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Stability Of The European Union (16) October 25 To December 31, 2012 193 comments
This instablog is designed as an interactive News Concentrator devoted to news and discussions about the debt and associated problems in the EU and its member states.
The top portion of the instablog contains useful background information/ charts.
Up-to-date news content is posed in the comments area. So if you are interested in current news, read the comments.
____________________________________________
A picture is often worth a thousand words. Here we have the Percent Economic Growth Rates for three countries: US, Greece, Germany. Note the distinct downturn in the US Economic Growth Rate.
tinyurl.com/25vyea7
Here is National debt as a percentage of GDP in 2009 for the Euro Zone. Look at Greece and Italy.
tinyurl.com/2vvcnxv
Here is Government deficit as a percent of GDP for 2009. Look at Greece and Ireland. Look at UK and Spain.
tinyurl.com/2vvcnxv
Here is the all important Jobs Picture as of March 2010. Look at Greece, Spain, Ireland and France.
tinyurl.com/29grmpy
=================
EFSF
What is the EFSF?:
The European Financial Stability Facility (EFSF) is a special purpose vehicle financed by members of the Eurozone to combat the European sovereign debt crisis. The €110 billion bailout to Greece is not part of the EFSF guarantees, but a separate commitment.
When you look at the Guarantee commitments by the different euro zone countries [tinyurl.com/3xde35o] you will see something interesting. Greece, Ireland, Italy, Portugal, and Spain (i.e., the PIIGS) account for over one-third (36.7%) of EFSF commitments. All by themselves, Italy and Spain have a financial commitment of almost one-third (29.8%) of the total EFSF commitment.
___________
(October 23, 2011) I added this nice summary graphic of the Dominoes effect associated with the European debt crisis. You can also see the graphic and the accompanying article with the following link:
(October 23, 2011) Guest Post: The European Financial Crisis In One Graphic: The Dominoes Of Debt. From: Zero Hedge, by: Tyler Durden.tinyurl.com/3ulxgmj
The original copyrighted graphic is from Charles Hugh Smith (" 2011) attinyurl.com/ygsa6j
Added February 9, 2012
Greek General Government Debt Percent GDP
tinyurl.com/73h5q2x
(March 10, 2012) tinyurl.com/7moa6tg
Unemployment for individuals less than 25 rose to 51.1 %, twice as high as three years ago as budget cuts imposed by the European Union and the International Monetary Fund as a condition for dealing with the country's debt problems have caused a wave of corporate closures and bankruptcies.
Fantasy Greek GDP Growth Rates:
In the fantasy report "Greece: Preliminary debt Sustainability Analysis" dated February 15, 2012 which I referred to as the "Deus ex machine" report one of the EUs key economic assumptions was that Greek GDP growth in 2012 would be -4.8% and -1% in 2013.
The Greek economy saw growth rates of:
-0.2% in 2008,
-3.3% in 2009,
-3.4% in 2010,
-6.9% in 2011
-7.5% in fourth quarter of 2011.
(Data from John Mauldin report tinyurl.com/7axvcmw)
I plotted the Greek GDP data below and projected the GDP values for 2012 and 2013 based on the current data. I also plotted the Greek GDP projections from the Deus ex machine report - blue line.
There is no Greek stimulus, jobs are in freefall. Which projection do you believe?
(March 29, 2012) Greek Deposit Run Update: Hopeless And Getting Worse. tinyurl.com/8425yf7
============
Added April 27, 2012
Q1 unemployment is now one quarter of the working population or 24.44%, up nearly 2% from the 22.85% as of December 31
(click to enlarge)
Global PMI Changes from March to April 2012
(click to enlarge)
From: ZeroHedge tinyurl.com/76d39dj
FUNDING GAP
(click to enlarge)
From: ZeroHedge - tinyurl.com/88qfjmc
Ten Year Bond Yield Curves as of 7/20/2012
From: The Disciplined Investor tinyurl.com/7yg5zku
(click to enlarge)
Here are some interesting charts on Italy sourced from Bloomberg's BRIEF August 7, 2012, available on "The Big Picture" site:tinyurl.com/8lty5uj.
I verified the shadow economy figures in the following sourced article about shadow economies:
Shadow Economies: Size, Causes, and Consequences by FRIEDRICH SCHNEIDER and DOMINIK H. ENSTE, Journal of Economic Literature Vol. XXXVIII (March 2000) pp. 77-114 tinyurl.com/8fpz6nz.
(click to enlarge)
(click to enlarge)
(click to enlarge)
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----------------------------
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This post has 193 comments:
HardToLove
(somehow a Scotty impression seems appropriate for the EuroStability blog... "I'm printing all I got Cap'n Draghi; I can'd do any more or the dilithium Germans will melt down and burn us all to pieces.")
From: The Wall Street Journal, By Gabriele Steinhauser and Matina Stevis.
The EU says additional funds are needed because the recession was deeper than anticipated.
http://tinyurl.com/d84...
An article free pass can be accessed by searching Google with " Greece Needs An Additional €30 billion through 2016" and click the third link.
----
There is no mention of the fact that the Greeks did not meet the austerity targets set for them by the Trokia - that's part of the Spin. I assume they are looking to extend the payout period for current debt instruments. Normally, that would trigger a default declaration, but ... wink, wink...
Meanwhile, the EU needs to release €31.5 billion in bailout aid before Nov. 16, when Athens faces a large bond redemption which it can't pay without those bailout funds. Of course, the Trokia wants control of the bailout funds.
Another €30 billion to kick the can for another two years - another €30 billion bump to the Greeks debt load...
According to the Greek press [http://tinyurl.com/9ar...] The government is facing a Sunday deadline for a full agreement on the package of measures set by the Troika.
That full agreement involves the Troika's demand that Greece resolve its objections to labor reforms by Sunday night, or else... The implication is that absent a compromise, the next Troika tranche of €31.5 billion is not coming...
http://tinyurl.com/9tv...
---
The Greeks have no choice, but implementation is another matter as is the assumption that the Greek government will remain in power.
CDS dominoes the reasoning to keep floating this debt?
I first learned about the (over) rehypothication of collateral last fall - multiples more (leverage) from London based dealers vs the U.S.
A look back shows most of the problems originated in the EU - but either way, it seems a HUGE reason why CB's are pumping liquidity into the system.
A worthwhile read for those unaware of the exposure;
http://bit.ly/s27ECm
From Reuters, by Paul Day.
Spanish retail sales fell at their sharpest pace in at least six years in September as already battered consumer confidence took another hit from a hike in sales tax.
Calendar-adjusted sales fell 10.9 percent year on year, the National Statistics Institute said on Monday. The fall, the largest since 2006, marked the 27th monthly drop in a row, reflecting an economy struggling through its second recession in three years.
Sales are expected to further drop as the government implements deep spending cuts and tax hikes in order to convince nervous markets it can control its finances.
"It's clear there are no signs the crisis is abating," economist at Nomura Silvio Peruzzo said. The results indicate that domestic demand is not going to be anywhere near what the government is anticipating. http://tinyurl.com/8se...
----
Spain increased its VAT on September 1 from 18% to 21%. Some of the more mathematically challenged members of the press report the change in Spain's VAT as a 3% increase. Actually, the government increased the VAT by 16.7%.
The Shadow Economy:
Of course, massive tax increases will act to decimate traditional retail channels and sharply increase activity in alternative, non-taxed retail channels. So the loss in tax revenues to the state will accelerate. Traditional retail establishments will need to cut back, further increasing the highest unemployment rate in the European Union [August - 25.1%].
Meanwhile, the "employment rate" in the non-taxed shadow economy will increase. So the government destroys retail sales with massive tax increases and guaranties increases in unemployment in order to 'convince nervous markets' to allow them to borrow more money in-order to keep their insolvent banking system afloat.
Meanwhile, more and more of the population moves into an underground, non-taxed shadow economy. As more and more of the population moves into the shadow economy, support for the government and the internal consistency of the country itself vanishes.
Debt Event Horizon:
Massive tax increases carry the seed of the destruction of the State itself. What needs to be sharply cut, and cut immediately is the debt load. The longer they delay, the closer they approach the event horizon; the point from which there is no further hope of servicing the immense weight of debt.
They're shocked when they raise taxes and revenue goes down because tax evasion increases.
They're shocked when they lower or remove a tax, then spend the same, and have a revenue shortfall.
Must be great to live in a world where your only consequence is not getting re-elected and then going to work as a consultant for double or quadruple the money (because really, these guys were so sharp, they got booted out of office, so they should be paid consultants, right?).
[hmmm... someone has a case of the rants... sorry]
I am sure this will end well since the govt knows which business' should be saved and which should be let go......sarc.
Its interesting to see a new and larger arena (an entire continent's economic system) perverted by the same counter-logical thinking that gave us Prohibition (and turned over much of our economy to violent criminal oligarchies). This sort of process is as predictable as gravity, and much more painful.
As a strategic investment matter, however, I believe this sort of nasty, hybridized economic result CAN be surprisingly resilient and long-lasting. Spain is creating what could be their permanent economic condition for the next 50 years. Once they turn over large chunks of their economy to organized crime, they will discover it s a LOT easier to give it away than to get it back.
Seemed far fetched to my teenage self. Not so much any more.
I have to wonder just how screwed up our left drifting USgov has to become before more and more small business moves off the books. Large and/or well connected companies are already effectively "tax free" WRT federal taxes. As more people become low or no income earners (officially) and pay no income tax, will the USgov move entirely to printing dollars as a source of revenue to run the creaking "business" of government? Will the massive USgov transfer payments be made with ever inflating fiat money?
Stay tuned. It doesn't look good so far.
The €13.5 billion worth of cutbacks for 2013-14 include a two-year increase in the retirement age from the current average of 65, salary and pension cuts, and another round of tax increases, including ... wait for it...
Raising taxes for the interest on bank deposits from 10 to 15 percent. http://tinyurl.com/d3h...
---
What do they 'think' is going to happen to bank deposits as these total fools raise the tax on bank deposit interest payments 50%!
We should not assume that they necessarily WANT to avoid a run on their banks, given that the EU and EZ are committed to support them. A nasty run and the injection of megabillions in liquidity may be part of their survival plan. It could also be a step on the path to general capital controls throughout the EZ.
Watch out, with that kind of devious thinking you might get hired as the next Sec. of treasury. ;-)
Facing the EZ financial stormtroopers moving in to control things, subtle instructions to the populace to move their assets away from centralized control and tax systems could be the "right" thing to do for patriotic Greeks.
By this time I would estimate that the grey and black market economies in Greece had at least doubled in size, and may well be larger than the "legal" economy.
LOL, the Troika could step in, assume control, and discover they held nothing but an empty sack.
HardToLove
Those teenage mutant ninja turtles are just urban fairy tales...
The real thing is a lot scarier.
Plus, the govmint can't impair your money (with any type of cash controls) if they don't know where it is. Silver or gold coins would be even better.
We libertarians applaud! Will citizens of other countries take note if the Greeks start to prosper? Well, yeah!
I am working on a summary of the key issues and current events, and hope to have it finished by the weekend...
http://bit.ly/Ru8f49
While EU news tends to deal with Greece and Spain, there are other issues impacting the EU, most notably protestations over a proposed 5% increase in the next EU budget. And what I consider as a real bomb, the Members of the European Parliaments plan for the EU to "own resources" - that is, to fund the EU from direct taxation, such as sales tax (VAT) or financial transaction tax, instead of the current system of national contributions.
Here is a brief summary of some needed background materials. This will be followed by some current breaking news stories that describe the controversy. My comments are enclosed in brackets [ ].
---
BACKGROUND MATERIALS ON BUDGET AND FUNDING PROPOSAL:
EU budget for 2014-2020 should rise at least 5%: SURE Committee
The Special Committee on the policy challenges and budgetary resources for a sustainable European Union after 2013 (SURE) was established by Parliament in June 2010 for a term of 12 months. Its task was to submit a report on the next multiannual financial framework (MFF) - the EU's long-term budget, which reflects its priorities ..
The SURE committee called for an increase of at least 5% [they actually want more] in the EU's next long term budget over 2013 levels and new sources of income in a vote on 25 May 2011. They said freezing future budgets, as demanded by some EU countries, is not a viable option, adding that the budget structure must clearly reflect the EU 2020 sustainable growth strategy.
The MPEs want the EU budget to be financed wholly from ITS OWN RESOURCES.
EU Parliament says reforms to the current system, introducing alternative sources of income such as a financial transaction tax or a new EU VAT, would reduce EU member states' contributions based on gross national income (GNI) from 75 % to 40 % by 2020.
[So the states contributions are reduced but taxpayer contributions are increased with an EU VAT. My guess is the states will not reduce their taxes, so what this represents is new taxes with a tax windfall for the individual states as the sweetener. Think of how this will reduce the GDP/ Debt ratio through new taxes and a book keeping change.]
The MPEs are not prepared to give their consent to the next seven year long term budget [MFF] regulation without political agreement on reform of the own resources system.
The UK government is adamantly opposed to the "own resources" proposal, which would scrap the complicated rebates that the UK and some other countries get from the EU.
[Here are two URLs that discuses some of the long-term budget issues in general]
http://tinyurl.com/ceu...
http://tinyurl.com/b2t...
----
LATEST NEWS ON THE UPCOMING FINANCIAL MEETING NOVEMBER 22 - 23
October 31, 2012 - David Cameron suffers Commons defeat on EU budget. From: theguardian, by Nicholas Watt
David Cameron will face a battle to secure parliamentary backing for any EU budget deal that falls short of real EU budget cuts after he suffered his first major Commons defeat on EU spending.
Senior Conservative MPs, who stopped short of joining 53 Eurosceptic rebels served notice that they will turn against the government if Cameron refuses to harden his position. That position is that the EU budget must at least be frozen at the EU summit later this month [Nov 22 - 23]. [In other words, they don't want just a frozen EU budget, they want cuts to the budget.]
The advisory vote is not binding on the government. But No 10 sources made clear the prime minister would lay down a "red line" at the EU summit, which opens on 22 November, to reject a planned 5% increase in the budget to ensure it only rises in line with inflation [inflation indexed increase. So it appears despite his loss in the commons, Cameron is still going for what he calls a freeze.]
Nigel Farage, the leader of the UK Independence party, said: "I am delighted that the house voted with the country rather than with the government whips. It is outrageous that the prime minister was prepared to go to Brussels in November and argue for what he would call a freeze and the rest of us would call an increase in the amount of money removed from British taxpayers to be spent by the distant EU bureaucrats."
[Why is Nigel referring to a freeze as an increase? Because EU budget decisions require the agreement of all 27 member states. If there is no deal on the long-term budget, the EU's 2013 budget will roll over into 2014 with an automatic 2% rise based on inflation. So a rollover involves an automatic inflation indexed increase.
The way I see it, any government representative that approves actions that will automatically occur in the event of a non-decision is shirking their elected responsibilities and should be recalled. All they are doing is saying if we can't agree to make an unpopular decision, the unpopular events will occur automatically, and we can't be held responsible for those consequences. Fiscal cliff logic]
----
Here is another article that identifies two primary sacred cows....
---
(November 1, 2012) France, Britain set stage for EU budget wrangling
From: Reuters, By Charlie Dunmore and Peter Griffiths
British Prime Minister David Cameron came under pressure to act tough on the European Union budget and France threatened to also use its veto, signaling a divisive start to bargaining over the 1 trillion euro ($1.3 trillion) long-term EU spending plan.
Farm Subsidies:
France has threatened to use its veto prompted by a proposal to trim farm subsidies, jealously guarded by Paris as the top recipient of such payments, as part of a compromise from the Cypriot EU presidency to cut the 2014-2020 budget by more than 50 billion euros.
"We oppose the proposed reduction," French European Affairs Minister said in a statement. "France would not support a multi-annual budget that does not maintain the funds of the common agricultural policy."
Despite support from Ireland and Austria, France's position puts it on a collision course with Germany, Britain and other net contributors looking to slash overall spending by 100-200 billion euros. [Two to four times larger than the 50 billion cut].
Regional Development Spending:
Agriculture and regional development spending together account for about three-quarters of the total budget. So leaders looking to limit their EU contributions will be forced into a choice between the two. Poland, like most poorer Eastern member states, receives far less in EU farm support than in regional development funds. Those regional development funds have been credited with helping it avoid a recession. Making the case for maintaining development spending, Polish Europe Minister Piotr Serafin said the benefits would be felt across the EU, an argument that may sway Berlin and others in the final reckoning.
http://tinyurl.com/agl...
===
This meeting is only two days long. I doubt they will be able to resolve the "own resources" proposal in that time period. My guess is we will see a can kicking strategy with no agreement on a seven-year budget amount because of economic uncertainty. So they will end up with an automatic inflation increased budget for the next year only. David Cameron will come home and get savaged in the Commons.
If there had been no PIIGS, it occurs to me that it would have been necessary for this group to create them...
Just as with our own early history and the subsequent (and eternal) growth of a Federal government once it broke down the defenses originally erected against it, disaster is required to plow the hard fields in which the Federalist seeds will sprout.
we picked up this board game some years ago at a garage sale, it seemed an amusing period piece and I like interesting board games
however, we have never played it...
and it will come as no surprise that when we read all the rules it was still unclear how to play ;-)
Just like the USfedgov now transfers massive amounts of money which would otherwise go to "best use" at a more local level.
(November 1, 2012) Venizelos Tries to Quash PASOK Mutiny. From: Greek Reporter, By Andy Dabilis
PASOK Socialist leader Evangelos Venizelos is struggling to keep his party from breaking apart after 17 of his 33 Members of Parliament defied him and voted against a privatization plan demanded by international lenders. http://tinyurl.com/aa9...
---
(November 1, 2012) Greek court challenges pension reform plan. From: Reuters,
Greek pension reform demanded by foreign lenders may be unconstitutional, a Greek court ruled on Thursday, in a setback to the government's efforts to seal a deal on an austerity package needed to secure aid.
The Court of Auditors, which vets Greek laws before they are submitted to parliament, said measures such as increasing the retirement age by two years to 67 and cutting pensions by between 5 and 10 percent could be against the constitution.
Greek lawmakers, who are expected to vote on the cuts next week, may disregard the court's opinion. But ordinary Greeks could still cite the ruling to fight pension reform in court, making it difficult to implement even if legislated. http://tinyurl.com/d6z...
---
Resurgence of the Andartiko? - Greek Resistance partisans who fought fascist occupation.
---
This instablog is designed as an interactive News Concentrator devoted to news and discussions about the debt and associated problems in the EU and its member states.
The top portion of the instablog contains useful background information/ charts.
Up-to-date news content is posed in the comments area. So if you are interested in current news, read the comments.
---
I did this because some new readers were apparently reading the Insta like an article where the primary content appears in the body of the article. This insta is actually a News Concentrator where current information is posted in the comments section.
http://bit.ly/UcR9KO
Swedens answer. http://bit.ly/REqlPq
http://fxn.ws/XenCkG
I would like to see a governor and a state legislature of a particular state to hire a bunch of lobbyists to lobby a neighboring state legislature to enact every welfare, tax, subsidy, regulatory scheme imaginable. Then have a tax credit for everyone and every business in that neighboring state that would move to their state. They could make all the same "you want baby chicks to die because you don't support all these welfare, tax, subsidy, regulatory schemes" arguments, and to be consistent with conventional wisdom, the lobbying state would have to be praised for how much it cares about the other state.
http://bit.ly/YMA1uq
France has been on a quest to foul up its tax base by making all the rich people leave since *before* Hollande was in office.
People focus on the French tax situation, but that's not all of the big problem.
Last year they passed these idiotic laws that made trustee relationships impossible in France. Effectively, if person A was found guilty of evading taxes, both person A and person A's trustee would have to pay the full penalty owed. This also impacted foreigners living in France.
Combine all that with attempts to crackdown on French people having Swiss bank accounts, and you have the seeds for an exodus of the people that pay the most taxes.
France http://reut.rs/Xgt7PK
Spain http://reut.rs/VQyvE7
Greece http://reut.rs/Xgt4nd
A deal on keeping Greece afloat and providing more bailout money for the near-bankrupt state is unlikely to be reached next week when euro zone finance ministers meet in Brussels, a senior EU official said on Monday.
(November 7, 2012) The Samaras Measures.
From: Greek Reporter, by Andy Dabilis
The government did not go along with a demand by the Troika for a six-day work week. There was also no mention of going after tax evaders who owe the country $70 billion [I would think knowing how much is owned means they know who owes it.]
* Abolition of already drastically-reduced summer, Easter and Christmas bonuses.
* Eliminating all extra bonuses to pensions and civil servants.
* New pension cuts of up to 25 percent.
[1 November, 2012 - Judges Ruled Upcoming Pension Cuts as “Violating Greek Constitution” http://tinyurl.com/ayt....
7 November, 2012 - Greece’s Supreme Court: Wages Cuts for Judges & Prosecutors Against Constitution - Under the new austerity package, judges’s and prosecutors’ wages will be cut by 19%-24%. However, according to the Greek Constitution, the wages for judicial personnel are bound to the wages of Members of the Parliament. The austerity bill does not demand equivalent cuts for the 300 MPs as for the judges. http://tinyurl.com/a3g....
PS: All of the pension cuts account for almost half of the austerity measures.]
* Cutting so-called “special salaries” of police, judiciary, military officers, state hospitals’ medical staff, university educators and diplomats by up to 30 percent.
* Laying off 2,000 workers at 75 percent pay for a year before firing them if new positions can’t be found.
* Abolishing state-allocated social benefits – to be replaced by benefits depending on income criteria [?]
* Freezing from 2013-16, payment of all target-related incentives to public sector workers [I assume they are talking about productivity related incentives here]
* Setting a 1,900 euros ($2,444) ceiling for wages of all employees in agencies and organizations in the general government [I assume this is a monthly wage cap]
* Slashing remuneration to employees in municipal or regional authorities, as well as further cuts in wages of ministry employees [This is pay cuts - Don't know what "slashing" means, but I suspect it's the same criteria used for the judges 19%-24%.]
* Cutting private sector pensions 25 percent [A one-fourth cut in private sector pensions... I assume this means the government has been making contributions to employee pension plans.]
* Raising the retirement age from 65 to 67 [A kind of pension cut]
* Abolishing supplemental pensions that many elderly depend on, which could lower pensions for some to 300 euros, or $385 a month – before taxes.
* Limiting benefits for the spouses of deceased pensioners.
* Abolishing pensions for Parliament deputies or municipal authorities elected under the new law. [I assume this means elected after the spending bill is approved]
* Setting income criteria for allocation of family benefits [not sure what this means]
* Liberalizing certain professions and service markets, including auditors, mini-van tourist services by hotels, tobacco product vendors, baby milk sales, accountants, private education, dental technicians, newspaper/magazine vendors, truck leasing services etc. [Don't know how this cuts government costs]
* Requiring higher co-payments for hospitalization, drugs and prescriptions, including a 25 euros fee ($32.17) starting in 2014 to be seen at a hospital, which could bar scores of thousands of the poor and unemployed from health care.
* Requiring 85 percent of drugs to be available in generic prescriptions. If patients prefer a brand-name, they will have to pay the difference in the cost. [So brand name use is considered a patient preference]
*A number of measures designed to roughly halve the monthly budget for pharmaceuticals and have pharmaceutical companies and pharmacies carry a greater proportion of the costs. [Guess what will happen]
* Raising taxes on the cheaper brands of cigarettes by 20 cents per pack, while the price of rolling tobacco will go up by about 85 cents. There will be no tax increase in the price of higher-priced brands.
* The special consumption tax on liquefied petroleum gas (LPG) used as fuel for vehicles is set to grow from 20 to 33 euro cents per liter.
* The Value-Added Tax (VAT) rate for agricultural products is seen declining from 11 percent to 6 percent, while diesel used by farmers will see a tax rise from 21-66 cents per liter. [Food production costs will increase which means prices will increase]
* Entrance tickets to casinos will drop in price from 15 euros ($19.30) to 6 euros ($7.72), with 4.80 euros ($6.18) of that going straight into the public coffers, while the state’s participation in the gross profits of casino games will rise by two percentage points. [Sounds like its aimed at tourists]
* The ceiling for cash transactions will be raised from 1,500 to 3,000 euros ($1,930-$3,860) with transactions above that level only to be conducted via checks or bank accounts. [Interesting... ]
* An extraordinary tax of between 25 and 35 percent on solar energy production plants, depending on the time the project was hooked up to the national electricity grid.. [25 and 35 percent!! No idea what they are doing here, and I doubt they know what they are doing]
* A tax of 140 million-200 million euros ($180-$257 million) from 2013 to 2016 on the shipping industry that was originally slated to be voluntary. [Originally slated to be voluntary... The tax will be passed off to the goods that are shipped]
I wonder how thats gonna work out.
• Final Vote 153 for, 128 against, 18 abstain
• PASOK expels 6 members; ND expels 1 for voting against party line.
---
Those that abstained should resign.
The margin for passage was small so the current ruling coalition is unstable. This reminds me of something I learned when I was a skier. The worst crashes occur when you attempt to recover from an unrecoverable situation. Basically, it's better to learn how to execute a controlled fall than going into a tree.
In the face of difficult problems, truth is the first casualty. The Greek debt level is unsustainable, Spain is next; what's left is political theater.
Higher and higher levels of non-productive debt eventually results in diminished economic growth.
Greece’s August jobless rate was the EU’s second highest, behind Spain, which was barely ahead, at 25.5 percent.
http://tinyurl.com/aty...
HardToLove
For 2013, the European Commission and European Parliament are seeking a 6.8-percent increase [nine billion euros] to 138 billion euros to bolster growth and jobs in the slowing economy. But net contributor countries, led by Britain, are seeking a sharp reduction to match the spending cuts and austerity policies of most European capitals. France, Finland and Germany want the 2013 budget to be cut by 5.0 billion euros, while London has suggested even more, stressing the need for austerity.
If there is no agreement on the 2013 budget, the EU would base its spending for next year on the 2012 budget, rolled over on a monthly basis.
The collapse of the 2013 budget talks, where leaders have a last-chance opportunity to resume on Tuesday, signals problems for the November 22-23 summit called to settle the bloc's even more hotly disputed 2014-2020 spending plans.
Because of the Commons revolt last week, Cameron may be forced to employ his veto at the EU summit on 22 November. The Germans fear the impact of a failed budget summit on the December summit where bigger issues such as the banking union will be discussed.
I thought only inflation and economic hardships were spreading. I didn't realize that intransigence was also in the mix. :-))
HardToLove
http://bit.ly/SQ5uaZ
Plans to give Greece extra time to meet deficit-cutting targets will open up a financing gap of around 15 billion euros through 2014 and 17.6 billion euros in the two following years.
The 115-page draft didn’t include proposals for plugging the financing hole and two critical sections -- on Greece’s debt sustainability and recommendations for next steps in the three- year effort to turn the country around -- were left blank.
The report assumed that Greece will succeed in getting two additional years, until 2016, to meet fiscal targets. Estimates of the financing gap were in brackets, indicating that they could change before European governments complete work on the Greek rescue package.
Options floated for filling the gap include cutting the interest rates and extending the maturities on Greece’s aid loans, paying out loans on a faster schedule and engineering a buyback of Greek debt. http://tinyurl.com/b25...
---
Greece falls deeper and deeper into the hole while the reports information on Greece's debt sustainability is left ... BLANK.
An eloquent assessment of the Greeks future if they continue with the farcical 'bailout'.
Probably both apply now.
HardToLove
So he went his friend Oscar Germany in the Euro apartments
Together, they're the odd couple
As mentioned in my post this morning, the debt sustainability part of the report was not ready for the finance ministers' consideration. And before the meeting, Germany's finance minister, Wolfgang Schaeuble, said Greece could not receive the next installment of its bailout loan until the question of its sustainability was resolved.
All along I have held the position that Greece would continue to receive support far longer than seemed likely at each of the constant series of flashpoints. This continues with this latest installment...
Its amazing that these highly educated European leaders persist in their naive faith that the remnants of the pre-existing free markets lurking somewhere beneath their fabian socialist system will lift up its invisible hands and save them like it always has in the past.
This "save the EU" show has gotten silly. If it were a reality show, no one would watch because it is such an obvious fantasy!
Luckily we in the USA are superior by dent of having our own currency. We don't need anyone's permission to print massive amounts of dollars to plug the deficit hole. Until, that is, lenders get spooky and start demanding higher and higher interest rates. Naw, can't happen HERE.
The Benny App.
If you look up at the 11th chart from the bottom of the concentrator (Greek GDP Growth 2012 and 2013 Projected), you will see that my projection of 2012 percent GDP growth was –8.5%.
In the fantasy report: "Greece: Preliminary debt Sustainability Analysis" dated February 15, 2012, one of the EUs key economic assumptions was that Greek GDP growth in 2012 would be -4.8%.
Greek GDP growth dropped .9% from the second to the third quarter of 2012. If it continues dropping at that rate, the fourth quarter number will be –8.1%.
I think the drop rate will increase with the latest suicidal cuts, so I stand by my original projection of –8.5%. The notion that the GDP percent growth would execute a ‘U’ turn was pure fantasy.
What no chart shows is how much of the economy is slipping into the darkness, going underground and off the books.
As far as using the numbers to estimate tax proceeds and the "official" economy, there can be little doubt.
France did manage growth of 0.2% in the third quarter, narrowly avoiding a technical recession after last month’s figure was revised lower to -0.1%. The French figures have now been revised lower in five of the past six quarters so it wouldn’t be too much of a surprise the same happens again. On top of that the French central bank claimed the country is likely to contract in the fourth quarter so even if the country avoids recession this year, it could easily fall into recession at the start of 2013.
Germany also beat expectations however the trend continued to head in the wrong direction. A growth figure of 0.2% is enough for the country to stave off stagnation or contraction in the short term but with the overall trend showing slower growth and the rest of the Eurozone implementing further austerity, it is only a matter of time before they get contraction in Germany. http://tinyurl.com/b2m...
mj
HardToLove
It's the interactive discussions among the participants that allows breaking news and background materials to be seen in many different interpretative contexts. That's the real power of these active news concentrators.
I salute all of the hosts and active participants of all of the News Concentrators who give their time unselfishly in pursuit of the truth and figuring out ways we might benefit from that knowledge.
On the EU News Concentrator:
The EU concentrator grew out of a question by OG back in Quick Chat 90. The first EU concentrator was published on August 17, 2010... so it's about 26 months old. Here is the link to the first one: http://tinyurl.com/cwc.... It's interesting to go back to the beginning to see what has changed in the past two years.
DG
thx
suicides up and foreclosure forebearance procedures to be put in place to allow families 24 months to stay in place.
http://bloom.bg/TKvPWA
At the same time, benefits are systematically reduced in the home state, thus it becomes budget neutral for a time, but long term, the multi-generational commitment goes away, and the home state would find it self with a surplus, which it then could use to lower taxes, and make the home state the most attractive place for capital in the US. Eventually, the only welfare program it would have would be its "Jobs Journey" (granted the journey doesn't end in a job, but the name and the good intentions is what really matters, not the outcome), which would eventually wind up being a miniscule portion of the state budget.
http://bloom.bg/T6PVvL
A new form of musical chairs?
A free market want's people. A coerced market want's to get rid of them.
But I love the Job Journey model. It fits the original concept of the States being laboratories of government, and the freedom of the individual to vote with his feet if he is unhappy with his current state address. So long as the Job Journey process lacks physical coersion (ie, forcing someone to move via the use of the state's police powers), its very interesting.
Greece Refuses To Comply With Latest Troika Demands. The demand is about the 20,000 STATE EMPLOYEE firings.
I look for multiple sources on something like this. So far, I can’t confirm the report…
On top of that, why say you are going to renege before you get the money? Get the money first. Never say you are going to renege, let the EU discover that on their own. That lets you kick the renege can... The EU knows the score here... The EU and Greece are both playing the same kick the can game. Spain will join in soon. This is all theater, just like the FCliff.
LOL, the rating agency dinosaurs are reduced to trusting the ability of a sovereign currency to be debased so long as it is an individual nation instead of a committee unable to agree on much of anything.
("fun" 150 second embedded video)
http://yhoo.it/Y6N4ZJ;_ylt=AkbkzRlQ4qdAjUMO...
The agreement is based on the goal of cutting Greece's government debt to 124% of gross domestic product by 2020 and to less than 110% of GDP by 2022.
The only problem is to achieve this goal Greece has to grow its GDP by EUR 20 billion in the next two years, and EUR 50 billion by 2020.
This move will NOT lift Merkel's center-right coalition over the hump next September, however. I still see them losing control of the German government.
http://bit.ly/Y2XZoH
Again, nature doesn't care about rhetoric or goals. It only cares about how you act.
http://bit.ly/V5CzPL
When they do I suspect the move out of the EZ will get more serious discussion.
The Greek banks have realized that the "voluntarily" buyback of Greek bonds marked down to 35 cents will affect their balance sheets where the same banks hold the same bonds marked to par.
In other words, the buyback will reduce the banks capitalization requiring them to borrow yet more money. If they borrow using those Greek bonds as collateral, they will need to borrow more because the valuation of the Greek bonds will be cut by the deeply discounted buyback. This will also hit the bank shareholders as well...
The banks want the European Financial Stability Facility (EFSF), to allow for the bonds to be valued at par when they borrow money. If that happens, the EFSF would effectively be allowing credit for the bonds at about three times their actual worth as measured by their buyback price (.35).
Of course, the whole situation is absurd because Greek bonds don't have any inherent value - they are valueless. Buying things in the absence of real-world valuation defines speculative trading.
Fantasy:
Greece set a minimum price range of 30.2 to 38.1 percent and a maximum price range of 32.2 to 40.1 percent depending on the bond maturities on the 20 series of outstanding bonds.
Athens said it would not spend more than 10 billion euros on the buyback. Investors must declare their interest by December 7 and the expected settlement date is December 17. http://tinyurl.com/c6h...
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Reality:
In order for Greece to reach the fantasy goal of a debt to GDP ratio of 120% by 2020, the EU has argued that Greece’s GDP will rise by about 50 billion while its debt will fall by 40 billion. This is precisely what they announced on 27th November: a boost in GDP by 50 billion and a concomitant reduction in public debt by 40 billion. There is no mention of how Greece's GDP is going to increase by an average of 7.1b per year so the entire exercise is utter nonsense to start with. But here is how they plan to decrease the debt by 40b.
The EU is going to cut 1% off its interest rate saving 2b. The EU is returning to the Greek government the profits made by the ECB on Greek government bonds that the ECB purchased, at a discount, between 2010 and 2011. That cuts another 7b from the total leaving 31b. http://tinyurl.com/d2n...
So the debt buyback has to come up with 31b. They have 10b for the buyback So they have to realize a 10b/31b = 32.2 percent price reduction. Notice that the 32.2 percent number is the lower figure of their maximum price range. This does not include costs.
When they start buying the bonds, the price will go up. As a result, the EU decided to fix the debt buyback price at the 35% level that was the going rate on the preceding Friday.
But they only have enough money to buy 31b of bonds if the price is 32% NOT 35%. So the auction prices need to come in below the average fixed percent buyback price to achieve the purchase goal of 31b. The only reason anyone would take an offer below the going rate is if they are forced to. So who is going to get forced? Samaras says the Greek Debt Buy-Back will Not Apply to Greece’s Pension Funds, so that leaves the Greek Banks. The Greek banks hold 15.2 billion, and it appears they are going to have to "volunteer" to sell below the average market price. This will of course increase the capitalization needs of those banks that will need to borrow more money, but presumably that bowering will not occur until after the German elections. Once those elections are over, than it will be revealed that the taxpayers of the EU are going to loose money on these bailouts. Than what?
If the people are smart, this should be an election issue now. Are the people being informed?
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Of course she paid the Greek taxes on it... I can't wait to hear how she made 700M...
The Bundesbank cut its 2013 projection to 0.4 percent from the 1.6 percent predicted in June and said the economy, Europe’s largest, will grow 0.7 percent this year, down from its previous forecast of 1 percent. Separately, the German Economy Ministry said industrial output fell 2.6 percent in October as investment goods production and construction activity slumped. http://tinyurl.com/d7s...
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Greece plans to tax businesses and middle incomes more in an effort to raise revenues from a tax reform bill it has long-promised its international lenders.
The finance ministry plans to raise the corporate tax rate on profits to 26 percent from 20 percent, said the official, who declined to be named.
The ministry’s proposals include reducing tax brackets to three from eight and imposing a 40 percent top rate on incomes above 40,000 euros. Currently, the 40 percent tax rate applies to those earning over 60,000 annually and those earning over 100,000 euros are taxed at 45 percent.
“The new tax system is simpler, fairer and geared toward growth,” the official, who declined to be named, said.
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Hmmm lets see now... those earning over 100k euros are currently taxed at 45%, but under the new "fairer" tax rate, they will be taxed at 40% - a nice 11% tax reduction. Meanwhile, those that earned under 60k now end up paying the top tax rate - Fairer for who?
The new tax system is geared towards growth?
Raising the corporate tax rate by 30% is going to induce growth? The companies will have to raise prices, profits will decline, and they will REDUCE staffing.
Or even worse, the companies will leave which is what Coca-Cola's Hellenic Bottling Company, Greece’s biggest quoted company did in October. That company which accounted for roughly one-fifth of the Greek stock market with a capitalisation of about €5.7b decided to leave. Of course, if they leave, all the jobs go with them.
He who refuses to be named is another of the idiots that are running Greece into the ground. I suppose the personal rate does not matter much since many don't pay their taxes anyway. But raising taxes on businesses by 30% will increase job loses, and that will decrease taxable income irrespective of the tax increase. My guess is when they plug these numbers into their spread sheets they assume that the employment rate will remain constant. In other words they are assuming that increasing tax rates on businesses by one-third will have no effect on the number of jobs they support.
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This represents a pull-back from Finance Minister Yiannis Stournaras's comment that said it was a “patriotic duty” for the banks to participate. As I stated before, I think it would be financial suicide for the banks to participate because it would increase their need for recapitalization.
In summary, he said, if the Euro collapses, it will be catastrophic not only for Europe, but for the global economy. Therefore, it will not be allowed to happen, and the Euro will succeed. [Logic, eh?]
He also indicated the reason for not letting Greece fail and/or leave the Eurozone was because people's fear of the "butterfly effect" (or domino effect) that once Greece leaves, then all eyes turn to which country is next. [A side thought I had was that as long as Greece remains the focus, it distracts people from how bad things are in Spain and Italy, etc.]
He believes there will ultimately be fiscal unity, although it will be a slow, often painful process. He more or less said that the pain would be part of the coercive process nudging people toward fiscal union. [This was in an answer he gave to my question. Coercive was the word he used.]
[I did not particularly care for what he said, but believe he represents the "majority thinking" of Europe's most elite (in wealth and politics). The notion of slow drips of pain to slowly nudge people toward unity they don't particularly want rings true to me as something these types of people would believe they can pull off.]
[My question was basically saying that he was assuming the general population would be more motivated by the economic fear of things getting worse than a fear of losing their country's sovereignty, and what really is there in the history of Europe to justify that thesis?]
Loss of Sovereignty:
To me, loss of sovereignty is an insurmountable issue. It's one of the reasons why I don't think a fiscal union will occur for many of the countries currently in the EU. For example, I seriously doubt England will accept a fiscal union or that the citizens of England will allow themselves to be directly taxed by the EU. It's not in their character as a people. History tells us they will fight to the death for their sovereignty. I think the notion that the majority of people in all these sovereign nations are going to allow the EU to directly tax them, or that the EU will directly control a countries sovereign budget are delusional.
Loss of Self Determination:
The second reason I don't believe a fiscal union will occur concerns the loss of self determination. Nigel Farage is correct, EU leaders like Van Rompuy and his legion of EU bureaucrat’s lack any semblance of democratic legitimacy, and as a consequence are completely out of touch with political realities. For example, the recent summit meeting of European leaders collapsed in late November amid substantial discord over a new budget where EU bureaucrat’s wanted a 6% increase in spending while its member states were struggling with recession and austerity cuts.
EU bureaucrats don't relate to political reality because they don't represent the people in the countries they want to control. Van Rompuy opposes direct election of the EU’s top leaders. So who elects the EU's top leaders if it's not the people of the EU's member states? Who is actually in control? That well-known brand name at the high-end of wealth management? If a fiscal union occurs the people not only loose their countries individual sovereignty, they also loose the ability to vote for the leaders of such a fiscal union. Hundreds, nay thousands of years of fighting for the right of self determination are lost -- for what?
Debt and the Illusion of Power:
The EU and its Central Bank are currently using debt as a lever to power. That works so long as there is no substantial default. Again, the EU bureaucrats and their IMF cronies are not in touch with reality. We all know that Greece's GDP is NOT going to increase anytime soon. Particularly after Greece just increased taxes on business profits by one-third. As a consequence, there is no relief in sight for the Greek people. The Greek people are in a desperate state. There are no jobs. There pension money is mostly gone. The people they elect say one thing to get elected than go and do the opposite thing when they get in power. There is NO HOPE.
This situation can't be tolerated much longer. The status quo is going to change either by vote or by coup. Greece can't pay back those loans. They are too far underwater, they must default. Once that happens, taxpayers in EU countries will have to absorb the costs of those bad Greek loans. The EU and the IMF will lie and try to hide those costs, but eventually, truth will prevail, and that truth will drive a stake through the heart of the concept of an EU fiscal union.
Reality Prevails
I think the well-known brand name at the high-end of wealth management that's been around a few hundred years, and who likely represents the powers behind the push for an EU fiscal union, is expressing wishful thinking. I see several reason why a fiscal union would not be acceptable to the citizens of EU member states. And I think once Greece defaults, the game is up. The only way out is for the EU to forgive debt, but if they do that, who else will be standing in line with demands for debt forgiveness? The deck is stacked, the hands are dealt. All the EU can do is kick the can since once they stop kicking the can, it's game over and reality prevails.
I would agree, the UK will NOT give up the Pound (and of course they are already permanently exempted under the EU regulations). But the key fiscal union has always involved the core nations in the EZ, ie, Germany, France, Italy, Spain, etc. If on looks back over my posts on this topic over the last few years, I have always believed that this could occur only after sufficient agony and terror had been visited upon the EZ to break down the natural sovereignty barriers. I believe we are one election away from this occurring in Germany (September 2013) and perhaps even closer in France. The PIIGS are obviously already committed to fiscal union (which I characterize as one of the final steps to the goal of a USofE), and many of the northern tier will fall in line after Germany capitulates.
Concerns over self-determination are real, and will be addressed with new EU rules (long waiting in the wings, and visible to even a casual observer in the various footnotes over the years). The nature of the central EU govenment in Brussels will change dramatically, falling more under the sway of Berlin and Paris. The ECB will follow suit (already has, really).
There is a real chance that a few nations will opt out of the USofE, including the UK and perhaps even the Netherlands or some of the Scandinavian countries, but I suspect that just as when the UK was first exempted from the rules, a new double standard allowing for membership in the EU without fulfilling all the requirements will be a probable outcome. The UK MIGHT be so disenchanted by the new dominance of a franco-german alliance in Brussels that they pull out, but I doubt it.
Greece is (as ever) at most a historic footnote to the greater struggle. Whether they ultimately remain in the EU is immaterial to the greater agenda.
I see a very strong chance that the initial fiscal union (aka, USofE) will overlay the EZ, including Germany, France, Italy, Spain, and the majority of the other current members (probably even Greece, though once again such a formation would present a golden opportunity to dump the Greeks in the Aegean). I do not foresee a requiment for 100% participation for the plan to move forward...
It is probable that this union will occur from the depths of the coming continental recession, which seems to be a potential final straw for the camel's back.
I think the UK is, more or less, not part of Europe, and certainly only a party to the idea of greater Europe, to stop it, and/or slow it down.
Denmark will opt out of greater Europe too. Not sure who else, though obviously Norway has always stayed away.
I think TB is in line with the view from the top. Election turnover is leaving those with stable positions in charge of moving things along.
I think what the bank executive who gave the speech underestimates is the willingness of the masses in many countries to protest and push back against fiscal union, and it's future implication of political union.
The banking guy seems to think the masses will realize fiscal union is in their economic interest. Apparently, he doesn't mingle among the lesser classes much. If he did, he'd realize you have to have wealth to worry about protecting it; and pretty much, most people don't have enough wealth to worry about it in the fashion he's thinking.
What become clearer to me, is that for Germany, France, Italy, Spain, Austria, Ireland, Finland, Sweden, Slovakia, Estonia, The Netherlands, Belgium (in 1 or 2 country form), Luxembourg, Malta, Portugal and Slovenia, the countries that use the Euro (ex-Greece), the situation that will unfold over the next few years comes down to a simple question:
elite vs. people - who wins?
It is just about enough to make me want to invest in riot gear companies, tear gas, poster board companies (what's a good protest without a sign?), and cobblestones (nothing says "riot" quite like hurling a cobblestone; a friend of mine has one she uses as a doorstop from the 1968 riots in Paris... quite something to imagine being on the receiving end of that)
Europe's been down this road before, but I think there is quite a bit on the line this time. However, I expect this will continue to be more protracted than we can imagine... until the day everything just suddenly happens (like the day Lehman failed).
Revolutionary change at a macro level such as we are discussing here often occurs from the bottom up (via force, back to the classic viewpoint by Lenin and Mao that "...power comes from the barrel of a gun..."), but can also come from the top down. The later case is what the euroelites have been laboring tirelessly for decades to accomplish, and only with the spate of wildly destructive economic disasters backstopped by pervasive socialist support programs have they truly set the stage. One trait which all such socialist systems share is that the rights and power of the individual are what is exchanged for social supports.
With every passing day the balance tips further, the process accelerated by failing economies and policies which do nothing but apply copious quantities of delay novocaine.
The primary lure in the US of E end game will be the same topic which spawned this discussion, ie, how to save the Euro. When the Euro can be debased (as of course we are doing so aggressively with the $) to pay for even greater and more luxurious social support systems, the riots will be muted and poorly attended.
35 years ago I wrote a science fiction short story predicting that eventually the huge bulk of mankind would exist on the dole, while nation states competed economically via their robots. This is an intermediate step...
Jon, re: "It is just about enough to make me want to invest in riot gear companies ..."
-- take a look at TASR -- it's been doing quite well and growth trend continues. http://bloom.bg/VHkfTt
Reuters has disclosed the Greek debt buyback retired €32 billion, but missed its goal by €450 million. As a result of a higher price paid for the buyback, the Greek debt/GDP will be reduced by 9.5% which is less than the 11% targeted.
The Greek banks did sell their Greek bond exposure taking a haircut, but the pension funds were not required to sell their bonds. That decision might look pretty smart if Greece defaults and the value of the bonds goes to zero. Of course, the pension funds will be wiped out.
The projected Greek debt/GDP ratio is rubbish anyway since its based on the Troika's fantasy Greek GDP projection rising in a straight diagonal line up and to the right over time starting in 2013. Of course, it did not work that way in 2012, and it's not going to work that way now particularly given that they have raised taxes on business profits by one-third. That will drive prices up and force tax paying businesses to cut jobs and or go out of business. So the GDP should drop like a stone in 2013 and continue to drop over time. The current Greek government has to fall and Greece will default. The only question to me is will it happen before the German elections?
I don't think a Greek default is priced into the markets either. When Greece defaults, I expect a substantial negative reaction.
I think the Belgian Bureaucrats are just stalling until the German voters become numb and the EU can bail out the rest of the Greek debt with new, advanced "infinity bonds". 30yr, zero coupon, 1%. You get the idea.
They all pretend the money's there because the bonds are still good! They havn't been defaulted yet, have they? Of course they CAN'T be in default for 30 years. :-(
Unfortunately that won't help the Greek people much since there is still no "real" Euros to pay wages or redeem pension promises. Or maybe there is. How long can we play "lets pretend"?
So the "Greek tragedy" continues.
I think the key is the Greek people. The EU may be able to stall things until after the German elections, but I don't think the Greek people can continue like this. The money from the loans is not going to the people, its going to support paybacks associated with the loans. So there is no hope of any kind of stimulus from the new loans.
Meanwhile, unemployment continues to rise. In addition, the EU needed to fake the projections in order to keep the IMF on the line. I seriously doubt that is going to work again. They did not even hit the goal that the IMF said it needed because the buyback was short. It will be interesting to see what the IMF is going to do about that since this violates the deal they made.
Origionally, the Greek government said the banks would not participate in the buy-back... but they ended up participating... I think that is a 'tell' that the banks are preparing for a default, and they dumped the bonds before they go to zero. The pension funds did not dump their bonds, so when Greece defaults, they get nada.
Assuming that I am right and the US of E players are largely in charge, I would expect Greece to be strung along right up until the moment when it will BENEFIT the US of E agenda for them to be tossed aside.
I am not necessarily associating the long term carrying costs of Greece with the German elections, however, since BOTH ends of the German political spectrum (the Bavarians, junior partners of Merkel's group, are the noteworthy exception) are US of E supporters. Regardless which of the two groups win in September, the upshot will be a government comprised of fans of an enormous socialist/federalist Europe dominated by Germany and France.
What is more likely is that Greece will be evicted at a time when the act will convince a lot of EZ citizens to vote to ratify the US of E.
"What is more likely is that Greece will be evicted at a time when the act will convince a lot of EZ citizens to vote to ratify the US of E. "
The upshot is that the Greeks as members of the EZ are toast, but they won't get popped out of the toaster and declared "done" until the powers in the EZ decide its time.
Greeks are in charge of Greece.
European elite is playing games and using Greek distraction to slowly coerce the rest of Europe toward (1) fiscal unity and (2) political unity.
In the end, Greece's share of global and European GDP renders it moot, but for now, it's reliably dysfunctional behavior is working for the ultimate purpose.
If I were the rest of the Euro folks, I wouldn't won't to kick Greece out until I knew I have bled them for all I could in an attempt to get back any portion of what I had lent them.
They are tied together in an unholy alliance based on hope that a miracle will happen that will probably keep them together a lot longer than anybody expects.
But the game rules are not public and never will be.
That's probably a better description. Sort of a default a bit at a time, and hopes nobody notices, and in the mean time keep hoping for that miracle. Either way, it does seem like this will drag on slowly year after year rather than some decisive event.
Seems like they are trying to make it such old news (same-ol'-thing) that everybody will let it go on the back burner, ignored. Then when Greece is finally dealt with and the news comes to the fore, most people won't be surprised except that they thought it already happened last year or so (Psychology 101).
http://bit.ly/W8BAkL
Paying for others excesses is not going to pass the peoples smell test. The politicians know it so they dance around the fire hoping not to get burned but knowing they will eventually.....but they still hope. Why? Because they are politicians tryin to get everyone to live as they feel we should....LOL
DG - that statement assumes the elite give a rat's pa-tootie about "the people", I don't think they do. As long as the elite think fiscal unity is better for their own personal wealth, they continue on the path.
(sorry FPA, not intending to disparage all rats, just a turn of phrase... I'm sure you have a very kind pa-tootie)
Seems things ARE working in the elites favor at present.
That's exactly what concerns me. I don't think the elite have a healthy enough fear of the mob. (Gee... when has that happened before in Europe?) It occurs to me we're not only in Europe's longest stretch of time without major warfare (if we pretend former Yugoslavia isn't part of Europe), but we are in one of Europe's longest stretches of time without mobs taking to the streets in multiple countries in fairly aggressive force (1989 in Central & Eastern Europe being last; 1968 before that...).
The problem the mobs will face in Europe this time around though is "who". The EU is such an amorphous blob, there is no one particular to be angry about, and no clear path to getting rid of it (topple your own government and new elite people come in who play ball with the EU too). If I were a mob, this might make me angrier.
(LOL - "if I were a mob...")
In 1989 "the people" toppled the Soviet state and Soviet bloc Europe. The EU doesn't have nearly the same firepower or hold on people.
In my wife's family (all still living in Czech Republic except her), there are a few people in her parents' generation who needed years of therapy after communism fell because they believed everything the old regime told them, and their whole world turned upside down the day communism ended. No one believes in the EU like that.
I am part of the mob and I have been standing 1.7 million strong in Washington. The OWS group has done it too across America.
When these mobs can get over thier political differences and see that they share 90% of the same concerns the mob will be much bigger in DC. However until they stop listening to the politicians stirring the pot over those 10% issues of difference the politicians will continue to win.
I believe the OWS message got co-opted by the Democians, unions, lefty loons and the press, but the point is the young folks are frustrated too. When we start working together, we have to keep the Republcrats from co-opting the tea party.....my God, we could close every city in America, take Washington down in a week and the press and politicians would have no choice but to STFU and listen. All the while we could be sharpening the blade on the guillotine and practicing on watermellons with the faces of politicians painted on them. I think we know an artist, TB, we might be able to conscript. LOL.
The Michigan vote gives me hope as folks watch the unions kicking and screaming like spoiled children after their parents have said no more candy. Folks watching TV are realizing how ugly unions have become. Those union members are some folks that need some therapy because they have come to believe everything the unions have told them. The unions should be required to pay for that deprograming.
I believe the Marines, all of our services for that matter, are a much more demanding and dangerous job yet there is no union to protect us. Today we have OSHA so we do not need unions, unless you intend to smoke pot and drink beer on lunch break. Hostess, now this, when will they grow up. Time to start deprograming.
I think some internet site will ultimately find a way to bridge the 10% of issues that divide people, and then things are going to get interesting.
So... in the high profile arena, France has lost the CEO of LVMH and it's best actor to Belgium because of high taxes. How many folks it has lost with lesser profiles?... don't know...
But I'm guessing they're netting a loss in tax revenues from raising their taxes. High profile examples of the ease with which people can move out of the country to other countries in the Eurozone will not help.
For decades wealthy people living in high tax environments (and yes, the US qualifies) have been able to arrange for payment of their services to occur "elsewhere". This means that when a headline actor, for instance, works on a movie filmed in Mexico, he arranges to have his salary deposited in his account in some tax haven instead of back home in hollywood. Even if he still lives in California, he might be paying few if any income taxes there because his pay checks never enter the country. This sort of dodge has been common for decades, and can be expected to become rampant as tax rates peak.
Its amazing, really, that politicians might be surprised that their primary targets, the wealthy, are also those with the resources to avoid their attacks. We will see similar stories here as the years go by...
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Alcohol Tax Hike Cuts Greek Alcohol Sales:
Just as increased taxes on restaurants and bars have forced sales and revenues downward, and increased joblessness, a big hike in taxes on alcoholic drinks in Greece has additionally backfired, sending tax revenues plummeting downward and cutting [legal] consumption in half.
The tax hike involved a 10 percent increase in the Valued Added Tax (VAT) up to 23 percent, and a second tax called the special consumption tax on alcoholic beverages which was raised 125 percent from 2009 levels. The high taxes, with VAT and SCTAB accounting for 57 percent of the retail price of popular alcoholic drink, have resulted in a decline in alcoholic beverage consumption from 284.06 million gallons in the first six months of 2009 to 147.84 million gallons in the first half of this year. [A 47.5% drop in consumption].
Actually, that's lawful consumption. The Greeks have responded in a perfectly predictable fashion by buying their liquor cheaper from unlawful, tax-free sources.
That's perfectly predictable by anyone with a brain, which clearly excludes the Greek government and their overseers the Trokia. Besides the loss in tax revenues for the state, the drop in consumption has resulted in the loss of some 10,000 jobs in the sector in 2010 alone.
http://tinyurl.com/c5x...
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Of course, in a perfectly predictable fashion, those tax-paying jobs were probably replaced to some extent by black market non-tax paying jobs for bootleggers. What they are going to end up with is a re-play of the prohibition era in the US when alcohol was made illegal. Substitute huge tax’s for banning, and you should get a similar situation.
It is good all the way around. The only possible load is that a few more folks may use pot then do now, with a possible reduction in their productivity. But it won't be a large (percentage) number.
Anti-drug idiocy in the US mostly causes large transfers of tax money to "law enforcement" agencies that add nothing to safety. Now there is a new source of funds!
My bitch is the government spending my tax money to hunt down, arrest and IMPRISON people (expensive! ) who are just carrying on commerce with a willing customer. I don't buy the "indirect damage to society" model. Alcohol and tobacco BOTH cause damage, possibly more then pot ever will, and we have incorporated them into the economy and society as a choice left to the adult consumer.
Banning pots is hypocritical and counterproductive. Note that the amount of illegal drugs used in the US is higher then ever today, after 80 years of "prohibition". Enough already! The "cure" is much worse then the disease.
One thing to add as to Greece (or the US, for that matter) is the fact that Governments involved in chasing the Prohibition unicorn also create corruption inside their own ranks, with the funding coming from the very untaxed products which are being Prohibited.
The Greek government might WANT to use force to collect the abusive taxes, but I suspect the hugely empowered criminal underclass will just funnel a percentage of their windfall profits to pay for corrupting the entire system from top to bottom. Cops, city officials, judges, and finally Army and Federal officials will enter their payrolls.
If one plans to destroy the efficient and lawful operation of one's government, Prohibition would rank as the #1 step to take...
#1...with a bullet.
People will call the police when another individual is attempting to harm them, but they aren't going to call the police when the individual is committing the action against themselves. So the only way to catch people is to have a surveillance state, which is what we see with infrared scanners, GPS tracking devices, phone taps, drones, etc.
Its really no different than a gov "banning" a religion, and then attempting to have everyone support the state religion. It usually becomes so expensive that it results in violence as a market correction.
It is a good thing that potheads are not known for violence against anyone. I say we return the favor and leave them alone. We certainly need the (now wasted) resources for other, far more important problems.
http://ti.me/YGjrKM
No one mentioned that we must feed and care for familys through welfare and medicaid and food stamps etc... when you jail the or one of the bread winners in the family. The cost is MUCH higher than simply the cost of incarceration.
The libertarian side of me says there should be no laws of this nature and the financial side of me sees the law enforcement cost, the criminal element cost, prison cost, welfare cost as just a portion of the total costs and I see its too high of a cost. Just that simple. Leave people alone.
Ron Paul made a very good point on this issue. He said we have drugs in our jails......with guards, fences, bars, searches, etc.....so who thinks we can keep it off our streets.
Frankly its time to stop being stupid. We should follow Portugals lead. It feels bad because we have been told it is bad for so long. Shake the propaganda loose from our minds and realize its not working. I do not use drugs but I should not say you can not.
Will there be some idiot out there with a machete or chain saw or God forbid a gun do something stupid while hopped up on some drug. Yep, statistically it will happen, it has happened already but its happening a whole lot now with Prozac and so many other legal psychotic drugs. The world will never be perfectly safe. You should be prepared to protect yourself, get a gun and a license to carry it even if drugs are not legalized. Some drugs are already legalized and they create killers. See below.
In case anyone missed the psychotic drugs creating mass shootings link:
http://bit.ly/RWCnrn
http://seekingalpha.co...
Good time to sit in the mud jaccuzi, imo...
And the rest of Asia is glued to the "Chinese miracle" even harder than Europe is to US Treasury support.
South America (check recent history in Brazil) is firmly commited to a major currency war with Euro and dollar. They are "all in" and should China (as I suspect) stand firm and then ultimately ratchet down the value of the yuan...
We could see a 40% correction on the wilder South American bourses.
Japan is still fooling themselves that they can work the yen back to 90/100 to the $. Truth is they cannot, so long as China doesn't want it that way, but when China DOES decide to cut Japan loose, the BOJ will see the 90/100 flicker by on the way to about 150/$. Since this will occur DESPITE determined money printing and currency destruction here and in Europe...
China joining the tussling in the currency trenches could make things get very ugly, very quickly.
The "commodity" countries like Canada and Australia will have their own problems, as their super-strong currencies send their industrial base into a tailspin. Even their commodity producers (mines, farmers) will find themselves in a major squeeze as their costs exceed the world prices.
Whiplash in commodity prices will be common and severe...
Etc. The knock-on effects could get wild.
http://nyti.ms/ZPJkOo
I think that scenario applies to the Spain of half a century ago.
http://tinyurl.com/b6s...
Happy New Year!
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