, signs that the boom in homeownership that began under Margaret Thatcher’s government 30 years ago is starting to reverse.

Some economists are concerned that as more people are forced to wait to buy a home, the country’s wealth gap could widen, endangering the retirement prospects for a swelling group of young adults they call "generation rent."

Charlotte Ashton, 30, has lived in rented accommodations ever since she left her parent’s home to attend university. She said she was happy sharing a five-bedroom house in the Shepherds Bush area of London with four other women but was saving for a down payment to buy her own home. "I do believe in the fundamentals of owning bricks and mortar as security for the future, more than leaving my money in the banks at a low interest rate," said Ms. Ashton, who works in public relations. "Unless you have a very well paid job and are willing to save every penny, it’s unfeasible to buy without the help of the bank of Mum and Dad."

About four years ago, a first-time buyer had to raise an average down payment equal to 41 percent of annual income to buy a property, according to the Council of Mortgage Lenders. Now it is more than 87 percent of income, or about £26,500 ($42,800). And while banks were willing to make mortgage loans for more than the value of the house before the credit crisis, buyers now find they must put up at least 10 percent, and often substantially more. (The average deposit for first-time buyers is 23 percent, according to the price comparison Web site Moneysupermarket).

A study by Halifax, a British mortgage lender, showed last month that while 77 percent of 20 to 45 year-olds who were currently renting would like to buy a home, more than two-thirds believed they had no prospect of doing so. Only 5 percent said they were managing to save toward a deposit. Those who do save, like Ms. Ashton, who has set aside the equivalent of about $50,000, are unlikely to be able to afford a home in the same area they rent in. "I would have to look further out of London or for a smaller property," she said. So for now, like many, she is staying put.

One reason homeownership remains attractive in Britain is because property values dropped less drastically than in the United States, in part because of a shortage in housing. Prices in some large cities, including London, have even increased recently. People still perceive a home to be a better and safer investment than a pension fund, said Andrew Hull, research fellow at the Institute for Public Policy Research. "Homeownership is also culturally entrenched," he said. "Owning a home is the main way of showing you made it."

The big shift toward homeownership came in the 1980s with Mrs. Thatcher’s right-to-buy policy, which allowed many in rented government housing to buy their homes. About two million homes were sold, earning the government tens of billions of pounds.

At the same time, the rental market became increasingly unattractive. Unlike Germany and other Continental European countries, Britain’s private rental market is highly fragmented, with many landlords, and laws that generally favor the property owner. Most leases are for six months only, with landlords rarely agreeing to commit to longer terms; this makes renting highly insecure.

But the aftermath of the banking crisis and the recession made buying more difficult. Over the last 10 years the number of people who owned homes here dropped to 67 percent from 70 percent. Meanwhile, the number of people in private rented housing rose to 16 percent from 10 percent over the same period, according to the Office for National Statistics.

"A growing number of young would-be buyers are preparing for lifelong renting — by necessity rather than choice," said Jonathan Moore, director of, a property Web site. Katherine Fyfe is one of them. Ms. Fyfe, a 42-year-old clinical systems teacher for the National Health Service in Devon, is eager to buy her own place, but her £15,000 in savings is not enough. "I’ve been clawing money together since my divorce in 2008, but it’s not been easy as the cost of rent has bitten into most of my pay," she said. She pays £380 a month for a room in a house in Exeter that she shares with two others.

Rising demand has pushed up rents by an average of 4.4 percent over the last year, according to LSL Property Services. In London rents increased 7.8 percent. Being unable to buy a home is just the latest blow for a British populace already battered by severe austerity and contraction. To reduce debt, the government is cutting pensions, welfare spending and public services, and has said it will eliminate 310,000 public-sector jobs by 2015.

Amid this economic hardship, some analysts warn that a wider shift toward renting could have adverse effects on society as a whole. "It could open up a widening of the wealth gap that already exists between homeowners and non homeowners, and people in ‘generation rent’ risk insufficient finances at retirement," Alison Blackwell, a research director at the National Center for Social Research and author of the Halifax report, said.

It could also have implications for the cohesion of neighborhoods, she said. Renters tend to be less involved in local communities because they are forced to move more often. And the economy as a whole may suffer because renters tend to curb spending to save for a deposit. For some, including Ms. Ashton, the prospect of buying in Britain seems so daunting that she even considered buying a property elsewhere. "I don’t rule out buying abroad," she said. "There are many more appealing markets than Britain. Florida, for example."

Insiders Sound an Alarm Amid a Natural Gas Rush
by Ian Urbina - New York Times

Natural gas companies have been placing enormous bets on the wells they are drilling, saying they will deliver big profits and provide a vast new source of energy for the United States.

But the gas may not be as easy and cheap to extract from shale formations deep underground as the companies are saying, according to hundreds of industry e-mails and internal documents and an analysis of data from thousands of wells.

In the e-mails, energy executives, industry lawyers, state geologists and market analysts voice skepticism about lofty forecasts and question whether companies are intentionally, and even illegally, overstating the productivity of their wells and the size of their reserves. Many of these e-mails also suggest a view that is in stark contrast to more bullish public comments made by the industry, in much the same way that insiders have raised doubts about previous financial bubbles.

"Money is pouring in" from investors even though shale gas is "inherently unprofitable," an analyst from PNC Wealth Management, an investment company,  wrote to a contractor in a February e-mail. "Reminds you of dot-coms." "The word in the world of independents is that the shale plays are just giant Ponzi schemes and the economics just do not work," an analyst from IHS Drilling Data, an energy research company,  wrote in an e-mail on Aug. 28, 2009.

Company data for more than 10,000 wells in three major shale gas formations raise further questions about the industry’s prospects. There is undoubtedly a vast amount of gas in the formations. The question remains how affordably it can be extracted.

The data show that while there are some very active wells, they are often surrounded by vast zones of less-productive wells that in some cases cost more to drill and operate than the gas they produce is worth. Also, the amount of gas produced by many of the successful wells is falling much faster than initially predicted by energy companies, making it more difficult for them to turn a profit over the long run.

If the industry does not live up to expectations, the impact will be felt widely. Federal and state lawmakers are considering drastically increasing subsidies for the natural gas business in the hope that it will provide low-cost energy for decades to come. But if natural gas ultimately proves more expensive to extract from the ground than has been predicted, landowners, investors and lenders could see their investments falter, while consumers will pay a price in higher electricity and home heating bills.

There are implications for the environment, too. The technology used to get gas flowing out of the ground — called hydraulic fracturing, or hydrofracking — can require over a million gallons of water per well, and some of that water must be disposed of because it becomes contaminated by the process. If shale gas wells fade faster than expected, energy companies will have to drill more wells or hydrofrack them more often, resulting in more toxic waste.

The e-mails were obtained through open-records requests or provided to The New York Times by industry consultants and analysts who say they believe that the public perception of shale gas does not match reality; names and identifying information were redacted to protect these people, who were not authorized to communicate publicly. In the e-mails, some people within the industry voice grave concerns.

"And now these corporate giants are having an Enron moment," a retired geologist from a major oil and gas company  wrote in a February e-mail about other companies invested in shale gas. "They want to bend light to hide the truth."

Others within the industry remain optimistic. They argue that shale gas economics will improve as the price of gas rises, technology evolves and demand for gas grows with help from increased federal subsidies being considered by Congress. "Shale gas supply is only going to increase," Steven C. Dixon, executive vice president of Chesapeake Energy, said at an energy industry conference in April in response to skepticism about well performance.

Studying the Data
"I think we have a big problem." Deborah Rogers, a member of the advisory committee of the Federal Reserve Bank of Dallas, recalled saying that in a May 2010 conversation with a senior economist at the Reserve, Mine K. Yucel. "We need to take a close look at this right away," she added.

A former stockbroker with Merrill Lynch, Ms. Rogers said she started studying well data from shale companies in October 2009 after attending a speech by the chief executive of Chesapeake, Aubrey K. McClendon. The math was not adding up, Ms. Rogers said. Her research showed that wells were petering out faster than expected. "These wells are depleting so quickly that the operators are in an expensive game of ‘catch-up,’ " Ms. Rogers wrote in an e-mail on Nov. 17, 2009, to a petroleum geologist in Houston, who wrote back that he agreed. "This could have profound consequences for our local economy," she explained in the e-mail.

Fort Worth residents were already reeling from the sudden reversal of fortune for the natural gas industry. In early 2008, energy companies were scrambling in Fort Worth to get residents to lease their land for drilling as they searched for so-called monster wells. Billboards along the highways stoked the boom-time excitement: "If you don’t have a gas lease, get one!" Oil and gas companies were in a fierce bidding war for drilling rights, offering people bonuses as high as $27,500 per acre for signing leases.

The actor Tommy Lee Jones signed on as a pitchman for Chesapeake, one of the largest shale gas companies. "The extremely long-term benefits include new jobs and capital investment and royalties and revenues that pay for public roads, schools and parks," he said in one television advertisement about drilling in the Barnett shale in and around Fort Worth.

To investors, shale companies had  a more sophisticated pitch. With better technology, they had refined a "manufacturing model," they said, that would allow them to drop a well virtually anywhere in certain parts of a shale formation and expect long-lasting returns. For Wall Street, this was the holy grail: a low-risk and high-profit proposition. But by late 2008, the recession took hold and  the price of natural gas plunged by nearly two-thirds, throwing the drilling companies’ business model into a tailspin.

In Texas, the advertisements featuring Mr. Jones disappeared. Energy companies rescinded high-priced lease offers to thousands of residents, which prompted class-action lawsuits. Royalty checks dwindled. Tax receipts fell. The impact of the downturn was immediate for many. "Ruinous, that’s how I’d describe it," said the Rev. Kyev Tatum, president of the Fort Worth chapter of the Southern Christian Leadership Conference.

Mr. Tatum explained that dozens of black churches in Fort Worth signed leases on the promise of big money. Instead, some churches were told that their land may no longer be tax exempt even though they had yet to make any royalties on the wells, he said. That boom-and-bust volatility had raised eyebrows among people like Ms. Rogers, as well as energy analysts and geologists, who started looking closely at the data on wells’ performance.

In May 2010, the Federal Reserve Bank of Dallas called a meeting to discuss the matter after prodding from Ms. Rogers. One speaker was Kenneth B. Medlock III, an energy expert at Rice University, who described a promising future for the shale gas industry in the United States. When he was done, Ms. Rogers peppered him with questions. Might growing environmental concerns raise the cost of doing business? If wells were dying off faster than predicted, how many new wells would need to be drilled to meet projections?

Mr. Medlock conceded that production in the Barnett shale formation — or "play," in industry jargon — was indeed flat and would probably soon decline. "Activity will shift toward other plays because the returns there are higher," he predicted. Ms. Rogers turned to the other commissioners to see if they shared her skepticism, but she said she saw only blank stares.

Bubbling Doubts
Some doubts about the industry are being raised by people who work inside energy companies, too. "Our engineers here project these wells out to 20-30 years of production and in my mind that has yet to be proven as viable," wrote a geologist at Chesapeake in  a March 17 e-mail to a federal energy analyst. "In fact I’m quite skeptical of it myself when you see the % decline in the first year of production."

"In these shale gas plays no well is really economic right now," the geologist said in  a previous e-mail to the same official on March 16. "They are all losing a little money or only making a little bit of money." Around the same time the geologist sent the e-mail, Mr. McClendon, Chesapeake’s chief executive, told investors, "It’s time to get bullish on natural gas."

In September 2009, a geologist from ConocoPhillips, one of the largest producers of natural gas in the Barnett shale, warned in  an e-mail to a colleague that shale gas might end up as "the world’s largest uneconomic field." About six months later, the company’s chief executive, James J. Mulva, described natural gas as "nature’s gift," adding that "rather than being expensive, shale gas is often the low-cost source." Asked about the e-mail, John C. Roper, a spokesman for ConocoPhillips, said he absolutely believed that shale gas is economically viable.

A big attraction for investors is the increasing size of the gas reserves that some companies are reporting. Reserves — in effect, the amount of gas that a company says it can feasibly access from its wells — are important because they are a central measure of an oil and gas company’s value.

Forecasting these reserves is a tricky science. Early predictions are sometimes lowered because of drops in gas prices, as happened in 2008. Intentionally overbooking reserves,
however, is illegal because it misleads investors. Industry e-mails, mostly from 2009 and later, include language from oil and gas executives questioning whether other energy companies are doing just that.

The e-mails do not explicitly accuse any companies of breaking the law. But the number of e-mails, the seniority of the people writing them, the variety of positions they hold and the language they use — including comparisons to Ponzi schemes and attempts to "con" Wall Street — suggest that questions about the shale gas industry exist in many corners. "Do you think that there may be something suspicious going with the public companies in regard to booking shale reserves?" a senior official from Ivy Energy, an investment firm specializing in the energy sector, wrote in  a 2009 e-mail.

 A former Enron executive wrote in 2009 while working at an energy company: "I wonder when they will start telling people these wells are just not what they thought they were going to be?" He added that the behavior of shale gas companies reminded him of what he saw when he worked at Enron.

Production data, provided by companies to state regulators and reviewed by The Times, show that many wells are not performing as the industry expected. In three major shale formations — the Barnett in Texas, the Haynesville in East Texas and Louisiana and the Fayetteville, across Arkansas — less than 20 percent of the area heralded by companies as productive is emerging as likely to be profitable under current market conditions, according to the data and industry analysts.

Richard K. Stoneburner, president and chief operating officer of Petrohawk Energy, said that looking at entire shale formations was misleading because some companies drilled only in the best areas or had lower costs. "Outside those areas, you can drill a lot of wells that will never live up to expectations," he added.

Although energy companies routinely project that shale gas wells will produce gas at a reasonable rate for anywhere from 20 to 65 years, these companies have been making such predictions based on limited data and a certain amount of guesswork, since shale drilling is a relatively new practice. Most gas companies claim that production will drop sharply after the first few years but then level off, allowing most wells to produce gas for decades.

Gas production data reviewed by The Times suggest that many wells in shale gas fields do not level off the way many companies predict but instead decline steadily. "This kind of data is making it harder and harder to deny that the shale gas revolution is being oversold," said Art Berman, a Houston-based geologist who worked for two decades at Amoco and has been one of the most vocal skeptics of shale gas economics.

The Barnett shale, which has the longest production history, provides the most reliable case study for predicting future shale gas potential. The data suggest that if the wells’ production continues to decline in the current manner, many will become financially unviable within 10 to 15 years.

A review of more than 9,000 wells, using data from 2003 to 2009, shows that — based on widely used industry assumptions about the market price of gas and the cost of drilling and operating a well — less than 10 percent of the wells had recouped their estimated costs by the time they were seven years old.

Terry Engelder, a professor of geosciences at Pennsylvania State University, said the debate over long-term well performance was far from resolved. The Haynesville shale has not lived up to early expectations, he said, but industry projections have become more accurate and some wells in the Marcellus shale, which stretches from Virginia to New York, are outperforming expectations.

A Sense of Confidence
Many people within the industry remain confident. "I wouldn’t worry about these shale companies," said T. Boone Pickens, the oil and gas industry executive, adding that he believes that if prices rise, shale gas companies will make good money. Mr. Pickens said that technological improvements — including hydrofracking wells more than once — are already making production more cost-effective, which is why some major companies like ExxonMobil have recently bought into shale gas.

Shale companies are also adjusting their strategies to make money by focusing on shale wells that produce lucrative liquids, like propane and butane, in addition to natural gas. Asked about the e-mails from the Chesapeake geologist casting doubt on company projections, a Chesapeake spokesman, Jim Gipson, said the company was fully confident that a majority of wells would be productive for 30 years or more. 

David Pendery, a spokesman for IHS, added that though shale gas prospects had previously been debated by many analysts, in more recent years costs had fallen and technology had improved.

Still, in private exchanges, many industry insiders are skeptical, even cynical, about the industry’s pronouncements. "All about making money," an official from Schlumberger, an oil and gas services company, wrote in  a July 2010 e-mail to a former federal regulator about drilling a well in Europe, where some United States shale companies are hunting for better market opportunities.

"Looks like crap," the Schlumberger official wrote about the well’s performance, according to the regulator, "but operator will flip it based on ‘potential’ and make some money on it."


Ruben said...

Bumping up from the end of yesterday's comments....

This Kunstler article really knocks it out of the park.

Back to the Future | James Howard Kunstler | Orion Magazine

Gravity said...

If there are no established protocols for leaving the eurozone, a reasonable course of action to accomplish this with some haste might be that such countries, as would wish to abandon the eurozone, should renounce any nato-membership, and then declare a state of war upon the remaining members, insofar as that these remaining members do continue to support the hostile occupying power of banking cartels. Conditions for peace might then involve debt forgiveness and the destruction of banking fascism to the extent required for national survival.

el gallinazo said...

First, I can't imagine that the enormous irony of these mega blimps (they remind me of the Baron Harkennen of Dune without the antigravity belt to get around) could be lost on the Greek people when they talk about austerity. They must have spring loaded toilet seats :-) Bet they would not use the Greek equivalent of "belt tightening" for fear of being immediately lynched. I am not the sveltest of characters in my later years, but these guys have a definite personality disorder. They must spend the majority of their lives chowing down to keep those physiques. Would one really want them as ministers?

Second, I do believe that if the parliament does reject the bail out, there **will* be tanks in the streets, because the country will be put under martial law. And if this is overthrown by the population, then NATO forces from outside of Greece will move in under the rubric that an attack against Greece, even by its own people, is an attack against the alliance. Same logic as "we destroyed the village to save it."

The alternative would be to call for new elections, but the Owners don't have time in their favor, and it seems unlikely that they could swing the populace around or bribe the new MP's more successfully than the current crop.

We are in the end game. Do not let the fact that there has not been a major fascist bloodletting in Western Europe since 1945 outside of the Balkans obliterate one's sense of history. But the Greeks might just be in luck because it appears that NATO ran out of bombs for the moment dropping them on Libya.

Gravity said...

The ensuing default swap cascade might well wipe out much of financial capitalism far beyond Greek borders, yet this doom is inevitable anyway, better to trigger this sooner than later, if no constructive solution to ever deleverage these monstrous swap schemes is forthcoming, and these cannot be further sustained by transfusing the blood of the people into the bottomless banks.

Alexander Ac said...

Check this Maloney et al. discussion about the coming crash...

at least, they are still laughing, but for how long?

scandia said...

@Ruben, I agree, excellent Kunstler article!

@Ilargi, Pangalos and Venizelos as the poster boys for one of the fundamental sins- gluttony- will surely rile the crowds.
Clearly these caricatures of the divine human form worshipped in historical Greece demonstrate they know how to get hold of the biggest piece of pie, if not the whole pie. Guess the banksters chose them for their snack, whoops I mean track, record.
Any bets on how far these gluttons can run if the crowd goes after them? 10ft? 100yds? Shish can they even walk without support?
Ilargi you are absolutely right on that public assets are being sold off all over the world. Even in Canada where the Harper poll support numbers are on the rise.

@Gravity, good to look outside regulatory capture as you are doing. Just don't think the boundaries are well enough defined for your solution to work. The divide is inhouse so to speak as Lautturi has been pointing out that the people say No and their leaders say Yes. Somehow we need to transend the politicians on the take. It is a class war already being waged.
I've been thinking too of the carperbaggers in Armani suits waiting to buy up Greek public assets. They may get deeds of ownership but I think they are naive to assume they can operate these assets. Remember how Russia destroyed all assets to keep them out of German hands? A good strategy in a pinch( pun intended).

p01 said...

@Alexander Ac

The rich boys preparing for collapse, hehe.

I have military training and I actually had an AK47 with live ammo during the '89 revolution when all hell broke loose (defending the factory I worked in, and the university I was learning at); from "terrorists", we thought I'm not so sure...
Luckily I did not fire the gun, but many did and killed many people (who had guns too, some were military) innocent or not.

Guns really don't help that much in urban warfare, especially coupled with false flags and mob delirium; Better leave town when things deteriorate. No arsenal in the basement can save you from a well-targeted Molotov when fire services are out.
Rich and poor we're all terrified at this point. But the rich are known to be rich...and not much they're much more terrified.
When someone makes and spends more than a medium-sized town, one can't say that they don't know what's coming for them; I guess we're all libertarians at heart ;)

Archie said...

The NYT article on the Natural Gas Rush was of particular interest since I recently watched the documentary film Gasland.

Filmaker Josh Fox uses a "follow my nose" exploration of fracking and eventually paints a very large picture of the practice in the US. It is not a pretty picture, but the Gas companies are relentless in their pursuit of the shale gas deposits.

Throughout the film, I found myself constantly asking "how can this be profitable?" I know that it helps to have lax regulators enforcing EPA rules. Yet, many of the people who leased rights to their property for shale gas development have won complaints of drinking water contamination. In those cases, the Gas Co. has undertaken to provide potable water, more or less in perpetuity to the land owners! And there are many other claims that are being litigated as I write.

Beyond that though, these shale deposits are drilled in close proximity to each other for miles on end. Each drilling site is no small capital investment, as you can plainly see in the film. I have little doubt that we (the taxpayers) are subsidizing the shale gas development as part of our campaign to be "energy independent". And at the same time, we are already privatizing the land that we live on and the drinking water sources that we need to survive.

My brother tells me that there is a one year moratorium in New York State but the Industry wants to frack the Catskill area north of NYC. This is the unfiltered watershed for NYC and northern NJ. Unlike the "inconvenience" of polluting a rancher in Wyoming, polluting the NY/NJ watershed will effect millions.

This country is so FUBAR!

p01 said...


soundOfSilence said...

Cheryl said in the last post...

"My portfolio is up like a rocket ship."

Here's to you Cheryl. May all your launches be successful:

Titan IV

Ariane 5

Delta II

Or in case you ever feel just start going in circles going in circles.

scrofulous said...

El Gal,

Thanks for the graph, in last commentary, very interesting!

In late 2007 I became very uninterested in having a FA handle my ill gotten, so am, like so many others, picking this s--t up on the fly, and for me rather haphazardly at that.

On that MBS debt you speak of, wouldn't that really get to the, robing Peter to pay Paul, end of things. I mean what outsiders are buying it? If my thinking is in any way correct then is the market going to look on that kindly?

I like a lot of what Rickards has to say but it does seem like he is trying to invent a perpetual motion machine. That debt other than MBS must have matured, no? ... and where would it go? It would be nice to be a great accountant, at least for a day or two, to make some sense of their balance sheets if that is possible. But I am a lowly painter who is lucky to know which end of a brush is for dipping.

Could it be that they are putting together straws to build a QE3, you know, a bit of Rickards, some SPR, and whatever else they figure will make it fly?

On a more current item; though it looks like tomorrow is a shoe-in for the bankers on the Greece thing, do you think maybe they will still end up choking on that olive in their martini. Those Greeks, from what I understand, do know how many fassolia beans make five!

Ruben said...


+1. Poor Cheryl.

"900 tons of flaming debris..."

Phlogiston Água de Beber said...

Pulled up from end of last topic's comments and with added links to a couple of her sample newsletters. Her view seems to be that the climate we are likely to get for the next several years may not be the most propitious for our well being. She strikes me as worth paying attention to, but she does not come cheap.

Jim Puplava interviewed Evelyn Browning Garriss for her views on what's next weather wise.
Worrisome weather patterns ahead

June 2010 Newsletter

December 2010 Newsletter

Phlogiston Água de Beber said...

@ SoS

We should never forget this rocket ship. As my late brother quipped about this launch, "the Navy managed to launch a grapefruit-size satellite about a tenth as far as the average Russian woman could throw it."

Vanguard TV3

Blackbird said...

Listen up folks:

I'll teach you how to buy with a smile.

Now, hush up and learn,
What's the worst that could happen?

You'll learn our about our national strength

You'll laugh till u cry

You'll beg for more!

Have fun and thank me when you're done.

Phlogiston Água de Beber said...

The Jungle Jimmy Papers: Chapter 1

The Jungle Jimmy Papers

Chapter 2

I took the stack of papers inside, flipped on the lights and sat down to see what JJ had brought me. After a quick scan of the first few pages, my throat constricted and I knew this was going require another bottle. I'd given JJ my last bottle of Irishman's fine triple distilled whiskey. Then I remembered Fred Reed's recommendation of tequila and Squirt. I had both on hand. I could now safely peruse the contents of JJ's gift.

I could see that Jimmy had tried to assemble the pages in their numbered order. There were several documents and he had mixed quite a few pages from different documents. Once I had that straightened out, I settled down to study these very disturbing documents.

One document that piqued my interest described the history of that apparently discarded debt bomb. It had been assembled for delivery to Iceland. It had been declared surplus after the Icelanders refused to take delivery. A handwritten notation indicated the Icelanders had threatened to throw it into a volcano if the banksters managed to sneak it into their country. The commenter noted that some Icelanders claimed to believe that the volcano god, known by the Greeks as Vulcan, got wind of this plan and made his feelings known.

Another one-page document was a directive for the team that JJ had observed to reclaim the bomb and bring it in to be refurbished. They want it to be ready in case the Icelanders knuckle under to the shysters from whom they hope to get a favorable ruling on their dubious claim that the Icelanders stole their money. This document was dated just a few days before Vulcan fired off what some might interpret as another warning shot. One can only envy the kind of efficient Intelligence Service operated by the gods.

It's really none of my business, but if I were them City of London boys and girls, I would think long and hard about bothering the Icelanders in ways that might lead to Vulcan losing his temper. He just might be busy right now topping off his magma chambers. They might want to take an example from their Special Relatives. Only pick fights with enemies you know you can whip easily and are unable to deliver retribution to the Homeland. Though it is in the nature of the Brits to do the exact opposite.

Absorbing that kind of information tends to make me thirsty. Of course, when the reward for thirst is so relaxing and calming to the spirit, it doesn't take much. A quick look at the next document told me I'd better make it a very tall drink.

No figures were given, but it was easy to infer from several statements that debt bombs had been planted pretty much all over God's Creation or at least the Hell's half acre that constitutes planet Terra. There were also passages indicating that debt bombs had been assembled with an enormous range of destructive power. In a copy of an email, one bankster had nicknamed them Weapons of Mutually Agreed Destruction. There were debt bombs designed for every kind of target, from students to sovereign states.

I went looking for any information the document might contain on what kind of triggering mechanism these bombs might carry. What I found instead was references to other apparently even more destructive bombs. It seems there are security bombs and something called derivative bombs. The generous helpings of soothing libations suddenly seemed inadequate and I was running low. Information like JJ brought to me can drive a person to drinking. I should probably send the banksters a nice Thank You Note.

I found a map showing how to get to the site where the debt bomb had been dumped. I decided to make a trip out there to see if I might find a few more papers and take a look at Obamaville.

Anonymous said...


I love the work you do here. Thank you - and be sure to keep it up. You are highly valued.

One comment, though. In order to solve problems for good, you have to identify the root cause and remove it.

Your efforts are focused on dealing with the problem instead of addressing the root cause.

Is that really a long term solution for the world's societies?

jal said...

It is time to look at Ms. Christine Lagarde, a candidate for the position of the Managing Director of the International Monetary Fund (IMF).

She made the following statement to the IMF Executive Board on June 23, 2011:

I will not shrink from the necessary candor and toughness in my discussions with the European leaders, on the contrary. There is no room for benevolence when tough choices must be made, and there is no option that does not start with difficult but necessary adjustments by the Greek authorities to restore the sustainability of public finances and to rebuild the country's competitiveness.
Does that sound like she is on the side of the people or the banking establishment?


jal said...

Cheryl said...
Listen up folks:

Have fun and thank me when you're done.
Thank you.
Now I got a problem ... I can no long tell the difference between reality and virtual reality.
I’m sure that I’ll have disturbing dreams.
Stick around.

Legendary Armor Rōnin said...

jal said...

"Learning Mandarin might be a good investment for the next generation."

p01 said...

"I'm pretty sure no matter how the chinese try and escape the inevitable, they will not succeed."

I'm with p01 on this one. While China, or some future descendant nation, seems likely to continue to be an important world power during the 21st century, there's not really a credible scenario under which they end up being a superpower until possibly sometime after the middle of this century. Some "unknown unknown" event or dynamic would have to occur for it to happen sooner, if indeed it ever does.

They have the same demographic problems as do all developed and most developing nations, they have fewer resources than do Europe, Russia, or No. or So. America, and they're further burdened with severe limits on their arable lands and clean water supplies.

All surmountable problems - but not quickly.

I. M. Nobody said...

"The wealth of the financiers consists of debts owed by the kings, queens and commoners, [who] cannot payoff those debts. Once that fact can no longer be ignored, the financiers will find themselves impoverished."

But in many cases the loans were backed by physical assets, which can be seized in lieu of payment. While financiers themselves have huge debts from the loans that they took to enable their financial speculations, there are bound to be at least a few people and organizations who will be able to carry their obligations with their remaining cash flow, plus alternative debt-satisfaction arrangements.

Many individual financiers and financial companies will be ruined, but it seems very likely to me that the class and industry will survive, and on a relative basis, even prosper.

The future's Lords and Masters of the Universe will still want to borrow, guaranteed.

Ruben said...

"This Kunstler article really knocks it out of the park."

While I enjoy reading Kunstler, and find great value in his observations, IMO he doesn't put enough weight on variables such as thermal depolymerization and conservation. As financial pressures cause U.S. motorists to drive fewer miles and to switch to tiny cars or even motorcycle-like transportation, and as alt-fuel production becomes more economically viable while fossil deposits produce less, the current dynamic could continue for far longer than Kunstler credits.

For instance, if lower desirability causes the price of suburban properties to crash, even if the price of gas goes up to $15/gal I still might choose to live in suburbia, because my overall expenditures would remain constant. I'd simply be paying a lot more for transportation and a lot less for housing than is the current U.S. norm.

While new suburban housing might not be built, such a dynamic could go on for as long as the current suburban housing stock was usable, which could easily be for the entirety of the 21st century.

And that's merely one example. There are a TON of inefficiencies that can be wrung out of current industrialized society before it becomes unviable. Much of what we do is because it's the cheapest way, not because it's the only way or the best practice.

Amory Lovins and the Rocky Mountain Institute take the same start-point as does Kunstler, and demonstrate how we might end up with a vastly different future than a "world made by hand".

Legendary Armor Rōnin said...

muchtooloose said...

"A thought about that maturing debt of 300 billion, one thing that has bothered me about it is what was done with any maturing debt before this point? And what did it amount to?"

The maturing debt was also used to buy new debt as a specific provision of QEII, and it amounted to an estimated $3oo billion, on top of the new $6oo billion in QEII spending.

skilo said...

"In order to solve problems for good, you have to identify the root cause and remove it.

"[TAE's] efforts are focused on dealing with the problem instead of addressing the root cause.

"Is that really a long term solution for the world's societies?"

I think that the general approach is that the root causes are self-limiting. The current system is unsustainable, and will therefore collapse/implode on its own.

The pressing issue isn't "how do we solve this problem for good?", but rather "how do we most effectively deal with the dangers inherent in how this problem's gonna solve itself?"

Brunswickian said...

Anyone been following GEAB and the phantom 15 trillion USD that is supposedly to vanish this autumn?

We estimated in 2009 that the world had about 30 trillion USD in ghost assets. Almost half went up in smoke in the six months between September 2008 and March 2009. For our team, it's now the other half’s turn, the 15 trillion USD of ghost assets remaining, purely and simply vanishing between July 2011 and January 2012. And this time, it will also involve government debt, unlike 2008/2009 where it was mostly private players who were affected. To gauge the extent of the coming shock, it is worth knowing that even US banks are starting to reduce their use of US Treasury Bonds to guarantee their transactions for fear of the increasing risks weighing on US government debt (6).

For the financial world’s players, the Autumn 2011 shock will literally be the ground giving way beneath their feet, since it’s really the foundation of the global financial system, the US Treasury Bond, which will plunge sharply

scandia said...

@LAR, I am really appreciating your comments, especially the one about the question is how are we going to deal with the inherent dangers in how this problem's gonna fix itself. Takes us back to systems theory?

@IMN, I listened to the Puplave/Garris interview. Jim was left repeating over and over how terrible her news was. Not much else he could say as she wasn't giving much away. Getting details will cost ya.
Bingo! I have your new handle-

@Brunswickian, Yes I have been reading GAEB when Jesse posts it. Dire warnings eh...I got the impression that Bigelow subscribes to the full version and hope Bigelow will make a comment.

Ilargi said...

"skilo said...

I love the work you do here. Thank you - and be sure to keep it up. You are highly valued.

One comment, though. In order to solve problems for good, you have to identify the root cause and remove it.

Your efforts are focused on dealing with the problem instead of addressing the root cause.

Is that really a long term solution for the world's societies?"

Is there such a long-term solution? I think what we -should- do is to minimize the suffering of the herd.


Ilargi said...

RE: GEAB (Leap2020)

They pin themselves down on a date once again. Read through their past publications and you'll see that a lot. Along with all predictions that haven't come true. Now it's January 2012. What if it happens in February? They'd be wrong again. What they call ghost money is what I refer to as zombie money. I like mine better. And yeah, it'll vanish, deflation can't be stopped forever. But $15 trillion by January? Not so sure.


ogardener said...

Blogger el gallinazo said...

First, I can't imagine that the enormous irony of these mega blimps (they remind me of the Baron Harkennen of Dune without the antigravity belt to get around) could be lost on the Greek people when they talk about austerity.

Tweedle Dee and Tweedle Dum reminded me of


p01 said...

In no way do I try to defend any politicians
But the "blimps" have a hormonal problem. I had it too (to a much less degree) after starting to eat the western diet (hitting 40s also helped).
I would rather put the blame on the "can never be too rich or too thin" crowd. They're the ones eating all the good cuts of meat with butter sauces and pushing the lowest quality of calories on to the masses, under the punishment of the twin reapers of saturated fat and cholesterol squeezing your heart (religion by charlatan science)
It's the poorer who suffer more from obesity and diabetes, not the rich.
Again, I don't defend any politician.

Greenpa said...

Polka Dot Gallows! El Gal - I think we have to intensify the language here. This is no longer mere Kabuki.

CNN offers, with a straight face the headline "Home Prices Rise- Stock Futures Up" - based on the following "statistics":

"NEW YORK (CNNMoney) -- The downward cycle in home prices broke in April after eight consecutive months of decline, according to a survey released Tuesday.

"According to the S&P/Case Shiller 20-city index, prices rose 0.7% compared with March, although they fell 0.1% when adjusted for the strong spring selling season. Prices were down 4% year-over-year.

"In a welcome shift from recent months, this month is better than last --"

But down 4% year/year. And indeed, many traders respond, mooing all the way.

This is Slapstick Kabuki. And yet. The audience cheers.


Greenpa said...

A textbook quality learning experience:

Have the operators of the Fukushima reactors learned anything?

Apparently not.

p01 said...

El gallinazo said
I am not the sveltest of characters in my later years

Just in case you want to be the sveltest and healthiest you'll ever be:
Our Daily Bread, or Not, As the Case May Be...
I cannot stress enough the stunning difference in health and well-being achieved by eating exactly the things what the establishment tell you will kill you in great pains.
This is a "conspiracy theory" that everyone can validate by simply doing the opposite. The results are fast and amazing.

Steve From Virginia said...

The Greeks and Europeans could escape their predicament to some degree but only with more imagination than they seem capable of at the moment.

What would Keynes suggest?

For Greece to issue drachmas but keep the euro. For Greece to erect tariffs on German and French products such as automobiles. He would insist on a doubling of EU energy taxes along with taxes on derivatives. Keynes would make the energy connections right off the bat b/c he was creative as an economist rather than a mouthpiece for big business.

The French had the right idea about creditors -- the tree of liberty must be periodically watered with the blood of bankers. The French kings cut their heads off. (Reinhardt and Rogoff)

Without a big change, Greece is doomed. It cannot default nor can it escape the euro, otherwise it cannot obtain fuel. Saudia nor the rest of OPEC will accept devalued drachmas. Sorry.

The EU is arguing over dead money. They need to move on ...

Bigelow said...


Quick 'n dirty GEAB Bulletin #56

Still a major report assumption: Euro survives. BRIC and Chinese support Euro as an exit strategy out of "dollar world". It does emphasize the insolvency of the global system and especially Western finance.

It forecasts the creation of a Eurobond system, circa 2012, clearing up the systemic weakness of individual sovereign debts within an European Union wide currency scheme. Anticipates private bond holders -are forced to- share in the debt write-down.

The crisis period covers July '11 - Jan '12. Little or no public monies left for further bailouts. Prognosticates public national government debt will be among the ghost (or zombie if you prefer) assets to vanish with private financials this time. Foretells that Eurozone debts precipitate the crisis and the US Treasury Bond complex succumbs by Autumn '11.

Projects that Western market real estate, including Japan, suffers a further 30% decline by 2015. No loans available combined with relentless boomer generation demographics continue to pressure housing thereafter.

GEAB's suggests avoid loss as opposed to speculate. Flee US dollars; get out of stocks. It predicts that physical precious metals hold up adequately as a store of value.

There is more, as the report augurs the world has about 5 years from 2012 to rebuild a shared global bureaucracy else splinter into nothing more than regional powers.

Did not mention Fourth Turning type World Wars, so it's all good.

jal said...

Re.: Dead Money …

I like the relationship that you made with the cost of oil imports and the future of those importers.


Bigelow said...

"BRIC and Chinese support Euro..."
Correction: BRIC especially Chinese support for Euro...

ghpacific said...

Seeing the picture of the greek tweedledee and tweedledum twins reminded me of the old joke about the Viet Cong sending a message to Russia asking for supplies during the war, The Russians reply "tighten your belts" to which the response comes "send belts".

jal said...

Let’s see ... an oil rich country sell its oil at $100.00/b and with the profits it can offer cheaper oil prices to its citizens.

Sound like a winning formula for the citizens of the oil rich countries.

From wiki
Fuel subsidies are common in oil-rich countries. Venezuela, which has vast oil reserves, maintains a price of Bs.F 0.097 per litre (around US$0.02), and has done so since 1998.[20] Other countries with subsidized fuel include Iran, Saudi Arabia, Egypt, Burma, Malaysia, Kuwait, Trinidad and Tobago, Brunei, Nigeria and Bolivia.

seychelles said...

Steve from Virginia said

the tree of liberty must be periodically watered with the blood of bankers.

Hooray! Debtors rule! As core human madness transiently (long time) takes center stage for the mandatory periodic cleansing!

p01 said

It's the poorer who suffer more from obesity and diabetes, not the rich.

My several times a week WalMart poll is
highly confirmatory.

Someone on TAE or a link to TAE recently said (paraphrase)

it's not the politicians that are the cause of the problem, it's the people

As the screws tighten, some people are seeing more clearly.

Ruben said...


Sure, Lovins and RMI come up with a different conclusion, but I see this as being very similar to the conclusions TAE draws. We can technically solve the problem within the time we have.

But will we? It just takes a few No answers and we have lost much of our opportunity--and ended up with a world much more made by hand.

Biologique Earl said...

My link to live broadcast (flash camera 3)of Greece protests has suddenly gone dead:

At the same time Google news posted a short video of people and police fighting but I didn't see any date for the video.

Anyone got an active link?

Is it temporary or an ominous new direction for events? No witnesses!?

Bigelow said...

Supergravity said...

My enhanced TSA tirade.

The TSA must be abolished; it has consistently shown to be deliberately enacting extremist policies, many of its employees are evidently afflicted by chronic terror-psychosis resulting in delusional frames of mind, or are self-confessedly engaged in sexual deviancy and indiscriminate political persecution of a violent nature under misplaced authority of the TSA.

A recent eyewitness account reveals that those who opt out of the body scanner are to be deliberately 'punished' for such a choice, as was admitted by a screening agent. This agent stated that it is implicit policy of the TSA to violently persecute dissenters, principally for being political opponents of the TSA, by means of premeditated [sexual] assault without pretext of security concerns. Such use of premeditated violence or coercive intimidation under threat of force to further political ends may itself legally qualify as terrorism.

The outrageous attempt to rationalise the latest affront, assault upon the elderly, leaves no doubt; this conduct is a symptom of autogenic political extremism resulting in collective ethical dysfunction which is on the brink of causing persecution atrocities.

There can be no probable cause or reasonable suspicion whatsoever to subject infants, the elderly, or any group, to such invasive pat-downs as would cause significant physical or mental anguish, as has repeatedly occurred, by so disregarding personal dignity and those negative liberties which are equivalent to civil securities.

There remains negligible chance of such vulnerable groups [of domestic origin] being used as carriers, or using themselves as carriers; there is no single verifiable occurence of a terrorist act being committed anywhere by such means as would use infants or the elderly as carriers, certainly not by domestic groups without extremist affiliation. Even if incidental intelligence reports indicate that certain groups may be used as carriers, it is irrational to profile all such groups as terror suspects indefinitely, as the resulting screening protocols are shown to be immediately and vastly harmful to civil security. All arguments employed thus far to rationalise the need for enhanced pat-down protocols, as now extended to all vulnerable groups, are logically invalid, grossly unconsitutional, delusional and self-defeating.

The defective reasoning behind said protocols is so peculiar that it can only be the product of a mental derangement induced by chronic terror-psychosis.
Rationalisations of aforementioned protocols invariably involve the statement that vague 'intelligence' reports indicate, or have previously indicated, that terrorists might prefer to abuse social conventions to carry out plots, by using the most unlikely and vulnerable groups as carriers for explosives, therefore these unlikely groups, by prefferential elimination of social conventions, must necessarily be prerendered terror suspects themselves, on the basis of unverifiable 'intelligence' reports so vague that they would broadly render everyone as suspect.
These protocols, by their extremist nature, deliberately disregard the constitutionally guaranteed civil security of negative liberties; in order to theoretically reduce the unquantified possibility of terrorist harm, civil rights are so assaulted that the political and bodily security of the citizenry is immediately diminished without provably or probably safeguarding bodily security from terror.

If any citizen would commit, or publicly rationalise, such criminal misdeeds, so engaging in, or publicly advocating, political violence [similar to that committed] by the TSA, this would suffice as grounds for criminal indictment and dismissal from public office. Janet Napolitano, as senior executive officer, if having authorised or publicly condoned said protocols, as resulting in criminal acts with reasonable foreknowledge, must be deemed a political extremist and is to be removed from office on grounds of ethical dysfunction/mental incapacitation.

scandia said...

@Bigelow, Thanks for the GEAB quick and dirty...Another assumption is that a loan generating interest income system will survive the populous awakening.I would think that taking on interest payments on debt will become an anathema for several generations.

I note as well that GAEB has a lot of money to pay a small army of global talented researchers. Ilargi and Stoneleigh with friends of TAE like Ash and VK produce as much and more on sheer heart and brain cells!
I am in awe of them .

Biologique Earl said...
This comment has been removed by the author.
Biologique Earl said...

Blogger Bigelow said...

Thanks Bigelow for the active link.

Biologique Earl said...

Supergravity said...The defective reasoning behind said protocols is ............

The purpose of the abusive physical security procedures is not to increase security instead it is to intimidate the proles and to decrease and/or eliminate constitutional rights. Once the public start to accept the abuses, TPTB will move on to even more aggressive power plays until no more rights are left and the masses are totally under their control. Period, full stop.

jal said...

There are many things for which we might want to be concerned.
Here is another one.
There used to be above ground nuclear testing in AZ. etc.
That radiation fall out found a place to rest in the soil, plants etc.
Now, AZ. is burning.
Should we expect toxic smoke particles to be drifting to new areas?

Phlogiston Água de Beber said...


There are two ways to seize collateral. In an age of respect for law, you go to court the decisions subsequently enforced via implied resort to force. In a post-legal age, actual resort to force is more likely to be necessary and much more likely to be resisted. Stoneleigh stresses the idea that excess claims have been created against real assets and that most claimants will get stiffed. My understanding of previous imperial meltdowns suggest to me that most of the successful seizures of assets will fall to people that had no prior claim. Financiers are trained in chicanery not combat.

Once the future is recognized as JHK's Long Emergency, lending and borrowing will mostly be reduced to circles of friends and some relatives.

My experience and observations leads me to an opposite conclusion about industrial efficiency. The chase after efficiency by the business class seems to be the proximate cause of the financial class being well on their way to Dead Persons Walking.

I think of Amory Lovins as a living testamonial to something the mid-twentieth century comedian-philosopher Brother Dave Gardner said. I think the human mind is wonderful. I mean dear hearts, you can think about a whole lots more than you can get.

O said...

The porridge bird chick is born able to fly immediately.It communicates with it's mother when to lay it's egg.

el gallinazo said...


I don't believe that there were ever any atomic bomb testing in AZ. Two bombs were detonated at the Trinity site in NM in 1945, one U238 and the other Pu. I believe that all further tests were moved to Nevada. While the Manhattan Project was centered in Los Alamos, which is currently threatened with intense brush fires, the test site was at the northern end of the White Sands missile range, which is quite some distance away. The Pu bomb produced a lot of glass referred to as trinitite. Most of it was bulldozed into the ground. A detailed graphic spectrum of its radioactivity by isotope may be found here.

Robert re TSA

You beat me to the draw, but I agree with you 100%. I believe that using any form of moral arguments regarding these developments, other than the obvious fact that they are evil, is counterproductive. The most useful way to regard them them is as an increasing use of force by the Owners as they enter their endgame and completely devoid of law or ethics. Arguing legalities with Adolf Eichmann as his SS thugs shoveled people into the gas chamber would not be a constructive approach.

scandia said...

@Supergravity, I think your rant is useful in that many have been brainwashed by the system and have lost their ability to think it through, You do an excellent job in this regard.
I, too, agree with Robert and el G that TSA methods are intentional intimidation by the state. Also need to follow the money. Someone is making a lot of money providing machines/personel. What is the worth of those contracts? Wonder too what profile the HR depts in said firms have designed to hire the right candidate? A predisposition to sociopathy,hyper respect for authority, abused as a child???
Does anyone on the board actually know someone who is employed by TSA? They'll soon be bumped by returning troops well indoctrinated to obey orders.

Biologique Earl said...

Fresh in from:

Now Salem 2 nuclear plant in New Jersey is under "hot-shutdown" mode and under investigation after a cooling pump failure caused it to close Monday according to Associated Press.



Meanwhile at Fort Calhoun nuclear plant, where the river has risen gradually, the water seeps in through sandbag walls, electrical conduits and other places that workers had not thought much about before. There are so many small water pumps running to keep up with the leaks that keeping them supplied with gasoline and diesel requires something akin to a bucket brigade.

Orange plastic fuel cans are rolled on a cart over the catwalks and then handed off to employees who are headed deeper into the plant. Climbing over the sandbags at the entrances, they carry them in, and workers on their way out pick up a few empties and carry them out for refilling. See:

Sounds like everything is ok and under control in lala land - kind of Déjà vu Fukushima.

el gallinazo said...

CHS hits a grand slam today regarding Greece and the EMU.

ends with:

"The game is over for the ECB, the Greek kleptocracy and the european banks. All that needs to happen now is for the players to reveal their miserable cards and fold. The losses will be stupendous, but they will only get more horrendous the longer the game is allowed to go on."

I am quite certain that the "austerity measures" will pass the Greek Parliament tomorrow. I am sure they are counting the votes and making the bribes where necessary. The Greek kleptocrats are counting on one more fix before the ship goes down.

The population will have no effect on this until such a point as it develops an organized revolution against the kleptocracy. If that should come to pass and the Greek military can no longer hold the fort, I think you will see outside NATO forces moving in.

The world central government has been the generational game plan of the banking cartel at least since the end of WWII if not earlier. This was headed up by the Rockefeller faction from North America and the Rothschild faction from Europe. A politically unified Europe without sovereign nation states was the end game, and a common monetary unit was the stepping stone. These MotU are not about to let 60 years of planning, scheming, and effort go down the drain with a shrug. The beauty of the situation is that the TBTF banks which they own as the senior bond holders, shot them in the foot or perhaps the crotch. Bring the beer and popcorn.

Brunswickian said...

The RBNZ preparations for "haircuts" on bank depositor's savings accounts

That is Reserve Bank of New Zealand

Phlogiston Água de Beber said...

IMHO, backed by some experience, TSA thuggery should rank quite low on our lists of things to get bent out of shape about. Aside from the probably quite substantial profits flowing to the Israeli manufacturer of the Pornographs, the main benefit to the imperial lizards would mostly be the bitching and griping they inspire. I learned in the military that the hierarchy actually likes it. It is sullen glowering looks they find scary. As long as they can keep the proles bitching and moaning about things that are not central to the program, their control is not too seriously threatened. The very reprehensible nature of their actions has negative consequences for the transportation industry and that contributes to the collapse.

On another front, Steve from Virginia has a new post up regarding Europe and its PIIGS. There is plenty to ponder, backed by charts, and things really worth worrying about.
Dead Money …

Alexander Ac said...

15 years after their oil consumption peaked, places like Italy, Germany, and Japan are pleasant and civilized countries to live in. So while peak oil certainly means higher oil prices, more economic weakness, and more stress on many individuals, it doesn't have to mean the end of life as we know it Wrote Stuart Staniford in his latest blog. Is it only me thinking to stop reading his blog?



Phlogiston Água de Beber said...

Is it only me thinking to stop reading his blog?

I would say No, except you can't stop what you never started. I kind of wonder if Stuart didn't take all the compliments paid to him on TOD just a little too seriously.

scrofulous said...


"Is it only me thinking to stop reading his blog?"

He is only saying what we all are doing ... letting the devil take the hindmost. Keep reading his blog he does put up some good information even if he does at times make tactless or unfeeling remarks.
Just watching Flash Camera #3: 'Trainee Troop maneuvers'

So 45 % of the young and able bodied Greek lads and lasses unemployed? When that vote is counted and austerity measures pass , I would think that knowing those 45% are out there should make even a most sophisticated banker tremble. That age group is prime military material, and I think there are plenty of hills in Greece to gather in, no? ( On that thought, Jesse had an interesting banner on his site, the other day, that were words by Hitler commending the fighting abilities and bravery of the Greek Guerrilla).

scandia said...

@IMN, just read " Dead Money ". Excellent analysis. I don't know the facts but Cdn oil is exported. Oil used by Cdns is imported. Those pipelines flow north/south, not east west. I've read the east coast provinces are particularly dependent on imported oil. Anyone out there know about our Cdn supply sources?

scandia said...

In addition China is " very interested " in Cdn oil. That tells me Cdns won't be first or second in line.Cdns are pretty cocky about being oil producers without realizing they may not get any of it for personal use.And it gets pretty cold up here. I don't enjoy waiting for a bus in winter.So far the buses are heated. And when the buses stop running walking in a blizzard holds little appeal for my geezette bones.

el gallinazo said...

Tyler Durden at his most amusingly snarky.

"In what may be the most prophetic news of the day, we learn that the head of Afghanistan's central bank, Abdul Fitrat (what an oddly appropriate name for a central banker), has escaped the country, emigrated to the US and "isn't expected to return because he fears for his safety after investigating fraud allegations at the country's largest lender, according to two Western officials."

"This is not a resignation but [an] escape from legal implication of his having failed to act responsibly as the head of the Central Bank." Fear not, Mr. Karzai, we can assure you that when our own ponzi scheme unravels, you can be the host of our own central bank head. Then at some point, an exchange can be effected.

jal said...

If I was China, sitting on all that cash, I would be buying votes so that Greece defaults.
Then I could buy failed Euro banks for pennies. That’s why deflation is beneficial for those with money.

Brunswickian said...

Gundersen: Intake Structure that cools reactor and spent fuel pool is probably most vulnerable part of Ft. Calhoun nuke plan — Critical that it stays dry

jal said...

GEEE! At last the dam is starting to leak.

Bank Of America To Pay $8.5 Billion To Settle Mortgage (Mis)Representation Suit With BlackRock, Pimco, New York Fed Et Al.

el gallinazo said...

Bilderberg 2011: The Rockefeller World Order and the "High Priests of Globalization"

by Andrew Gavin Marshall

Long and very well constructed article. Factual and balanced until the final paragraph (as quoted below).

Three quotes:

"For more than a century ideological extremists at either end of the political spectrum have seized upon well-publicized incidents such as my encounter with Castro to attack the Rockefeller family for the inordinate influence they claim we wield over American political and economic institutions. Some even believe we are part of a secret cabal working against the best interests of the United States, characterizing my family and me as 'internationalists' and of conspiring with others around the world to build a more integrated global political and economic structure--one world, if you will. If that's the charge, I stand guilty, and I am proud of it.[67]"
David Rockefeller, Memoirs, 2002

"We are grateful to the Washington Post, The New York Times, Time Magazine and other great publications whose directors have attended our meetings and respected their promises of discretion for almost 40 years. It would have been impossible for us to develop our plan for the world if we had been subjected to the lights of publicity during those years. But the world is more sophisticated and prepared to march towards a world government. The supranational sovereignty of an intellectual elite and world bankers is surely preferable to the national auto-determination practiced in past centuries.[68]"
David Rockefeller, reportedly 1991 Bilderberg annual meeting

So, happy 96th birthday, Mr. David Rockefeller! But I am sorry to say (or perhaps not so sorry) that while the mainstream media have “respected their promises of discretion,” the new media – the alternative media – have not. As you said yourself, “It would have been impossible for us to develop our plan for the world if we had been subjected to the lights of publicity during those years,” it seems that the “lights of publicity” are now descending upon your “plan for the world,” making it all the more difficult to come to pass. Indeed, “the world is more sophisticated,” but not because the world is ‘ready’ for your plan, but because the world is getting ready to reject it. While national sovereignty certainly has problems and is hardly something I would consider ‘ideal’, the “supranational sovereignty of an intellectual elite and world bankers” is about the worst scenario one could imagine. So as a birthday present to you, Mr. Rockefeller, I promise (and I am sure that I am speaking for a great many more than simply myself) that I will continue to expose your “plans for the world,” so that your dream – and our nightmare – will never become a reality. The light will shine, and in due time, the people will be ready to follow its path.

Gravity said...

Indeed the TSA tragedy is not the greatest of concerns, but still important somewhere, as the ones responsible for those criminal procedures and protocols, such as homeland security chief Napolitano and TSA boss Pistole, and other extremist ideologues, whether delusional or simply evil, are likely to cause more harm if not brought to account under the rule of law as may yet exist, or at least their policies must be publicly identified and denounced as extremist in such a way as would lessen their abusive powers, since the case must be made that autogenic political extremism within government is precisely what is enabling this cryptofascist descent, apart from corruption of the citizenry.
Furthermore, when certain patterns of codified extremism are so definitively expressed and the resulting abuses repeatedly rationalised while still under some semblance of lawful conduct, it must be concluded that those reponsible for implementing and executing policy are certifiably insane or ethically dysfunctional, being afflicted with either terror-psychosis or plain sociopathy.

Gravity said...

Give the people control of a nations Gravity and it matters not whence Rothschild wanes.

Phlogiston Água de Beber said...

@ scandia

I'm pretty sure that on balance Canada must be a net exporter of oil as well as other natural resources.

It is a shame that Canada shows so little inclination to follow Jeffery Brown's Export Land Model and depend on its own oil for sustaining a decent standard of living. I'm guessing that Ontario may, despite being the political center, get the short end of the energy straw. And after all that selfless commitment to NATO. Color me ashamed.

scrofulous said...

Legendary Armor Rōnin

Sorry, missed your comment, thanks, now what you mention would lessen any effect that Richards talks about wouldn't it?


Gee been out in the studio trying to build something to hold a remote computer and when i come in I get the first news of the general strike in Greece, and off of MSM news, for gods sake! I then tune into A&E and all I get is Tylers and Durden's.

ilargi you gots to get some way that discrete conversations can happen, like on the birth place of this site. Good stuff here but it is too much like sorting through my shop for the nut and bolt I need and finding nothing but lag bolts! Good items in their need but ....?!

Groov'nor said...


Solutions are hard to find around here. However, there are many people out there who acknowledge the failures of the current system and are actively trying new alternatives. People like John Robb, for example. He just started a new project, called Miiu, in order to facilitate the process of creating what he calls "resilient communities" i.e. communities that produce most of what it uses locally. I believe this is somewhat also the idea of TAE, a way to insulate people from the global economic meltdown.

Frankly, I'm impressed that with so much in common TAE and Mr. Robb never met virtually. While TAE tackles the big picture with brilliant analysis, Mr. Robb is tackling the practical side of it, the seeds of a new and better world economy. Both sites complement each other perfectly.

Alas, maybe I'm just a young fool making too many connections out of my daily feed of information.

Anonymous said...


>>I think that the general approach is that the root causes are self-limiting. The current system is unsustainable, and will therefore collapse/implode on its own.

The pressing issue isn't "how do we solve this problem for good?", but rather "how do we most effectively deal with the dangers inherent in how this problem's gonna solve itself?"<<

Do you think that a group with all the wealth and power and impoverished, deflationary busted nations will "self correct?"

I get the feeling this deflationary collapse chaos is being used to sell, shall we say, a "new world order."

As the people who want to rule the world get more power and society loses what little liberty and power it has, I see things getting worse, not better.

I hope I'm wrong.

Anonymous said...


>>Is there such a long-term solution? I think what we -should- do is to minimize the suffering of the herd.<<

I don't know if there is a long term solution. But I do know that if nobody attempts to fix the root causes, they tend to get worse.

If the herd is "protected" while an authoritarian Big Finance Capital dictatorship is set up, will it matter when the modern version of the "Gestapo" or "Stazi" show up and take whatever was protecting them?

I don't know, but I do know that history tells that powerful people turn heinously evil on the "herd" quite consistently.

And, no, I'm not convinced "this time is different," although I *really* hope it is.

Maybe it is best to have a "division of labor" in this entire effort.

Anonymous said...


>>Bank Of America To Pay $8.5 Billion To Settle Mortgage (Mis)Representation Suit With BlackRock, Pimco, New York Fed Et Al.<<

FYI - you misspelled "tax payers."

Anonymous said...


Let me be more specific. As tough as adjusting to a new environment will be, I'm more concerned about the criminals who have brought about this Ponzi system, who hate our rights enough to eliminate them, who joke about wars where 90% of the casualties are civilians and starve people to death as a matter of policy.

They will want to control their crown jewel, they have all the wealth, they have all the power and they control the military, nice suits and good marketing notwithstanding.

These lawless criminals are a real issue that we will have to contend with at some point. Not to blame, but to keep them from further stealing everything we have via their control of the Central State and its assets.

Bigelow said...

"We are going to have a war on terror which you can never win, and so you can always keep taking people's liberties away. The media is going to convince everybody that the war on terror is real. The ultimate goal is to get everybody in the world chipped with an RFID chip, and have all money be on the chips, and if anyone wants to protest what we do, we turn off the chip."
--Nicholas Rockefeller to producer Aaron Russo (America: From Freedom to Fascism) eleven months before the 9/11 World Trade Center attacks

Phlogiston Água de Beber said...

@ skilo

Begging you pardon, but aren't you maybe getting just a little hysterical. I'm getting the impression that the country you think you have been living in is quite different from the one you've actually been living in.

The Finance Capital dictatorship has existed for quite a long time now. Undoubtedly longer than you or I have been alive. They put the official stamp on that in 1913 when they denied the Treasury the right to use its own money.

The Stasi has mostly contented itself with building dossiers on us. On fairly rare occasions they do go out and fill somebody full of lead. But by and large, life in these United States hasn't been all that bad over the past 100 years.

Going forward it will be bad and it was bound to come no matter what system we had. It's peak oil meets collapsing finance. I'm pretty confident that Ponzi schemes existed long before Charles Ponzi was born. Obviously they couldn't call it that until after Chuck arrived on the scene.

You express a lot of worry about banksters ending up with all the power. They've had most all the power for a long time. Hundreds of years. When Hjalmar Schacht spoke even Hitler listened. Their actions toward the PIIGS suggest to me that they perceive how close they are losing their power.

You are excessively certain that the men behind the curtain are guaranteed the absolute loyalty of the military. Andrew Bacevich put up an essay on Tom Engelhardt's site today suggesting that many military officers are wising up. As the chaos progresses I am anticipating a fracturing of the military forces. Much as has happened in Yemen and Libya. At one time or another it has happened almost everywhere.
War Fever Subsides in Washington

Anonymous said...


1. It is pretty obvious to me that the "game" has a changed compared to 1913 through 2008. Different game means different risks - and I see a full frontal assault on the Constitution and a full fledged police state being set up. I agree the same criminals have been around for a while. I agree they have been in power and quite the big bad for some time (lying about the Gulf of Tonkin to trick the country into murdering millions - many of them Americans). Whether it is my perception or whether it is real, I have a serious sense that something wicked this way comes.

2. So you are betting on the military stopping these people from imposing their will (privatized rain water, starvation as a policy, etc...) on the Western nations?

I hope you are right. I'm just not convinced sitting back prepping, drinking beers and waiting for the military to stand up to the tyrants is the way to maximize the odds of this happening.

Nor am I convinced that an effective military coup will end up very well, either.

I don't know what will happen, but my eyes are wide open that history shows it doesn't end up very good very often.

Alexander Ac said...

Scienfitic American has this article:

Storm Warnings: Extreme Weather Is a Product of Climate Change



Ilargi said...

Live cams Parliament building, Syntagma Square, Athens:

1: Better, but no sound

2: With sound


Redbriars said...

@ Scandia

There was a nice series on Canada's oil situation on The Oil Drum last year. You should be able to search for it; if not I can post the link when I get home.

As I recall, western oil goes south to USA and we import approx. the same amount in the east (ON, QC and Atlantic provinces) from Norway, Nigeria, Venezuela etc. Eastern refineries are set up for sweet light crude and western crude is much heavier, so western crude might not be of much value to the east initially.

We have little oil pipeline capacity that goes west to east so we might have to move it by rail, which CN says that it can do.

p01 said...

Alexander Ac said
Is it only me thinking to stop reading his blog?

I did stop. Only because I think oil stats and wishful thinking are becoming irrelevant at this stage in the game. Very thought provoking analysis on Steve from Virginia's new & improved blog fills the gap.

scandia said...

@REdbriars,,,just did a quick look around the Oil Drum archives. Looks like pipelines go north south with one going just west for the Chinese. Seems possible to redirect oil to Montreal from the US. The eastern provinces depend on ME supply. Not anything said about Ontario. How will Ottawa, nation's capital, get their supply?
All this brings to mind a phrase, " preferred customer status".
Please do send that link when you get home. Thanks.

Steve From Virginia said...


My understanding is that Canadian oil is refined outside Canada. Finished crude products are imported back into Canada.

I cannot say all Canadians are pleased with their 'energy subject' status vis-a-vis the US. At the same time, Canada exports other goods to the US and other countries, these goods are energy in changed form.

A large question mark looming over Canadian energy is the tar sands project. It depends on dwindling natural gas supplies and acquiescence about water pollution to produce a narrow 6-1 energy return on energy invested. Any change in gas cost or water rules and the presumed 4-5 million barrels per day are not forthcoming.

Alexander: Some of the folks in the bubble will stay there longer than others. I don't know about the Japanese as their nuclear ordeal is just beginning. Japan is an island, its neighbor is water, Germany's?

When Europe's young people realize they can't live like Americans don't live any more there will be the five stages of grief, anger is in there somewhere.

Meanwhile, Staniford will have his denial.


p01 said...

I'm watching a live stream #3. Reminds me of Ceausescu trying to talk on teevee while the riots started breaking on the streets. Surreal. Don't these idiots realize what they're playing with? I bet the language of the speech is the same, but I can't understand a word of greek. Except "cacophony", that caught my attention.

p01 said...

I'd like to thank everyone (Ilargi, I.M.N, scandia, ElG, sorry if I missed anyone) who spoke highly about Bageant and his books. I finally found his "Deer Hunting with Jesus" and was hooked. "Wow!" is just about the best review I can muster at this point. Thank you!
Still hunting for the Rainbow Pie.

lautturi said...

No more necessary to have public figures give real speeches. Computerized real talking heads are here (one can always trust Japanese to figure how-to-do-it out).

I wonder when J3sus makes the next coming...

Bigelow said...

“From tile manufacturers in Shanghai to shoe factories near Hong Kong, smaller businesses have driven Chinese growth over the past two decades, accounting for about 60 per cent of gross domestic product. So, a sharp slowdown in their activity would weigh heavily on the Chinese, and by extension, world economy.”.
China's Small Business Are Going Bankrupt, Disinvesting And Increasing Capital Outflows -Michael Pettis

Biologique Earl said...

Just in: ATHENS, Greece — Greece's lawmakers have approved a key austerity bill, which will impoverish the Greek people and make the banker oligarchs even richer.

Tonight is going to be a hot one in Greece! And the people are right.

el gallinazo said...

Well the austerity vote was as easy for the Troika as buying a $20 hooker. The only course left for the Greek people is to overthrow the corrupt, Quisling government. Whether they do it non-violently as they did in Argentina by everyone going on strike and pounding pots or violently as they fought the Wehrmacht and Waffen SS, it is their only option. Never underestimate the viciousness of the bankers and their stooges. High probability that NATO could invade Greece if they throw out the scum. Recommend that Papandreou might rent Fernando de la Rúa's old helicopter so he can make a hasty exit to Basle from his roof. But he better leave his fat friends behind or it might never get off the roof.

jal said...

Now that we know that the Greeks have said yes to spending less and the banks are going to lend/give them more money, there are other thing happening to keep you from going to sleep.

Here is a good report of Putback Litigation

Bank of America Likely to Settle Case with NY Fed, Pimco, Blackrock for $8.5 Billion

Egypt says will not need IMF, World Bank funds
Radwan said Qatar had provided $500 million for budgetary support in the past week. "That is a gift," he said, when asked if there were any conditions attached to the Qatari cash.
He said Saudi Arabia had earlier offered a similar amount.

Redbriars said...

@ Scandia, Steve

Here's the Oil Drum link:

Lovely work from Gail Tyvberg (sp?)

Another nice piece on our Oil Sands, also from Gail:

These are from August and Sept 2009.

There were also some discussions on TOD in the comments of some posts regarding Canada's obligations under NAFTA to continue to ship to USA.

jal said...

I found this colorful statement on a blog.

... many Slovak politicians who wanted their country to avoid the aid to Greece altogether are actually the only ones who respect the laws underlying the eurozone. Balanced budgets etc. are among the conditions that the eurozone members should guarantee.

This "detail" has become so controversial that when ECB board member Jürgen Stark reminded the world today that a proposed bailout for Greece would violate a no-bailout clause in article 125 of the EU treaty, he almost shocked everyone else. "Haven't we sh*tted upon all the laws already? Why the f*ck are you annoying us with something as obsolete as the laws and treaties, Herr Stark?" the European politicians and financiers almost uniformly screamed at the German chap. "We love to break all the laws, especially if parasitic millionaire communists pretending to be victims are the recipients of the money - that what makes us politically correct."
What does he really say ...

el gallinazo said...

Laws? We don't need no steeeeenking laws. We are the Owners (or their sock puppets).

Phlogiston Água de Beber said...

skilo said...
I don't know what will happen, but my eyes are wide open that history shows it doesn't end up very good very often.

That is quite true according to my reading as well. In the case before us it is inescapable that it can only end very badly. In essence, we have partied like VJ-Day never ended. But, as always happens when a society parties too hearty, the libation of choice (in our case oil) starts to run low. Then you get the hangovers, which in societal terms implies chaos and sociopathic behaviors.

As Dubya famously said, the Constitution is just a piece of paper. A piece of paper that various parties seeking to exercise power have used as a lever against each other. Many of the people who signed on were violating it even as the ink was drying.

The balance of power remained fairly stable for about two centuries so that even the Finance Capital dictators were significantly constrained in what they dared do. With a lot of help from ordinary folks like us, they finally pushed their icon, Lord Mammon, onto the throne.

I am not counting on the military to stop Mammon. I did my military time, during Berlin Wall, Cuban Missile Crisis and Tonkin Gulf as a matter of fact. I count on them for nothing. Militaries most of the time enjoy a high level of internal loyalty, but not so much toward civilian governors. They have enjoyed a long honeymoon with the Mammonite forces. Their loyalty comes at a price. One the Mammonites will be unable to continue paying.

Debt is mana for Lord Mammon. Stoneleigh's advice to get out of and stay out of debt is not only sound for personal circumstances, but also serves malnutrition to the beast. You can use the addictive libation to make Comrade Molotov's Cocktails if you like, but there is so far little to indicate that it does much good.

Showing up too early for a revolution can be very unhealthy. So sitting back and enjoying a beer while waiting for the revolution's time to come round is not a bad idea.

Biologique Earl said...

Well as expected, the big bank stocks are roaring ever higher. Why shouldn't they, they are the beneficiaries of the "bailouts". And of course several of the big banks just got handout in the form of fines instead of jail time, again, for their fraud.

Wonder what will happen to them if and when Greek people force a default? Well we may not have to wait too long to find out, I think.

ghpacific said...

John Perkins warned of EHMs (Economic Hit Men) Mike Ruppert is warning us of EFMs (Emergency Financial Managers)already in the USA, today we are all Greeks.

jal said...

Before jumping off the cliff, the EU will need to review and improve the mechanisms of equalization payments.

For years, Canada has had their “Greek Provinces”

In Canada, the federal government makes payments to less wealthy Canadian provinces to equalize the provinces' "fiscal capacity"—their ability to generate tax revenues. In 2009-2010, six provinces will receive $14.2 billion in equalization payments from the federal government.[1] Until the 2009-2010 fiscal year, Ontario was the only province to have never received equalization payments; in 2009-2010 Ontario will receive $347 million,[2] while Newfoundland, which has received payments since the program's creation, is now a so-called "have" province, and is now a net contributor that does not receive Equalization payments.

Mike Tanis said...

Re: Greece (and much of the rest of the modern world).

Confucius: "He who will not economize will have to agonize."

As I perceive it the Greeks have voted to extend the pain over a longer period while hoping the severity can be modulated.

Isn't that sort of like taking aspirin for an abscessed tooth and hoping it will get better over time? Or should you just yank the tooth, drain the corruption and get well again?

Borrowing money to cure your addiction to borrowed money seems like taking aspirin for your toothache.

Ilargi said...

"Robert said...
Well as expected, the big bank stocks are roaring ever higher. Why shouldn't they, they are the beneficiaries of the "bailouts". "

US financials have lost about 25% since the beginning of February this year.


Phlogiston Água de Beber said...

Punchline of the day from CHS.

Do you really think you don't live in a kleptocracy? Why? Because the truth hurts?

Frank said...

@Scandia Ontario gets a bunch of oil from one of those "north-south" pipelines.

It drops down into Minnesota, crosses upper Michigan and then back into Ontario at Sault Ste. Marie.

jal said...

Did the stock market go up today?

Maybe it was because of this good news.


Agreement Covers Nearly All Legacy Countrywide-Issued First-Lien Private-Label RMBS Exposure, Represents 530 Trusts With Original Principal Balance of $424 Billion Bank of America and Countrywide to Pay $8.5 Billion to Settle Claims; Will Provide an Additional $5.5 Billion in the Second Quarter of 2011 for Representations and Warranties Exposure At Quarter End Will Have Settled or Provided Additional Reserves for a Substantial Portion of the Original Principal Balance of Representations and Warranties Exposure With Settlement and Additional Mortgage-Related Costs, Company Expects to Report Second-Quarter 2011 Loss of $0.88 to $0.93 Per Share, Including a Goodwill Impairment Charge of $2.6 Billion Excluding Mortgage Items and Other Non-Operating Items, Company Expects to Report Second-Quarter 2011 Net Income of $0.28 to $0.33 Per Share

el gallinazo said...

Stoneleigh (Nicole) just did a half hour gig on Financial Sense with Jim Paplava. Going to listen to it now. If you go there you might as well check out Chris Martenson from yesterday. There are two main differences between I&S and Martenson. One is that CM say that the natural direction is deflation but the gov and Fed can and will convert it to HI. I&S says that when the deflation hits it will prove the Fed to be a toothless tiger. The other difference is that CM sounds like Ned Flanders from The Simpsons.

scandia said...

@REdbriar and Steve, I'll read the oil drum articles to-night.Thanks!

just rec'd a note from a friend that the Knesset has approved the first draft of a law that will require the Palestinians to pay for the demolition of their homes.
I've raised the Israel rating from sociopath to psychopath.
Money must be getting tight which seems odd if they control the banking cartel? Or good time to pass some nasty legislation when all attention is on Greece/sovereign defaults?

scandia said...

@Frank, Just caught your comment about the pipeline passing through Sault Ste, Marie. I'd really like to see a pipeline map of NA. Sounds like a vulnerable maze? I'll let you know what else I discover.

Lynford1933 said...

I believe this is the original document from "Capitol Hill Blue". If you have another verifiable source please link it.

"Bush on the Constitution: 'It's just a goddamned piece of paper'
Dec 10, 2005, 06:02
Email this article

Printer friendly page

This article was based on sources that we thought, at the time, were reliable. We have since discovered reasons to doubt their veracity. For that reason, this article has been removed from our database."

One statement I did see on TV by GW, after he went to KSA because the price of gas was going up in 2008, was something like, "It's not nice to ask the Saudi's to raise production when they may not be able to do it."

I'm not a Bush guy but then again I'm not an Obama guy either.

Gravity said...

@IM Nobody
"As Dubya famously said, the Constitution is just a piece of paper."

The constitution is an excellent idea, wherein the rule of law exists as the sovereign property of the citizenry. Although it remains an unrealised ideal, a constitutional structure under the guidance of a fully informed citizenry is the only known method by which people's coexistence with eachother and their institutions may become bearable.
Without such a system, institutions and their civil societies become ruinous.
The constitution becomes just another goddamned piece of paper whenever there are not enough citizens who remember or safeguard its function, and who would make the protection of its integrity their civil duty and personal responsibility.
In that regard, Dubya was never a capable citizen, and should have been impeached immediately after said seditious remark, as the constitution would demand.

scrofulous said...

Bought Icelandic scallops the other day. One must show solidarity with them that tell bankers to "Go pound sand".

Phlogiston Água de Beber said...

@ Gravity

It really doesn't matter whether Dubya said it or not. It is not open to question that he allowed and I would say encouraged his administration to operate as if that was what he truly believed. Unfortunately, that Constitution put the power of impeachment in the hands of a body that had also sold out to the dictators. So, no help there.

These essays published on Counterpunch might render a little clearer picture of what Usanistan has become.
In America, Lawlessness is Now Complete

Idolizing Absolute Power

The Constitution might get another chance someday, but not until the power of money has been broken. There will have to be a lot worse suffering before that could happen. I think Greg Lake probably says it at least as well as I can.

@ muchtooloose

Well said.

jal said...

It's Official: China Is The "Mystery" Daily Buyer Of Billions Of Euros
Cough, cough!

Look at what is happening at present.

China has the biggest pile of "GO money". China has a lot of US$ that it can use, through shell companies and institutions, to affect the future of the EU.

Diversification, control of assets, and improving cash flows is an objective that is not foreign to China.

The game is over when someone leaves the table. For now, China is not willing to end the game.

The "gang of eight" has still too many properties, hotels and houses to generate cash flow.

A few more turns of the dice are still required before control of the game is transfered to the new player.

Learning Mandarin might be a good investment for the next generation.


umaperegrina said...

An interesting look at our future by John Michael Greer. He uses a metaphor often used by Stoneleigh, that of a game of musical chairs, and suggests that the best response is to refuse to play.

He does not see the likelihood of the United States spiraling into revolution:
"It’s an interesting detail of history that revolutions rarely happen in ages of decline; the classic recipe for revolution is an extended period of economic improvement for the bulk of the population, followed by a standstill or a reversal. (The government of China would do well to take note of this.) In times of decline, the class and group solidarity essential to an effective revolution dissolves into a scramble for slices of a shrinking pie, in which your own peers are usually your worst enemies."

How Not to Play the Game

scandia said...

@umaperegrina, thanks for the excellent " How Not To Play the Game".
Stoneleigh also says not to indulge
the emotions of rage. Engage the " cognitive override " etc....
I am still working with the learning from the Dr. Gabor Mate workshop. He spent quite a lot of time doing little exercises about personal boundaries, about saying no, about asking why one carries around a pile of unexpressed no's. This has caused me to scale up the personal no to how does a society say no without destroying relationship and necessary structures. I have no useful answer at the moment.
Clearly several societies are saying NO!I suspect if citizens had said no earlier in the relationship with the state a chaos producing revolution would not be required.

lautturi said...

I&S - have you made contact with Golem XIV? He does write clearly about the whole shebang... here's one of his latest: Truth, threats and IMF.

scandia said...

FYI,,,a map of pipelines in Canada and other countries as well. Might be useful in the decision making as to whether and where to relocate?

p01 said...

Tourists in Greece are visiting the old and the new ruins.

gylangirl said...

The acronym PIIGS seems designed to blame the victims and justify imposition of austerity measures.

I have resolved to use the replacement acronym GIPSI since that appears to be the order in which the those nations are falling to the banksters. And it more properly identifies them as the landless peasants they are becoming.

Biologique Earl said...

Blogger gylangirl said... The acronym PIIGS seems designed to blame the victims and justify imposition of austerity measures.


I am glad to see someone else unhappy with the acronym piigs. Anyone familiar with the English language will immediately have an image of piigs as fat grunting creatures wallowing in the mud. (Seems fitting though for a couple of Greek politicians currently in the limelight) I don't know who first used it but I suspect the US. Just like Bush II and cohorts calling countries that did not agree with them on their war mongering "The Old World group" or something similar. Such terms are designed to belittle and diminish. Derogatory, diminishing terminology is something the neoconservatives in the US have developed to a smoothly honed art. I do like your substitute term GIPSI and will use it where appropriate.

jal said...

Since nobody seems willing or capable of commenting of the implication of BANK OF AMERICA having to give back up to $14B for MBS, ( Represents 530 Trusts With Original Principal Balance of $424 Billion Bank of America and Countrywide to Pay $8.5 Billion to Settle Claims; Will Provide an Additional $5.5 Billion), I found someone who can and does comment.

The BoA MBS Settlement
posted by Adam Levitin, (he has served as Special Counsel to the Congressional Oversight Panel)

Alexander Ac said...

Not even misallocation of precious resources:

Video of world's longest sea bridge opened in China

*42 km
*1 billion Euro
*one bus and few cars going by
*doomed by peak oil



bluebird said...

Thank you jal for that link. I've come to the conclusion that the banks and corporations, any of them and all of them, will do whatever they want (with our money) until they are caught. Even after that, there is nothing to stop them. Where is the justice department to throw them into jail?

No one that I know, seems to pay any attention to the corruptness, the stock market is rocketing up, so everything must be fine. Besides, it's the 4th of July, a long holiday weekend. Time to party.

bluebird said...

Geithner rumored to leave the Treasury after the budget deal

Timing is everything. Why is this tidbit being leaked today?

Alexander Ac said...

...and C B Farrell...:

Yes, you can forget “Peak Oil.” Forget global warming. Forget debt, deficits, defaults. Forget commodities, scarce resource depletion. Forget all other economic, political, military problems. Yes, forget all of them. None of them matter … if our leaders fail to deal with the world’s out-of-control population bomb. Nothing else matters. Nothing.

goes Ehrlich

Ilargi said...

New post up.

The Impossible and the Inevitable


Anonymous said...


don't forget republic. we aren'ta democracy (elect tyrants to do as they like), we are a democratic republic (elect people who are bound by law that they can't break).

this confusion has led to the TSA literally grabbing genitals of children at the airport and reaching inside the underwear of some passengers.

this would be OK in a democracy, but it is criminal behavior of tyrants in a democratic republic.

the difference is not trivial.