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The headline is a bit misleading, as some cited countries may face upcoming crises or indeed implode, but the shock waves might be regional at best. For example, France's chance of causing a critical global situation depends more on the conjunction of every other EU country imploding as well. The usual suspects are included (N./S. Korea, Venezuela, Syria, Egypt..), but seriously, the Netherlands? Is turmoil in the Netherlands really going to spark any kind of global conflagration? C'mon.. Business Insider. Excerpts:
The European economy is deteriorating and leaders across the continent are being booted from office in favor of a new generation of politicians. Rising tensions in the Middle East and uncertainty over leadership changes in emerging markets worldwide are adding to investor concerns.
Tina Fordham, Senior Global Political Analyst at Citi, is out with her mid-year outlook, presenting all of the bank's views on all of the biggest political risks emanating from the world's key hotspots over the remainder of this year and into 2013.
With key elections ahead, unresolved conflicts that continue to roil entire regions, and rising nationalist sentiment in major world economies, investors will want to stay abreast of developments on the international political scene.
Why Citi bothered to include Russia or China (Both fairly stable, at the moment)to the list, or formally recognize how America's potential economic meltdown might either blow up internally, or critically hobble most financial markets is puzzling. Of real concern: Israel/Iran/Syria/Turkey/Saudi Arabia/Egypt (Multiple scenarios involving each other, Russia/China and/or NATO), Greece/Italy/EU meltdown, and surprisingly not on the list, Japan's economic and radioactive death spiral. Fukushima doesn't rate as a "global hotspot?"
I'm sure Ms. Fordham got paid a shitload of money for her analysis, and I'm glad I didn't have to actually pay money for said analysis. I've got a friend whose rantings are more comprehensive, more pertinent, and much more interesting and/or entertaining than the USA Today version of geo-political current events Citi has offered up.
I'm also sure that there are a lot of clueless rich people who will gladly pay for this "analysis," confident they're the ones with the valid information. Good for them. I'll take ______ insights anytime, whether he's sober or drunk. His narrative is far more compelling than this dreck, slurred or not.. And it's free.
The rumblings from officialdom begin, or continue.. The Guardian, via The Extinction Protocol:
August 6, 2012 – ROME - The big news this morning is coming from an interview Italy’s Mario Monti gave to German magazine Der Spiegel, in which he warned that growing Italian resentment against Germany risks the break-up of not just the eurozone but the European Union itself. He said the eurozone tensions “bear the traits of a psychological dissolution of Europe,” adding that Europe “must work hard to contain it.” Asked about a strengthening in resentment between the allegedly profligate southern European nations and the bloc’s thrifty northern members, Monti told Der Spiegel “it is very alarming, and we have to fight against it. Yes, there is a front line in this area between north and south, there are reciprocal prejudices,” according to AP’s report of the interview. In the meantime, tensions between Germany and Italy appear to be on the rise. The news comes after an Italian newspaper splashed its front page on a photo of Angela Merkel with her arm raised and the headline “Quarto Reich.”(Ouch!) Meanwhile, in an op-ed in Germany’s Bild Romano Prodi, a former Italian prime minister and president of the EU Commission, urged Germany to show “true leadership” in steering the continent through the crisis, saying the bloc’s biggest economy has the duty “to lead Europe toward a better future.” If Germany fails to lead through the crisis, it “would be the political end, for Europe and for Germany,” he insisted, urging Berlin to present a “clear action plan to achieve a democratic, federally structured Europe.” It is important to note that il Giornale (Where the headline 4th Reich appeared)is owned by Berlusconi. –Guardian (Full article at this link)
Huge. Zero Hedge. Excerpts:
Just when you thought the Li(e)bor scandal had jumped the shark, Germany's Spiegel brings it back front-and-center with a detailed and critical insight into the 'organized fraud' and emergence of the cartel of 'bottom of the food chain' money market traders. "The trick is that you can't do it alone" one of the 'chosen' pointed out, but regulators have now spoken "mechanisms are now taking effect that I only knew of from mafia films." RICO anyone? "This is a real zinger," says an insider. In the past, bank manager lapses resulted from their stupidity for having bought securities without understanding them. "Now that was bad enough. But manipulating a market rate is criminal." A portion of the industry, adds the insider, apparently doesn't realize that the writing is on the wall.
There have been plenty of banking scandals, but none quite like this: Investigators and political leaders believe that the manipulation of the Libor benchmark interest rate was the result of organized fraud. Institutions that participated could face billions in fines and penalties.
And:
What the Banks Could Now Face
German banks must have pricked up their ears when BaFin President Elke König recently spoke about the Libor scandal. "Basically, banks must establish suitable reserves for possible losses," König concluded.
Investors, like Vienna hedge fund FTC Capital, have made it clear that they do not intend to let up. They feel obligated to their customers to file claims for damages, explains FTC executive Majcen...
There are already 20 lawsuits in the United States, some of which have been combined into class action suits. The plaintiffs range from the City of Baltimore to police and firefighter's pension funds, the City of Dania Beach, Florida, and Russian oligarch Vladimir Gusinsky.
They feel encouraged by the actions of regulators. "Both the American CFTC and the FSA have done excellent investigative work," says Majcen. Bank analysts expect that other institutions could face fines similar to the one imposed on Barclays. In fact, it ought to be in the banks' best interest to quickly settle their cases. "But they're afraid, because since Barclays, they know that it isn't just about money, but also about making heads roll," says a major shareholder of Deutsche Bank.
German attorneys are also lining up to represent potential clients. "A few institutional investors have already contacted us," says Marc Schiefer of the law firm TILP in the southern German city of Tübingen.
Years could go by before damage suits are ruled on...
Possible Libor-related liabilities would cause serious problems at WestLB, or its successor company Portigon. The once-proud state-owned bank is in the process of being liquidated, at a cost of billions to its former owners, the western German state of North Rhine-Westphalia and savings banks. The Libor scandal could further increase the burden on taxpayers.
...
The call for stricter regulation is also getting louder in politics once again... "cheap populism."
"This is a real zinger," says an insider. In the past, bank manager lapses resulted from their stupidity for having bought securities without understanding them. "Now that was bad enough. But manipulating a market rate is criminal." A portion of the industry, adds the insider, apparently doesn't realize that the writing is on the wall.
The parties involved, including Deutsche Bank and its new co-CEO Jain, cannot expect leniency when charges are investigated. "We can't make any allowances for high-profile names," say officials in the capital.
The vast inter-connectedness of these institutions presents a huge problem for regulators and investigators(Think thousands of strings of Christmas lights tangled together), but the main players are known, and those players have got to be freaking out. Who will be branded "The First Example?"
Couple thoughts: The public will never understand this scandal until the media finds a way to explain it clearly and succinctly. But the media first must start actually covering this scandal.
What a glorious time to be an honest, independent Auditor! Welcome to your Golden Age, nerds!
Of course it was.. Again, any of this "we had no idea" crap is just that. How much bigger can the scale of corruption get? Naked Capitalism:
A comment in today’s Financial Times is by a former Morgan Stanley trader, Douglas Keenan, confirms a passing comment in the Economist, that Libor manipulation goes back for more than 15 years. In fact, this piece makes it clear that is the time frame exceeds 20 years. From the Financial Times:
In 1991, I had live trading screens that showed the Libor rates. In September of that year, on the third Wednesday, at 11 o’clock, I watched those screens to see where the futures contract [on three month Libor] should settle. Shortly afterwards, Liffe announced the contract settlement rate. Its rate was different from what had been shown on my screens, by a few hundredths of a per cent.
As a result, I lost money. The amount was insignificant for me, but I believed that I had been defrauded and I complained to Liffe [ London International Financial Futures Exchange, which is where the contract traded]. Liffe explained that the settlement rate was not determined by what rates were actually in the market. Instead, the British Banker’s Association polled banks, asking them what the rates were. The highest and lowest quoted rates were discarded and the rest were averaged, giving the settlement rate. Liffe explained that, in doing this, they were adhering to the terms of the contract.
I talked with some of my more experienced colleagues about this. They told me banks misreported the Libor rates in a way that would generally bring them profits. I had been unaware of that, as I was relatively new to financial trading. My naivety seemed to be humorous to my colleagues.
So consider what this tells us:
1. Libor manipulation was already recognized by market participants in 1991 as a common phenomenon. That implies it had been going on at least a few years before that
2. The manipulation appears to have more than occasionally been more than a single basis point (Keenan says here the effect was “several” basis points, which I take to be three or more)
Oh, an an additional tidbit: Bob Diamond was in Morgan Stanley London as of then, in charge of interest rate trading, which means his claim that he had found out about Libor manipulation at Barclays mere weeks before his Treasury Select testimony was bollocks.
Visualizing the daily, business-as-usual LIBOR corruption of all things financial is like standing on the beach of a small island, turning 360 degrees, and seeing nothing but water. It. Is. Everywhere.
Just because 16 banks did the rigging, doesn't mean Almost Everyone Else didn't know about it, and use it to their advantage. Derivatives are firmly involved now, and so is Geneva, Switzerland. The derivatives Leviathan rises from the depths; The monster's size grows quickly to the horizon, then beyond. We gasp at its size, unable to process.. Zero Hedge connects all the dots. Excerpts:
That Lieborgate is about to spill over and take down many more banks is well known: as previously reported that the world's biggest bank Deutsche Bank, has become a rat for the Liebor prosecution having turned sides. The reason: "Under the leniency programs of the EU, companies may get total immunity from fines or a reduction of fines which the anti-trust authorities would have otherwise imposed on them if they hand over evidence on anti-competitive agreements or those involved in a concerted practice." However, just like in the case of Barclays (with Diamond), JPM (with Bruno Iksil), UBS (with Kweku) and Goldman (with Fabrice Tourre), there always is a scapegoat. Today we find just who that scapegoat is. From Bloomberg: "Regulators are investigating the possible roles of Michael Zrihen at Credit Agricole, Didier Sander at HSBC and Christian Bittar at Deutsche Bank, the person said on condition of anonymity because the investigation is ongoing. The names of the banks and traders were reported earlier today by the Financial Times."
Of course, as so very often happens, the link between the investigated firm, and the person in question no longer exists - after all what better brute way to tie up loose ends, than to fire the person in question at some point in the past: "Michael Golden, a spokesman for Deutsche Bank, confirmed that Bittar left the bank last year and declined to comment on the investigation." Not surprising. Yet this is where the story gets interesting, and provides a whole new twist on the Lieborgate scandal.
Notice that up until now, the only firms that have been implicated in Lieborgate are, by definition, the BBA member banks which provided daily USD Libor fixings. However, nowhere is it said that this information never exited this close knit cabal of 16 manipulating banks. After all, there are $2 trillion in AUM (a number that is likely $5 trillion when accounting for all the rehypothecated assets at the Prime Brokers) out there run by unregulated hedge funds, and all of these entities would certainly find a way to make a pretty buck on even the tiniest 'manipulated', and leveraged Libor arbitrage. And would also pay a pretty penny to get that info. Which brings us back to Bittar. And LinkedIn.
And:
The original LinkedIn list continues (much to the likely chagrin of at least one SocGen trader and one more CA-CIB banker), but we have seen enough, and the pattern is forming: it appears that the bankers who were allegedly involved in Libor manipulation in some capacity in their previous lives working for banks, decided to quietly depart under mutually acceptable conditions and find new lives, still trading Libor and IR derivatives, in some of the best known, and even less regulated, Swiss hedge funds and private banks.
Our question then is the following: while much has been said about Lieborgate as being purely associated with the 16 BBA USD fixing member banks, just who else made money, and is the traditionally quiet and always under the radar Swiss financial community about to be exposed for having profits far more from Lieborgate than any of the BBA member banks?
Because if the stigmatized traders were accepted with open arms at various Swiss hedge funds, one would think there may, just may have been, some quid pro quo in the past (for those who have worked in the financial industry this needs no further explanation).
We eagerly await the answer, and perhaps the Swiss regulators to finally wake up to their own "pristine" financial industry.
So really.. Just about anyone remotely on the inside could pay for manipulated rate information, and now, it's possible that many, many, many people did, and they all profited from it; A lot. All on the backs of those who didn't. Also known as "muppets," also referred to as "customers."
LIBOR goes global in three.. Two..
Eventually, they'll all turn on each other. In the meantime, you might want to try some flavored butter with your popcorn.. Stay tuned; It's gonna be a grrrrrrreat show! Raw Story:
A top Barclays executive who quit over the bank’s rigging scandal told British lawmakers Monday that he was instructed by his former boss Bob Diamond to manipulate key inter-bank lending rates.
Jerry del Missier resigned two weeks ago over the scandal, which has also claimed the jobs of Diamond and Barclays chairman Marcus Agius and rocked the City of London, one of the world’s top financial hubs.
It had emerged that del Missier told Barclays traders to manipulate the bank’s submissions for the Libor and Euribor rates in a bid to make it seem as if other banks were more willing to lend to Barclays than they actually were.
Diamond has said that del Missier did this after “misinterpreting” a phone conversation between Diamond and Bank of England (BoE) deputy governor Paul Tucker in October 2008.
But asked by the British parliament’s Treasury Select Committee on Monday whether the phone call was “an instruction” from Diamond to cut the submissions, del Missier replied: “Yes, it was.”
Diamond, who stepped down as Barclays chief executive hours before del Missier on July 3, previously told the committee he had not instructed del Missier to manipulate the rates.
According to Diamond’s account of the phone call, Tucker had told him that Barclays’ Libor submissions did not always need to be so high.
Diamond said Tucker told him that, against the backdrop of the global financial crisis, British officials were interpreting Barclays’ relatively high Libor submissions as a sign that the bank was struggling.
Diamond told the committee that he had not interpreted the conversation as an instruction from the central bank to rig the rates, but del Missier had.
On Monday, del Missier said: “What was communicated to me by Mr Diamond was that there was political pressure … regarding Barclays’ health and that we should get our Libor rates down.”
Del Missier said he relayed the conversation to the head of the money markets desk and “fully expected that the Bank of England’s views would be incorporated in the Libor submissions.”
He added: “I would have expected that taking that into account would have resulted in lower submissions.”
However, asked by one of the panel if he had been told outright by Diamond to invent submissions, the Canadian replied: “No sir, that’s not what Mr Diamond said.”
Del Missier said that in the context of the events that were shaking the financial world at the time, “it didn’t seem a significant event.”
Asked if he knew that manipulating the Libor rate was illegal, del Missier said: “No, it did not seem an inappropriate action given that this was coming from the Bank of England.”
Barclays was fined £290 million ($452 million, 360 million euros) after admitting attempting to manipulate the Libor and Euribor rates between 2005 and 2009.
Libor (London Interbank Offered Rate) is a flagship London instrument used as an interest benchmark throughout the world, while Euribor is the eurozone equivalent.
The rates play a key role in global markets, affecting what banks, businesses and individuals pay to borrow money.
More to follow: More testimony, more daggers, more bloodletting. How's that popcorn? Delicious?
Was the petrol price rigged too? Found this trolling on Godlike Productions, from The Telegraph/UK. Excerpts:
Motorists may have been paying too much for their petrol because banks and other traders are likely to have tried to manipulate oil prices in the same way they rigged interest rates, an official report has warned.
Concerns are growing about the reliability of oil prices, after a report for the G20 found the market is wide open to “manipulation or distortion”.
Traders from banks, oil companies or hedge funds have an “incentive” to distort the market and are likely to try to report false prices, it said.
Politicians and fuel campaigners last night urged the Government to expand its inquiry into the Libor scandal to see whether oil prices have also been falsely pushed up.
They warned any efforts to rig the oil price would affect how much drivers pay at the pump, which soared to a record high of 137p per litre of unleaded earlier this year.
Robert Halfon, who led a group of 100 MPs calling for lower fuel prices, said the matter “needs to be looked at by the Bank of England urgently”.
I'm sure The Bank of England will jump right into a comprehensive investigation and get to the bottom of this Shocking! Scandal.. Uh huh.. The only thing Shocking! about this report is that people still find the idea of Oil and Gas and Gold and Silver and Interest Rate price manipulation Shocking(!). Seriously, if Speculators can affect commodities prices, don't you think that prices can be fixed on a more "institutional" level? And that price fixing has been happening for.. Forever? Also, to clarify: This is, as of now, a British financial scandal, but due to global inter-connectedness, how long do you think it'll take for these same accusations to surface in the US? A lot longer, probably, given the shitty state of American bought and paid for media, also called "The Liberal Media," by those who obviously have no fucking clue as to what is happening all around them!
Also, in case those in finance trot out the old "It was an accident, and we'll all do better next time," my "very good Internet friend" Bartcop puts it best: If you benefit from "mistakes" you keep making, can you honestly continue to call them "mistakes," as opposed to "strategy?" Not verbatim, of course, but you get the gist..
Peregrine chief arrested for lying to regulators. Raw Story. Excerpts:
The head of collapsed US futures broker Peregrine Financial Group was arrested Friday on criminal charges, days after he apparently attempted suicide and confessed to fraud in a signed statement.
Russell Wasendorf, the sole owner and chief executive of Iowa-based PFG, admitted in the suicide note that he had embezzled millions of dollars from clients over 20 years.
The company’s accounts have a shortfall of about $200 million, according to a US regulator who sued the company Tuesday.
A US federal court in Cedar Rapids, Iowa said Friday that Wasendorf, 64, was charged with making false statements about customer funds.
He was due to appear in court later Friday.
“The complaint alleges that, from 2010 through July of 2012, Wasendorf made false statements to the United States Commodity Futures Trading Commission (CFTC) regarding the value of customer segregated funds held by Wasendorf’s company, Peregrine Financial Group, Inc.,” the court said in a statement.
According to the complaint, filed by the FBI, emergency personnel responding Monday to a 911 emergency call found Wasendorf “unresponsive” in his automobile, along with an apparent suicide note to his wife.
In addition, a signed statement was found inside the vehicle detailing fraud committed by Wasendorf through PFG over the past 20 years.
“I have committed fraud. For this I feel constant and intense guilt,” Wasendorf wrote.
“Through a scheme of using false bank statements I have been able to embezzle millions of dollars from customer accounts.”
The forgeries went undetected for nearly 20 years, he said, because he had sole access to the company’s accounts at US Bank.
Wasendorf said he used a combination of Photo Shop, Excel, scanners and printers to make “very convincing forgeries.”
“With careful concealment and blunt authority I was able to hide my fraud from others at PFG.”
When online banking became prevalent, he said he learned how to falsify online bank statements.
“The regulators accepted them without question.”
The Iowa court said that Wasendorf was interviewed by law enforcement personnel at the University of Iowa Hospital on Monday, and Wasendorf acknowledged he had written the statement and that the information it contained was true.
PFG, also known as PFG Best, filed Tuesday for Chapter 7 bankruptcy, which involves the sale of assets to pay off creditors.
The action came hours after the CFTC sued PFG and Wasendorf, alleging they had falsified information in filings and overstated the company’s bank deposits.
The CFTC said the firm had a shortfall that currently exceeds $200 million.
“The whereabouts of the funds is currently unknown,” the CFTC said.
On Monday the National Futures Association, responsible for monitoring PFG for compliance with reporting requirements, took an emergency enforcement action against PFG and Peregrine Asset Management.
The NFA blocked new or additional customer accounts or funds, alleging PFG had failed to prove it had met capital and segregated funds requirements.
On Friday, other regulators indicated they were looking into the situation.
The US Securities and Exchange Commission is reviewing records to determine where there are securities customer funds missing, SEC spokesman John Nester said.
A spokeswoman for the Financial Industry Regulatory Authority, told AFP that “FINRA reps have been on-site at Peregrine’s Cedar Falls offices to look into the firm.”
Suicide note and FBI affidavit here:
The Real Libor Scandal Paul Craig Roberts. From Activist Post. Excerpts:
The question is, why do investors purchase long term bonds, which pay less than the rate of inflation, from governments whose debt is rising as a share of GDP? One might think that investors would understand that they are losing money and sell the bonds, thus lowering their price and raising the interest rate.
Why isn’t this happening?
PCR’s June 5 column, “Collapse at Hand,” explained that despite the negative interest rate, investors were making capital gains from their Treasury bond holdings, because the prices were rising as interest rates were pushed lower.
What was pushing the interest rates lower?
The answer is even clearer now. First, as PCR noted, Wall Street has been selling huge amounts of interest rate swaps, essentially a way of shorting interest rates and driving them down. Thus, causing bond prices to rise.
Secondly, fixing Libor at lower rates has the same effect. Lower UK interest rates on government bonds drive up their prices.
In other words, we would argue that the bailed-out banks in the US and UK are returning the favor that they received from the bailouts and from the Fed and Bank of England’s low rate policy by rigging government bond prices, thus propping up a government bond market that would otherwise, one would think, be driven down by the abundance of new debt and monetization of this debt, or some part of it.
Libor: They all knew – and no one acted
"Trade-Off": A Study In Global Systemic Collapse Zero Hedge. Excerpts:
The argument that a large-scale and globalised financial-banking-monetary crisis is likely arises from two sources. Firstly, from the outcome and management of credit over-expansion and global imbalances and the growing stresses in the Eurozone and global banking system. Secondly, from the manifest risk that we are at a peak in global oil production, and that affordable, real-time production will begin to decline in the next few years. In the latter case, the credit backing of fractional reserve banks, monetary systems and financial assets are fundamentally incompatible with energy constraints. It is argued that in the coming years there are multiple routes to a largescale breakdown in the global financial system, comprising systemic banking collapses, monetary system failure, credit and financial asset vaporization. This breakdown, however and whenever it comes, is likely to be fast and disorderly and could overwhelm society’s ability to respond.
Why Don’t the Corrupt Players On Wall Street and In D.C. Show Remorse for Their Destructive Actions…And Why Don’t We Stop Them? Washington's Blog, via Zero Hedge. Excerpts:
(From Bloomberg)
The “corporate psychopaths” at the helm of our financial institutions are to blame [for the financial crisis].
Clive R. Boddy, most recently a professor at the Nottingham Business School at Nottingham Trent University, says psychopaths are the 1 percent of “people who, perhaps due to physical factors to do with abnormal brain connectivity and chemistry” lack a “conscience, have few emotions and display an inability to have any feelings, sympathy or empathy for other people.”
As a result, Boddy argues in a recent issue of the Journal of Business Ethics, such people are “extraordinarily cold, much more calculating and ruthless towards others than most people are and therefore a menace to the companies they work for and to society.”
How do people with such obvious personality flaws make it to the top of seemingly successful corporations? Boddy says psychopaths take advantage of the “relative chaotic nature of the modern corporation,” including “rapid change, constant renewal” and high turnover of “key personnel.” Such circumstances allow them to ascend through a combination of “charm” and “charisma,” which makes “their behaviour invisible” and “makes them appear normal and even to be ideal leaders.”
***
They “largely caused the crisis” because their “single- minded pursuit of their own self-enrichment and self- aggrandizement to the exclusion of all other considerations has led to an abandonment of the old-fashioned concept of noblesse oblige, equality, fairness, or of any real notion of corporate social responsibility.”
***
He says the unnamed “they” seem “to be unaffected” by the corporate collapses they cause. These psychopaths “present themselves as glibly unbothered by the chaos around them, unconcerned about those who have lost their jobs, savings and investments, and as lacking any regrets about what they have done. They cheerfully lie about their involvement in events, are very convincing in blaming others for what has happened and have no doubts about their own worth and value. They are happy to walk awayeconomic disaster that they have managed to bring about, with huge payoffs and with new roles advising governments how to prevent such economic disasters.”
They continue to lie. We continue to let them.
He's not wrong. Businessinsider:
News that that a swarm of termites deep inside the British banking system have been fiddling the interbank interest rates (LIBOR) for years in order to systematically vacuum a few billion pence off the exchange floors for themselves is the latest blow to the credibility of the global money system - and probably a fine overture to a looming climactic implosion of the gigantic, creaking, smoldering, reeking, duck-taped edifice of broken promises, booby-trapped hedge obligations, counterparty follies, central bank euchres, sovereign flim-flams, and countless chicanes too various, dark, and deep to smoke out.
Next, we'll probably hear that Lloyd Blankfein over at Goldman Sachs has been tinkering with the rotation of the earth in order to gain a few micro-milliseconds of advantage in his firm's high frequency trading rackets. After all, back in 2008 Lloyd himself claimed to be "doing God's work."
In short, world banking is now hopelessly pranged, and I am not at all sure the project of civilization (modern edition) can continue by other means. The impairments of capital formation are now so profound that no one and nothing can be trusted.
Not only are all bets off, but nobody will want to make any new bets - and by that I mean venture to invest accumulated wealth (capital) in some useful project designed to sustain human well-being. What remains is just the desperate hoarding of whatever remains in assets uncontaminated by the pledges of others to pony up.
All this points to a dangerous new period of political history, a deadly Hobbesian scramble to evade the falling timber in a burning house as the rudiments of a worldwide social contract go up in flames. Such is the importance of legitimacy: the basic condition for governance, especially among supposedly free people.
You can meddle in a lot of distributory issues - who gets what - but when you mess with the most basic operations of money to the extent that no one is sure what it's really worth, or what it represents, then you are deeply undermining society. This is now the condition that is set to blow up republics.
Reality dislikes fraud and accounting tricks. Reality is serious about settling scores. Reality eventually intervenes and puts an end to monkey business. What will it be this time?
Europe and America have been buying a month here, a month there (of a fragile, continuing status quo) on the installment plan. That's what QE, TARPs, LTRO, EFSF, Operation Twist, et cetera, are all about. Think of them as multi-billion dollar (euro) fire extinguishers bought on credit cards. Europe is now completely out of credit to buy more fire fighting equipment.
For months now it has been down to whether Germany intends to keep supporting Spain, Italy, Greece, Portugal, Ireland, the French banks (and a few stray forgotten places between the backwaters of the Danube and the Gulf of Finland) without any say in how they manage their allowance. Much as Germany enjoyed the Ponzi heyday of the Euro zone, a big "tilt" sign now flashes ominously over the continent, signaling game over. All fall down.
Everybody gets real poor real fast. M. Hollandaise over in Paris has already sealed his fate with his stupid plan to return to "go" on the Ponzi game-board. Merkel's tattered scarecrow of a coalition will blow away in the next national election. The Club Med countries will soon boil up in street-fighting, Holland and Finland will drink themselves to death, and across the channel outsider Britain will fizzle away to a burnt bowl of mulligatawny. That's what the end of the summer looks like to me.
Over here, in this sorry-ass edition of America, the election will look more and more like a World Wrestling Federation staged dumb-show between two catamite hostages of a foul corporate oligarchy. Imagine that horse's ass Mitt Romney spending the next four months denouncing Obama-care, modeled on his own health care reform in Massachusetts, while Obama pretends he has a grip on an economy where the rule of law is absent due to Obama's own omissions and negligence.
And if you can't stand that spectacle, just look around at America itself: a wasteland of futile motoring and discount shopping populated by depressed, overfed clowns bedizened with sinister tattoos, pretending to be Star Warriors. No nation ever seen in human history ever laid such a disappointing egg. Only to have it fry on the sidewalk.____________________________________
You ever get that sneaking suspicion 2013's gonna be real different than 2012?
Also: I'm in the mood to type like hillbillies talk, that's why.
Corporate Welfare, anyone? Why yes, thank you! I'll have billions, please! Zero Hedge.
JP Morgan’s credit rating would be much lower without government backing.
As Bloomberg noted last week:
JPMorgan benefited from the assumption that there’s a “very high likelihood” the U.S. government would back the bank’s bondholders and creditors if it defaulted on its debt, according to the statement. Without the implied federal backing, JPMorgan’s long-term deposit rating would have been three levels lower and its senior debt would have dropped two more steps, Moody’s said.
And as the editors of Bloomberg pointed out a couple of weeks ago:
JPMorgan receives a government subsidy worth about $14 billion a year, according to research published by the International Monetary Fundand our own analysis of bank balance sheets. The money helps the bank pay big salaries and bonuses. More important, it distorts markets, fueling crises such as the recent subprime-lending disaster and the sovereign-debt debacle that is now threatening to destroy the euro and sink the global economy.***
With each new banking crisis, the value of the implicit subsidy grows. In a recent paper, two economists — Kenichi Ueda of the IMF and Beatrice Weder Di Mauro of the University of Mainz — estimated that as of 2009 the expectation of government support was shaving about 0.8 percentage point off large banks’ borrowing costs. That’s up from 0.6 percentage point in 2007, before the financial crisis prompted a global round of bank bailouts.
To estimate the dollar value of the subsidy in the U.S., we multiplied it by the debt and deposits of 18 of the country’s largest banks, including JPMorgan, Bank of America Corp. and Citigroup Inc. The result: about $76 billion a year. The number is roughly equivalent to the banks’ total profits over the past 12 months, or more than the federal government spends every year on education.
JPMorgan’s share of the subsidy is $14 billion a year, or about 77 percent of its net income for the past four quarters. In other words, U.S. taxpayers helped foot the bill for the multibillion-dollar trading loss that is the focus of today’s hearing. They’ve also provided more direct support: Dimon noted in a recent conference call that the Home Affordable Refinancing Program, which allows banks to generate income by modifying government-guaranteed mortgages, made a significant contribution to JPMorgan’s earnings in the first three months of 2012.
Way to suck at the government teat, Mr. self-proclaimed free market champion.
Psst.. I think he's talking about you, Jamie Dimon.. Also: Does this make me a shareholder in JP Morgan? Because I have more than a few Post-It Notes of suggestions that might de-shitify current circumstances..
The prediction has been made. Will Dr. Burry continue his roll? Zero Hedge(Video at the link) Whole post:
Infamous for his prediction of the great recession, Europe's demise, and the collapse of the US financial system (as well as profiting extremely handsomely from said predictions), so well captured in Michael Lewis' book "The Big Short", UCLA's Dr. Michael Burry undertakes UCLA's Economics Department's commencement speech with much aplomb. In this "age of infinite distraction", the astounding truthiness of this 15 minute speech is stunning from single-sentence summation of Europe's convulsions that "when the entitled elect themselves, the party accelerates, and the brutal hangover is inevitable" he reminds us that Californians, and indeed all Americans, should take note. A quarter-of-an-hour well spent from a self-described 'chicken-little' who was "just trying to figure it all out".
Another clear-eyed warning to be ignored, yeah? It's not like this collapse is already in motion or anything..
Ahh, the great PASOK flip-flop. Nice.. Sensible Greeks, you have every reason to believe the two parties that brought you to the brink of financial DOOM will find the way back to prosperity! Good for you; Here's a participation ribbon! Rest up, Riot Dog; You'll be busy soon enough! Zero Hedge. Excerpts:
One of the biggest caveats from yesterday's Greek election result was that Pasok announced it would only participate in a broad coalition government that includes Syriza. Obviously Syriza promptly turned down the offer, which has now put the ball back in the court of the Pasok leader - Venizeloz. Being a career politicians, and knowing quite well what the final outcome of the Greek fiasco would be, it was only a matter of time before the former minister of defense, finance, and yes, sport, would flip flop, and hint that a government of just ND and Pasok would also work, as the alternative is just too harsh to even consider. In other words, we may shortly get a repeat of the precisely same leadership that brought Greece to 23% unemployment and a completely destroyed financial and economic system, with Veni back in the role of finance minister once again.
And:
Does this mean a Greek government just may happen, evading a 3rd Greek election in as many months? We will know for sure by tomorrow night, when Pasok said is the deadline by which a new government has to be formed. As for bets on the longevity of the new cabinet, we have no idea what the spread is, but we take the under.
What's the definition of insanity? Happy fun times are just ahead with your "new" old leaders, Greece! Opa! When you take back to the streets, remember to hydrate? It's gonna be a long, hot summer!
Interesting theory as to how the Eurozone may spin down/spin out of control and implode/explode.. The Extinction Protocol. Excerpts:
Here’s how the Eurozone crisis might come to a head over the summer: a “Spanic,” followed by a “Quitaly,” followed by a “Fixit.” A fresh panic in Spain might be followed by rising demands for Italy to quit if it doesn’t get the same terms its fellow Mediterranean country has been offered, followed by a Finnish departure from the euro that might finally bring the whole saga to a climax. It would be a rough ride — and you wouldn’t want to be holding many assets other than dollars or gold or possibly Swiss francs while it was playing itself out. But at least it might bring a resolution to the crisis. Almost a quarter of the euro’s 17 members have now needed outside help, and Cyprus will probably join the list soon. It is hardly a great record for a monetary experiment, which, let us remember, was meant to bring greater stability — not less. So how could this play out over the summer. Here’s how the sequence might work: First, the Spanic (for a panic in Spain). We’ve just seen one rescue package for the troubled Spanish banks. But who says 100 billion euros is enough? This is a country that is sliding into deep recession, and where the government is cutting spending fast — which is only going to deepen the recession.
..
Imagine how that is going to feel to the Italians. The Spanish get borrow money at half what it costs them — and this at a time when very high borrowing cost are pushing your country into the fifth recession since the nation joined the single currency. Worse, Italy has to stump up around 22% of the Spanish rescue — borrowing money at 6% to give to its neighbors at 3%. That isn’t going to go down well. Finally a Fixit (for a Finnish exit). The crisis will finally come to a head when one country decides to get out. Finland is the most likely. Why? Because it is a small nation with a strong economy. It is easy to head for the door. Finland would be better off on the first day, just as Estonia was when it decided to leave the ill-fated ruble zone created after the collapse of the old Soviet Union. It doesn’t particularly have to worry about the impact on the European Union, in the way that Germany would if it opted out. If a country such as that leaves, it is effectively game over, but no one can really say that of a tiny place such as Finland. And it has a strong anti-euro political grouping; the True Finns scored well in the last election and may well improve their position in the polls. Finland is already demanding collateral for its portion of the Spanish loan. That could well turn into a deal-breaker — no collateral, so we’re out of here. Once one country leaves, it is much easier for the next to leave, in much the same way as it is easier to be the second person to leave a really bad party than the first.
(Emphasis from the article)European Banks will be wiped out: Few large eurozone banks would be left standing and the banking sector could face a €370bn (£298bn) loss if the euro crisis results in the single currency bloc breaking apart, according to one of the first in depth analyses of what might happen if the eurozone disintegrates. The analysis by Credit Suisse estimates that up to 58% of the value of Europe’s banks could be wiped out by the departure of the “peripheral” countries – Greece, Ireland, Italy, Portugal and Spain – from the eurozone. Even if the single currency remains intact some €1.3tn of credit could be sucked out of the system as banks retrench to their home markets, unwinding years of financial integration, the Credit Suisse analysis warns his represents as much as 10% of the credit in the financial system. “We find that a Greek exit could be manageable … but in a peripheral exit, few of the large listed eurozone banks would be left standing,” the Credit Suisse report said. The banking sector could need capital injections of as much as €470bn if the three scenarios considered by the Credit Suisse analysts – a Greek exit, an exit of the periphery countries and a situation where banks retrench domestically – happen at once.
And:(My emphasis)
The Credit Suisse analysts insist they are not expecting the euro area to break up – or for Greece to leave – but they believe it is likely there will be a dramatic reduction in cross-border business – leading to less loans for businesses and individuals. The International Monetary Fund has estimated that some €2tn of credit could be lost through a euro zone break up and the Credit Suisse analysts point out they have only analysed the impact on banks they research.
Remember the good old days of say, January, when any mention of Greek, Spanish, or Italian bailouts, defaults, or anyone at all leaving the European Union was so far fetched it wasn't even discussed? Wow, six months later, and here we are.. So what does that say about the real magnitude and urgency of Credit Suisse's analysis? Is this close to an accurate assessment, or a vastly under-estimated threat?
The E.U. implosion continues. Zero Hedge. Excerpts:
Earlier today, by way of a simple graphic, the world's biggest hedge fund, Bridgewater, was kind enough to remind the world just how pointless any debates about Europe's future viability are if the primary funding conduit: the EFSF/ESM hybrid can not provide the cash needed for even half the combined funding needs of Italy and Spain. Now, Bridgewater strikes at Europe once again, this time redirecting the general attention to where it is long overdue: Italy.
And:
..at negative €48 billion in residual LTRO capital, Italy flat out has no additional cash with which to plug ongoing debt funding needs.
Greece, Spain, and Italy in various states of economic and domestic flux. Germany has to be thinking of leaving the Union.. Greece has shown them that austerity through the EU won't come without many fights. As the "Banker" country, problem nations have a lot of outstanding money owed to Germany. They might be economically the strongest country in the EU, but Germany is not invincible, and quite capable of being sucked asunder in the financial quicksand trapping their debtors.
Decision time looming for all countries, including Germany and France. Who stays? Who goes? Can a few be sacrificed for the many? Is it too late?
How long before Italy's distress begins to reverberate here in the U.S.?
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