Eurogeddon

Death of a currency as eurogeddon approaches

The defining moment was the fiasco over Wednesday's bund auction, reinforced on Thursday by the spectacle of German sovereign bond yields rising above those of the UK.

If you are tempted to think this another vote of confidence by international investors in the UK, don't. It's actually got virtually nothing to do with us. Nor in truth does it have much to do with the idea that Germany will eventually get saddled with liability for periphery nation debts, thereby undermining its own creditworthiness.

No, what this is about is the markets starting to bet on what was previously a minority view - a complete collapse, or break-up, of the euro. Up until the past few days, it has remained just about possible to go along with the idea that ultimately Germany would bow to pressure and do whatever might be required to save the single currency.

Andrew Bailey: 'UK banks must brace themselves for euro break-up'

Andrew Bailey, deputy head of the Prudential Business Unit at the Financial Services Authority (FSA), noted that British banks are not heavily exposed to the eurozone, but said they must prepare for some countries to exit the single currency – or a complete break up.

"We cannot be, and are not, complacent on this front," Mr Bailey said. "As you would expect, as supervisors we are very keen to see the banks plan for any disorderly consequence of the euro area crisis. 

Hmmmm, aren't Barclays, Royal Bank of Scotland, Bank of Ireland and Allied Irish 'British'?

Europe Short on Cash as Bond Fears Deepen

The euro zone is stuck in a double crisis. On the one hand, investors are no longer interested in purchasing sovereign bonds. On the other, banks with such bonds on their books are being treated with extreme caution. A massive financial crisis threatens -- and it could be worse than the last.

Prepare for riots in euro collapse, Foreign Office warns

As the Italian government struggled to borrow and Spain considered seeking an international bail-out, British ministers privately warned that the break-up of the euro, once almost unthinkable, is now increasingly plausible.

Diplomats are preparing to help Britons abroad through a banking collapse and even riots arising from the debt crisis. 

The Treasury confirmed earlier this month that contingency planning for a collapse is now under way.

A senior minister has now revealed the extent of the Government’s concern, saying that Britain is now planning on the basis that a euro collapse is now just a matter of time.

“It’s in our interests that they keep playing for time because that gives us more time to prepare,” the minister told the Daily Telegraph. 

20 Banks That Will Get Crushed If The PIIGS Go Bust

We took a list of the largest European banks by assets and compared their market cap, common equity, and total exposure to PIIGS debt (thank you for the bank statistics, EBA!). Then we calculated exposure to PIIGS debt (sovereign and private) as a percentage of the banks' common equity. (Notice that HSBC, ING, and even Societe Generale are all absent from this list.)

So far our track record is pretty good--we predicted that Dexia was the most vulnerable bank outside of the PIIGS back in July. If the eurozone crisis continues to escalate, we will see more and more banks bow to the pressure of exposure and become unable to borrow money.

The List: Banks That Will Fail (A must read)

Foreign News: Eurobonds and contagion to Poland and Slovenia

The other major story is contagion. The English-language press has had considerable coverage of downgrades in Portugal, France and Hungary. What they have not got a lot on is the contagion into eastern Europe. Poland’s currency is tanking as a result. Moreover, the halt of Austrian loans into central Europe is creating a credit crunch there which will negatively affect the economy irrespective of the macro fundamentals (which are poor due to real economy effects out of Euroland). Slovenia, a former model country in the east, is the other major target of contagion.

I think we will have one more can kick to satisfy the markets temporarily. An IMF loan or some such bullshit that will put off Eurogeddon until early 2012. We can't let The Grinch steal Christmas via the Credit Default Swap sell App on his iPhone.

Edit Update. See what I mean (from Bloomberg as to why markets are up today)....

The IMF is preparing a 600 billion euro ($794 billion) loan for Italy in case the country’s debt crisis worsens, La Stampa reported, without saying where it got the information. As of Nov. 17, the Washington-based IMF had about $390 billion available for lending, which Managing Director Christine Lagarde has said may not suffice to meet loan demand if the global outlook worsens.

PS Meanwhile on the Debtstar...
Is the U.S. About to Invade Syria … and Pick a Fight with China and Russia?

Anatomy Of A Stock Market Crash

1929 - 1932 Dow Jones

• September 1929 - November 1929, a 49% fall from 381 to 198.
• November 1929 - April 1930, a 49%  rally from 198 to 294 (bear market rally)
• April 1930 - July 1932, an 86% fall from 294 to 41.
• September 1929 - July 1932, a total fall from peak of 89% fall from 381 to 41.
• The September 1929 peak was regained 25 years later in 1954.

2007 - 2011 Dow Jones

• October 2007 - March 2009, a 53% fall from 14066 to 6626.
  
• March 2009 - April 2011, a 93%  rally from 6626 to 12810 (bear market rally based on US Fed 'printing' money)
  
• April 2011 - ?????, an ??% fall from 12810 to ???.
• The October 2007 peak regained ?? years later in ????.

2007 - 2011 Australian All Ordinaries Index

• October 2007 - March 2009, a 54% fall from 6716 to 3111.
  
• March 2009 - April 2011, a 62%  rally from 3111 to 5036 (bear market rally, we didn't 'print' money)
• April 2011 - ?????, an ??% fall from 5036 to ??? (presently down 19% since April 2011
• The October 2007 peak regained ?? years later in ????.

Will the Fed print again when the shit hits the fan? Will it have any effect?

Headlines from the era



"We will not have any more crashes in our time." - John Maynard Keynes, 1927

"There will be no interruption of our permanent prosperity." - Myron E. Forbes, President, Pierce Arrow Motor Car Co., January 12, 1928

"There is no cause to worry. The high tide of prosperity will continue." - Andrew W. Mellon, Secretary of the Treasury, September 1929

"Stock prices have reached what looks like a permanently high plateau." - Irving Fisher, Ph.D. in economics, Oct. 17, 1929

"Secretary Lamont and officials of the Commerce Department today denied rumors that a severe depression in business and industrial activity was impending, which had been based on a mistaken interpretation of a review of industrial and credit conditions issued earlier in the day by the Federal Reserve Board." - New York Times, October 14, 1929

"This crash is not going to have much effect on business." - Arthur Reynolds, Chairman of Continental Illinois Bank of Chicago, October 24, 1929

"...despite its severity, we believe that the slump in stock prices will prove an intermediate movement and not the precursor of a business depression..." - Harvard Economic Society (HES), November 2, 1929

"The Government's business is in sound condition." - Andrew W. Mellon, Secretary of the Treasury, December 5, 1929

"President Hoover predicted today that the worst effect of the crash upon unemployment will have been passed during the next sixty days." - Washington Dispatch, March 8, 1930

"The spring of 1930 marks the end of a period of grave concern... American business is steadily coming back to a normal level of prosperity." - Julius Barnes, head of Hoover's National Business Survey Conference, Mar 16, 1930

"While the crash only took place six months ago, I am convinced we have now passed the worst and with continued unity of effort we shall rapidly recover. There is one certainty of the future of a people of the resources, intelligence and character of the people of the United States - that is, prosperity." - President Hoover, May 1, 1930

"The worst is over without a doubt." - James J. Davis, Secretary of Labor, June 29, 1930

Gentleman, you have come sixty days too late. The depression is over." - Herbert Hoover, responding to a delegation requesting a public works program to help speed the recovery, June 1930

"We have hit bottom and are on the upswing." - James J. Davis, Secretary of Labor, September 12, 1930

"President Hoover has summoned Colonel Arthur Woods to help place 2,500,000 persons back to work this winter." - Washington dispatch, October 21, 1930

"I see no reason why 1931 should not be an extremely good year." - Alfred P. Sloan, Jr., General Motors Co, November 1930

"The depression has ended." - Dr. Julius Klein, Assistant Secretary of Commerce, June 9, 1931

"I believe July 8, 1932 was the end of the great bear market." - Dow Theorist, Robert Rhea, July 21, 1932

"All safe deposit boxes in banks or financial institutions have been sealed... and may only be opened in the presence of an agent of the I.R.S." - President F.D. Roosevelt, 1933

Australian Banking Crisis

GFC II on its way: Norris 

OUTGOING Commonwealth Bank chief executive Ralph Norris has warned that the European debt crisis has entered a dangerous phase, likening the current turmoil to the global financial crisis of three years ago.

Mr Norris said global money markets ''effectively froze'' this week as Germany failed to sell the entire stock of €6 billion ($8.2 billion) worth of long-term bonds.

But Mr Norris, who retires next Wednesday after more than six years in the role, cautioned that credit-crunch conditions were returning, which is threatening to choke off funding for banks around the world.

''This has potential to be significantly worse than the Lehman Brothers collapse and the subprime crisis because now we are talking about nation states,'' Mr Norris told BusinessDay.

''If you have a situation like you had today, where markets had effectively frozen, then it doesn't matter how good your name is, you are not going to be able to access markets,'' Mr Norris said. ''As of today, no banks could access these markets.''

Westpac boss Gail Kelly also expressed fears about the fragile situation and urged Europe's regulators to get on top of the crisis.

''What's happening in Europe is a major concern and not improving. The various authorities in Europe actually have the capacity to deal with these issues - I certainly wish they'd get on with it and do it,'' she said.

One misstep to an Aussie bank calamity

If the Australian bankers make the wrong decisions, then we will have a credit squeeze and dangerous asset price fall. Or putting it another way, Australian bank chief executives are about to really earn their money and if they fail, they will be put on the scrapheap. 

  

Banking Crisis Anatomy

If funds dry up in Europe, they will dry up elsewhere. And Australian banks rely on liquid funding markets overseas to run themselves.

If credit markets freeze overseas, so will bank lending in Australia. That means people won't be able to take out a loan to buy property. Demand for property will dry up. And property values will disappear. By that we mean that an asset without demand doesn't really have a price. It's like a pebble on the beach. Until someone wants to give you money for it, it's not worth anything.

Australians expecting a housing bubble to pop may have to adjust their narrative. The straw that breaks this camel's back may be falling on the other side of the world - in Europe's debt markets.

But it's not just home lending that could disappear. Personal loans usually freeze up first. All this means your business will not be able to get loans, your children won't be able to get a mortgage and your credit card will stop working. 

When the EFTPOS machine spits out 'insufficient funds', you won't know whether it means the bank can't afford to pay you or you don't have any money left in your account.

The Russian Federation Will...Take Out Any Part Of The US Missile Defense System, In Europe.

Nice.

(7 minutes in): "First, I am instructing the Defense Ministry to immediately put the missile attack early warning radar station in Kaliningrad on combat alert. Second, protective cover of Russia's strategic nuclear weapons, will be reinforced as a priority measure under the programme to develop out air and space defenses. Third, the new strategic ballistic missiles commissioned by the Strategic Missile Forces and the Navy will be equipped with advanced missile defense penetration systems and new highly-effective warheads. Fourth, I have instructed the Armed Forces to draw up measures for disabling missile defense system data and guidance systems if need be... Fifth, if the above measures prove insufficient, the Russian Federation will deploy modern offensive weapon systems in the west and south of the country, ensuring our ability to take out any part of the US missile defense system, in Europe. One step in this process will be to deploy Iskander missiles in Kaliningrad Region.

 Full must watch address to the public: for English closed captioning hit the CC button

Chinese Manufacturing Shrinking

The report below confirms some of my recent posts:
The Reasons For China's Imminent Bust
Its On: China vice premier sees chronic global recession
"Every Province Of China Is Greece"
Chinese Bears Getting Bigger (has further links within)


The internal Chinese economy is in trouble.

Credit Suisse: "The ‘Last Days’ of the Euro"

The ‘Last Days’ of the Euro

We seem to have entered the last days of the euro as we currently know it.

That doesn’t make a break-up very likely, but it does mean some extraordinary things will almost certainly need to happen – probably by mid-January – to prevent the progressive closure of all the euro zone sovereign bond markets, potentially accompanied by escalating runs on even the strongest banks.

That may sound overdramatic, but it reflects the inexorable logic of investors realizing that – as things currently stand – they simply cannot be sure what exactly they are holding or buying in the euro zone sovereign bond markets.

Print Euros and send Gold to the moon?

Its On: China vice premier sees chronic global recession

China vice premier sees chronic global recession

"The one thing that we can be certain of, among all the uncertainties, is that the global economic recession caused by the international financial crisis will be chronic," Wang was quoted by the official Xinhua news agency as saying at the weekend.


Wang's comments were the most bearish forecast ever by a top Chinese decision-maker about the world economy, and Beijing's worry about a worsening global environment could translate into an impetus for pro-growth policies at home.

I read this as the Politburo can blame the world for the for the shit hitting the fan internally as the Ponzi disaster that is the Chinese economy is now unravelling.

Debt Sustainability: Which Countries Are Beyond the Point of Return and Why

Must Watch.




Who is Kyle Bass? Someone with a lot of credibility that puts his money where his mouth is and makes money.

Read Making a killing.

Among them was Kyle Bass, the manager of a hedge fund called Hayman Capital in Dallas. He was a Texan in his late 30s who had spent the first years of his career selling bonds for Wall Street firms. In late 2006 he'd taken half of the $10 million he had saved on Wall Street, raised a further $500 million, created his hedge fund and made a massive wager against the sub-prime mortgage bond market. By the time I went to see him, the sub-prime mortgage bond market had collapsed. He was now rich and, in investment circles, a little famous. But his mind had moved on - having taken his profits, he had a new all-consuming interest: governments. In his opinion, the financial crisis wasn't over. It was simply being smothered by the faith and credit of Western governments, which had taken on to their own books the risks associated with dodgy securities worth trillions.

Bass and his colleagues were no longer talking about the collapse of a few bonds but about the collapse of entire countries. They had a shiny new investment thesis. From 2002 there had been something like a false boom in much of the rich, developed world. What appeared to be economic growth was activity fuelled by people borrowing money they probably couldn't afford to repay. At a rough count, worldwide debts, public and private, had more than doubled since 2002, from $84 trillion to $195 trillion. "We've never had this kind of accumulation of debt in world history," Bass said.

I like people with CREDIBILITY, don't you?

When we met in late 2008, Bass had just bought his first credit default swaps on the countries he and his team of analysts viewed as the most likely to be unable to pay off their debts: Greece, Ireland, Italy, Switzerland, Portugal and Spain. A credit default swap enables investors to bet against the price of a bond - to "short" it. It is an insurance policy with a twist: the buyer doesn't need to own the insured asset. No insurance company can legally sell you fire protection on another person's house, but the financial markets can sell you default insurance on another person's investments.

The prices Bass paid for default insurance now look absurdly cheap. Greek government default insurance cost him 11 basis points, for instance. That is, to insure $1m of Greek government bonds against default, Hayman Capital paid a premium of $1100 a year. He guessed that when Greece defaulted, as it inevitably would, it would be forced to pay down its debt by roughly 70 per cent - which is to say that every $1100 bet would return $700,000.

A path Australia has taken:

It was simply being smothered by the faith and credit of Western governments, which had taken on to their own books the risks associated with dodgy securities worth trillions.

The Australian govt has taken on our banks private debt exposure and I reckon that puts them up for $500B+ when the property markets collapses.

Refinancing may push rates higher

THE nation's biggest banks are expected to draw heavily on covered bonds as they face the challenge of raising more than $80 billion in long-term funds from jittery credit markets next year.

Covered bonds, allowed by legislation passed last month, attract lower interest rates by giving investors a claim to savings deposits in the event of a default. ANZ Bank last week made the first Australian covered bond issue, and Westpac is said to be planning a raising. The Commonwealth Bank and NAB are expected to soon follow suit.

The numbers ticking up should scare you... Australian Debt Clock

Youth Unemployment In The EU

Nuremberg Rally 1936

Youth unemployment 15-24yo PIIGSUK

Portugal 27.7%
Ireland 29.8%
Italy 27.8%
Greece 42.9%
Spain 45%
UK 20.4%

More austerity anyone?

Austerity will involve cutting military budgets, pensions and some charismatic officers getting forced early retirement on reduced pensions. Now add reduced social welfare to those youths and you get no hope, no future, no cash. A powderkeg. All it needs is charismatic leadership offering hope and a future (add patriotism and nationalism).

How do you think Franco, Hitler and Mussolini got traction? The stage is set and only fools can't see we are back in the 1920s

Euro Debt/Death Event Horizon Draws Closer

Draghi is not going to play yet...
Bank Chief Rejects Calls to Rescue Euro Zone

And despite ever louder calls for central bank intervention, Mr. Draghi offered no hope he would come to any country’s rescue by pumping money into the financial markets. 

The Pain in Spain
Euro-Zone Contagion Has Madrid Deeply Worried

The Spanish have less debt than the Germans, and they've set strong austerity measures in gear. Nevertheless, they might become the next victims of the euro crisis. Madrid's troubles show that individual nations can hardly defend themselves against speculative attacks.

Horror has a name: the zona de rescate, or rescue zone. That's what the Spanish media calls the region above 7 percent on international bond markets. When Greece, Portugal and Ireland had to start paying 7 percent, they were forced to seek help from the European Union in carrying their national debts.

On Thursday, Spain lurched a hair's breadth away from the zona de rescate. In an auction of 10-year government bonds, the nation had to offer investors interest rates of 6.975 percent. It's the highest rate Spain has paid since 1997, before the launch of the euro, and the shock came only three days before a parliamentary election that will probably topple the government of Socialist President José Luis Rodríguez Zapatero.

More Ouzo please. 
Greek "Unity Government" Effectively Collapsed Already

The very instant the Greek "Unity Government" formed it was divided. Antonis Samaras, the leader of Greece’s New Democracy Party, one of the three coalition parties that formed the government says he will not sign a document demanded by the IMF before it will release the next tranche.

 

Who Rules Europe?

The Germans?

Ireland: "Germany Is Our New Master"

The Irish government has complained to European partners after confidential budget information shared with its EU-IMF lenders was leaked by German lawmakers, sparking a political storm at home.

The media and opposition reacted furiously at the fact that the details of the December budget were presented to German lawmakers before their Irish counterparts, heightening fears that its EU-IMF bailout has undermined Irish sovereignty.

"Germany is our new master," ran a banner front-page headline in the Irish Daily Mirror. Opposition leaders in parliament described the leaks as "incredible" and "unprecedented" and demanded the government explain.

Goldman Sachs?

Our friends from Goldman Sachs…

According to its detractors, the European network of influence woven by American bank Goldman Sachs (GS) functions like a freemasonry. To diverse degrees, the new European Central Bank President, Mario Draghi, the newly designated Prime Minister of Italy, Mario Monti, and the freshly appointed Greek Prime Minister Lucas Papademos are totemic figures in this carefully constructed web.

Heavyweight members figure large in the euro crisis

Draghi was Goldman Sachs International’s vice-chairman for Europe between 2002 and 2005, a position that put him in charge of the the “companies and sovereign” department, which shortly before his arrival, helped Greece to disguise the real nature of its books with a swap on its sovereign debt.

Monti was an international adviser to Goldman Sachs from 2005 until his nomination to lead the Italian government. According to the bank, his mission was to provide advice "on European business and major public policy initiatives worldwide". As such, he was a "door opener" with a brief to defend Goldman’s interest in the corridors of power in Europe
.
The third man, Lucas Papademos, was the governor of the Greek central bank from 1994 to 2002. In this capacity, he played a role that has yet to be elucidated in the operation to mask debt on his country’s books, perpetrated with assistance from Goldman Sachs. And perhaps more importantly, the current chairman of Greece’s Public Debt Management Agency, Petros Christodoulos, also worked as a trader for the bank in London.

Two other heavyweight members of Goldman’s European network have also figured large in the euro crisis: Otmar Issing, a former member of the Bundesbank board of directors and a one-time chief economist of the European Central Bank, and Ireland’s Peter Sutherland, an administrator for Goldman Sachs International, who played a behind the scenes role in the Irish bailout.

A power struggle looms

Squid Vs Merkel

Goldman, in their puppet-masterly way, suggest (in an ever so logical manner) that perhaps Mrs. Merkel should allow for the print-fest and provide their right-hand man Draghi with the ammo he needs to have that discussion.

The Reasons For China's Imminent Bust

Gordon Chang: The Reasons For China's Imminent Bust

The global dominant narrative about China is wrong, claims Gordon Chang. Don't expect it to be the 'pocketbook of last resort' that will rescue world markets from their current malaise.


And don't expect its remarkable economic growth to continue. In fact, expect a "hard landing" for China - and soon.

Forbes.com columnist and international lawyer Gordon Chang has spent much of his time since the early 1980s working and living in China. His primary knowledge of the country and his relationships there give him a superior understanding to how its economy is actually faring than many analysts based in the West. And what he sees today doesn't inspire confidence.

We are seeing the first real signs of slowdown in China's economic growth looking at the year-over-year numbers for the past several months. Car sales have decreased nearly 5% since last year, and property values are beginning to plummet in key markets (30% in October alone in Shanghai).

Gordon sees these as the inevitable harbingers of a coming collapse in China due to excessive stimulus policies the government undertook starting in 2009. The bubbles and malinvestment created by this stimulus have not been addressed, and increasing weakness and transitions inside the political system are making it less likely they will be before market forces intervene.

On The Repercussions of Excessive Stimulus

Inefficiency eventually catches up with every economy. They have a semi-closed system so that they are not necessarily subject to the principles of economics in the same way that we are, but they can only delay the inevitable. They cannot prevent it entirely, and that is really going to be their problem. Because they have done a lot which just does not make economic sense. I mean it might make sense in terms of rapid buildup of an economy, but they have to pay a price. And they have not paid their price yet.

The one thing that people say is "These Chinese leaders are so great at economic management because they got through 2008-2009 and they had enormous double-digit growth while the rest of us were suffering." Well yes, they did that but they did that at great cost.

And so for instance in 2009, the first full year of their stimulus plan, they dumped something like $1.1 trillion into a then $4.3 trillion economy. And so did they create growth? Yes, they did, but they also created a stock market bubble, a property market bubble, and inflation. And they have yet to deal with the property market and the inflation problems. Those are dislocations that they do not have the answers to. I would rather have our economic problems than theirs any day of the week.   

On Growing Political & Social Instability

Starting at the end of next year, the Communist party is going to change the officers of their Politburo Standing Committee, the apex of political power in China. We are going to have a new General Party Secretary. And then in the early part of 2013, the government officers change. And sometime after that, the all-important Central Military Commission has a revamp of membership. And so at this time of political transition, the important economic decisions are not being made. But it is even worse than that, because corruption indeed is engulfing the political system. It is causing so much friction in society. The Communist Party is not able to mediate conflict and its only answer is to increase coercion.

And that is why you have survey after survey of the rich and the super-rich, they talk about leaving China. It is not the poor who are going, which we have seen in many waves throughout the last couple hundred years, now the rich are thinking of getting out. They are getting passports, they are putting their families offshore, and this is of concern because this is a leading indicator.

If you go about 25 miles south of where I live, and go to Princeton, New Jersey, you will see a lot of beautiful homes. I mean, they are all paid for, they have got a wife there, they have kids, and they have one or two Mercedes in the driveway. It is the perfect American family, except one thing is missing, and that is Dad. Dad is a senior official in Beijing and he is stealing as much money as he can. And at maybe not the first sign of trouble, but perhaps the second sign of trouble, he is on the United flight to New York, because he is not going to stay to defend a regime that is shaking. And that is one of the reasons why I think we have to be concerned about the way the Chinese economy is going, because the Chinese rich are starting to see the signs and are beginning to bail out.

We are talking about the people who have benefited the most from this system. And they can see the problems at the top of society. We have now a weak General Party Secretary, Hu Jintao, and he is going to be followed by probably by someone who is just as weak, especially in his beginning years, Xi Jinping. This is a political system that will not be able to make the decisions and to implement them that everyone knows have to be made. And that is why, for instance, we have not seen much in the way of reform over the last five years. In fact, we have seen a reversal of reform. And most of the conditions that have given rise to China's extraordinary growth either no longer exist or are disappearing fast. And so this is an economy in trouble.

On The Popping of China's Real-Estate Bubble

There was just too much money in the economy and so people then poured money into apartments. And China has gone on a tear building ghost cities and all the rest of it. And now the progression that you talked about -- skyrocketing prices and then stable prices, selling volume, and then property price declines -- is what we are seeing in China.

 In October, last month, prices in places like Shanghai declined 30%, as we saw developers start to offer these enormous discounts. And by the way, these discounts were so big that people who bought at earlier stages in these same developments, where these discounts were being offered have now taken to the streets complaining if you are giving 30% discounts to these other guys, then give it to me as well. And so we have not got a little bit of social unrest because of falling property prices.

 In Wenzhou, which is in prosperous Zhejiang Province, which was perhaps the most prosperous province up to about a year ago, developers are, one developer is now offering BMWs to the first 150 buyers of apartments. And this is just a sign that property prices have not only softened, but they are starting to fall quickly.

You know, every market has to go to equilibrium. There are too many apartments in China and not enough buyers and occupiers. And it was going to go to equilibrium in some fashion. What is really surprising observers is that the rapidity at which we see this move to equilibrium. Last year there were, in about I guess it was April or May, the state grid in China reported there were 64.5 million apartments that showed no electricity usage for six consecutive months. That is enough housing for 200 million people, but yet Beijing was decreeing the building of 30 to 50 million more apartment units....

 But at the end of the day, there has got to be a correction. And what goes up fast comes down fast. And what we are seeing is the down phase. The only issue is whether Beijing can stop the down phase by administrative measures. But so far the Chinese leaders, Premier Wen Jiabao, last Sunday said "nope, we are going to stay with these tightening measures." And that has really created great pessimism in the Chinese property market...

 And so really what we have is a government now that is really trying to bring the property market down. And of course it wants to do so gradually, you know, orderly. But as you say, it is a bubble, there is a pin and the problem is that Chinese leaders cannot manage the process of bringing the property market down to equilibrium....

When China's elite analysts start talking about prices being 50% of where they are this year that means that they are probably privately thinking that no, prices will not halve: they might go down even further than that. And that is really a problem because that mentality, once it gets embedded in people's minds in China really means that, Chinese leaders then have very few tools in which to prop up the property market.   

Nigel Farage Is On Fire

Here is a speech by Nigel Farage to the European parliament. It is a must watch. Brilliant stuff.

When 30 Trillion Dollars Disappears, Where Does It Go?

A great read...

Global systemic crisis: 30,000 billion US dollars in ghost assets will disappear by early 2013 / The crisis enters a phase of widespread discounting of Western public debt 

Specifically, LEAP/E2020 anticipates the loss of 30,000 billion ghost assets by early 2013 (2), with an acceleration in 2012 of the partitioning process of the global financial market (3) into three increasingly disconnected currency areas: Dollar, Euro, and Yuan. These two phenomena feed into each other. They will also be the cause of a sharp decline of 30% on the part of US currency in 2012 (4), as we announced last April (GEAB N°54 ), which will occur amidst a sharp reduction in demand for the US dollar and the worsening of the US governmental debt crisis. The end of 2011 will therefore see, as anticipated, the trigger of the European debt crisis detonating a US bomb.

Gold will then go the moon if 30% is wiped off the USD.

Its all connected.
U.S. Banks Face Contagion Risk From Europe Debt


Check This Out...

Australian Debt Clock

Over $2.1Trillion and climbing. Mostly in a housing bubble. The land down under is going to get royally ****ed over.

Stockmarket Tech Update.

Australian Housing Train Wreck

Ugly....

The Shit Is Going To Hit The Fan In 2012

I was a little incredulous when I read this, I've blogged regularly that the Chinese economy is just a property bubble come ponzi scheme and its going to go down Japan's path of the early 20th century but I am amazed as to how bad it is.... Buyers and developers face some harsh home truths

"The decline in home prices is just beginning. And this price adjustment will cut deeper than was the case in 2008 to 2009," said Chen Li, head of China equity strategy at UBS Securities. "The fluctuations in the property market, in fact, may pose the biggest challenge to China's economy next year."

Meanwhile...
European Government Bond Market "Frozen" says Bank of Italy Managing Director

Only open this one  on an empty stomach...
JPMorgan, Goldman Keep Investors in Dark on European Debt Risk ; Net Position Disclosure Hides True Risk

Back on the Debtstar...
$15,OOO,OOO,OOO,OOOBAMA! - It's Official: Total US Debt Passes $15 Trillion

Too sad for commentary, but here is some math: total US debt has increased by 41.5%, or $4.4 trillion, from $10,626,877,048,913 on January 20, to $15,033,607,255,920, under Obama as president.
(as a reminder the most recently updated debt ceiling is $15.194 trillion)

"Every Province Of China Is Greece"

Check this out.

Chinese Banking System Nearly Bankrupt Says Professor of Finance at the Chinese University of Hong Kong; Nothing Shocking About Mistrust, Lies, Suppression of News

Larry Lang, chair professor of Finance at the Chinese University of Hong Kong, said in a lecture that he didn’t think was being recorded that the Chinese regime is in a serious economic crisis—on the brink of bankruptcy. In his memorable formulation: every province in China is Greece.

The restrictions Lang placed on the Oct. 22 speech in Shenyang City, in northern China’s Liaoning Province, included no audio or video recording, and no media. He can be heard saying that people should not to post his speech online, or “everyone will look bad,” in the audio that is now on Youtube.

In this new millennium I often wonder how a 1930s style global depression  is going to play out and who will be at war with who in the end.

Also, the EU failure barometer, Italian 10 Year Bond now over 7%.

Long Live European Democracy - A Tale About Little PIIGS.

 (street of Athens)

I'm away from home on business until Christmas and my posts will be infrequent. Apologies.

But, onwards and upwards, last week, democracy died. Elected representatives of Greece and Italy surrendered to the banking cartels and now those countries are run by cartel reps. No one dares ask the people via referendum or plebiscite.

Bravo. Civil wars in 2013? Earlier? If you think the populations of a country like Italy will take tough it out, austerity so German and French bankers can get the cash, you are dreaming. A country that makes Maserati, Lamborghini and Ferrari and high end aerospace products and aircraft, top end fashion etc are going to take Irish and Greek austerity...dream on.

First, a timeline for Greece [and some PIIGS]

Following is a timeline of Europe’s debt crisis from the signing of the Maastricht Treaty to Greece’s agreement to set up a government of national unity.

1992

Feb. 7: Maastricht Treaty signed, setting up an “irrevocable” monetary union without a central finance ministry or a mechanism to leave the euro.

16 Sept: Europe’s Exchange Rate Mechanism blown into disarray when the U.K. is forced to exit the currency regime, a precursor to monetary union. Billionaire George Soros reportedly makes $1 billion selling the pound. Italy later exits and the Spanish peseta, Portuguese escudo and Irish punt are devalued.

1996 

Dec. 13: In the absence of a euro finance ministry, EU leaders consent to a German-inspired “Stability Pact” designed to impose financial penalties on countries that overstep deficit limits.

1998 

March 14: Greece enters the ERM.
  

1999 

Jan. 1: Euro established with 11 founding members.

2001 

Jan. 1: Greece enters euro region. Greek 10-year bonds yield 5.36 percent, Spanish 10-year bonds 5.09 percent and Italian 10- year bonds 5.16 percent. Germany’s 10-year bund yields 4.85 percent.

2003 

Nov. 24-25: Germany, France override EU budget rules after saying they expect to exceed the EU’s 3 percent deficit limit for a third year. Spain, Netherlands, Finland and Austria object.

2005 

March 20: EU finance ministers bow to German pressure to relax deficit rules.

2008 

Sept. 15: Lehman Brothers files for bankruptcy, triggering worldwide market panic.

Sept. 30: Ireland guarantees all deposits and most debt liabilities of its banks. Irish 10-year bonds yields 4.590 percent.

2009 

Jan 14: S&P cuts Greece to A- from A. The rating company cites the country’s weakening finances as the global economy slowed. Greek 10-year bond yields rise to 5.43 percent the next day.

Jan. 15: Ireland nationalizes Anglo Irish Bank.


Jan. 19: S&P cuts Spain to AA+ from AAA.

May 6: Spanish Finance Minister Elena Salgado sees “green shoots” in Spanish economy. Ten-year bonds yield 3.93 percent.

Oct. 4: George Papandreou leads Socialist Pasok Party to landslide victory in Greek elections, beating New Democracy by the widest victory margin since 1981 on pledges to boost spending and wages.

Oct. 20: New Greek Finance Minister Papaconstantinou says deficit will balloon to 12.5 percent of GDP this year, more than double the previous government’s forecast. Yield on Greek 10- year bond 4.58 percent.

Oct. 26: Former head of Greek National Statistics Service says his body “holds no responsibility” for the revision of deficit figures since 2008.

Nov. 5: Papandreou announces first budget. The plan aims to trim the deficit to 9.4 percent GDP in 2010.

Dec. 16: S&P Cuts Greece to BBB+ from A-, three steps above junk.

2010 

Jan. 14: Greece adopts three-year plan to bring the European Union’s biggest budget deficit within the EU limit in 2012. The same day, ECB President Jean-Claude Trichet said Greece won’t win any special treatment from the central bank.

Jan. 21: Papaconstantinou says Greece won’t need a rescue package. The yield on Greece’s 10-year bond reaches 6.248 percent, a euro-era high.

Jan. 29: EU Commissioner Joaquin Almunia says in Davos there is no ‘Plan B’ for Greece. “Greece will not default. In the euro area, default does not exist.”

Feb. 2: Greek government announces austerity package to get deficit to 3 percent of GDP in 2012.

Feb. 11: EU leaders hold first emergency summit on Greece. EU agrees to take “determined and coordinated action” to protect financial stability of euro area, without giving further details.

Feb. 15: Papaconstantinou says “we are basically trying to change the course of the Titanic. People think we are in a terrible mess. And we are.”

March 4: Germany snubs aid for Greece in “historic moment” for EU as protesters seize Finance Ministry in Athens.

March 8: Portuguese government announces new budget cuts, more asset sales and a freeze on public wages.

March 10: Former Italian Prime Minister Romano Prodi says Greece’s problems are “completely over. I don’t see any other case now in Europe.”

March 16: Euro-region finance ministers lay groundwork for making emergency loans available to aid Greece. S&P affirms Greece BBB+ rating and takes it off Creditwatch negative. Papaconstantinou says the EU needs a “loaded gun” to fend off speculators.

March 18: Papandreou calls on EU partners to come up with specific aid measures within a week to help Greece, hints he might seek support from IMF if EU partners don’t act.

March 24: Fitch cuts Portugal’s credit rating to AA-.

March 25: Trichet says that the ECB will continue to accept bonds rated as low as BBB- as collateral, reversing his January refusal to give Greece special treatment. Later that day in Brussels, Trichet abandons his opposition to IMF involvement in a Franco-German plan to give Greece bilateral loans at market rates.

March 26: Head of Greek debt agency says rescue deal “wipes out the risk of default.”

March 30: Ireland says country’s banks need to raise an additional 31.8 billion euros of capital.

April 8: Greece’s 10-year bond yield reaches 7.4 percent, pushing the spread on German bunds to a euro-era high of 442 basis points.

April 12: Euro-area finance ministers agree to provide up to 30 billion euros of loans to Greece over the next year with the IMF agreeing to put up another 15 billion euros in funds.

April 21: Greece, facing 8.5 billion euros in bond redemptions the following month, begins talks with the EU, the ECB and the IMF on conditions tied to 45 billion-euro in aid.

April 22: The EU revises Greece’s 2009 budget deficit to 13.6 percent of GDP, higher than the government’s previous forecast of 12.9 percent. Ireland overtakes Greece as the EU nation with the largest deficit with its shortfall revised to 14.3 percent. Moody’s cuts Greece one level to A3.

April 23: Papandreou asks EU for a 45 billion-euro bailout from the EU and IMF, calling it a “a new Odyssey for Greece.” “But we know the road to Ithaca and have charted the waters,” he added, referring to the return of mythological hero Ulysses to his island home.

April 27: Ireland can “easily” weather the impact of the Greek crisis on financial markets, the country’s debt agency head said.

April 27: S&P become first rating company to cut Greece to junk, downgrades Portugal to A-.

April 28: S&P cuts Spain’s credit rating for second time since January 2009, pushing the euro to a one-year low of $1.3115.

May 2: Euro-region agrees on a 110 billion-euro rescue package for Greece. Greece agrees to 30 billion euros in austerity cuts over the next three years in exchange for the aid.

May 3: The ECB says it will indefinitely accept Greek collateral regardless of the country’s credit rating.

May 5: Protests in Athens against the government’s austerity plans turn violent and three people are killed when they become trapped in a bank set ablaze by demonstrators.

May 6: Greek Parliament approves deficit cuts. Greek 10-year yields reach 12 percent the next day.

May 7-8: European leaders agreed to set up an emergency fund to stem the sovereign crisis and said the workings of the financial backstop will be hammered out before the markets open May 10.

May 9-10: EU finance chiefs, in a 14-hour overnight session in Brussels, agree to set up a 750 billion-euros rescue mechanism for countries facing financial distress and the ECB said it will buy government and private debt in the biggest attempt yet to end the sovereign-debt crisis. The meeting gives birth to the European Financial Stability Facility, the region’s temporary bailout mechanism, with initial capital of 440 billion euros.

May 10: Merkel’s party suffers its worst postwar defeat in Germany’s most populous state after a regional vote overshadowed by aid for Greece. The result cost Merkel control of the upper house of parliament. Bundesbank President Axel Weber publicly criticizes ECB bond purchases.

May 12-13: Spain announces public-wage cuts and a pension freeze while Portugal says it will lower the salaries of top government officials and increase taxes. Spain cuts deficit target to 6 percent in 2011 and trims growth outlook.

May 18: Greece receives its first bailout loan for 14.5 billion euros, one day before 8.5 billion euros in bonds come due.

May 27: Italian Prime Minister Silvio Berlusconi unveils 25 billion euros in deficit cuts meant to help “defend the euro.”

May 28: Fitch cuts Spain’s AAA rating one level to AA+

June 23: Greek 10-year bond yield closes above 10 percent for first time in euro’s history.

June 14 Moody’s cuts Greece to junk.

July 13 Greece returns to bond markets for first time since bailout, selling 1.62 billion euros of six-month bills.

July 23: Europe publishes the results of bank stress tests. Only 7 of 91 lenders flunk the test.

Aug 24: S&P cuts Ireland’s credit rating to AA- because of concern over the costs of shoring up the country’s banking system.

Sept. 29: Spain’s first general strike in eight years to protest cuts and an increase to the retirement age.

Sept. 30: Ireland prepares to take majority control of Allied Irish Banks Plc and pump extra cash into Anglo Irish Bank Corp. Moody’s cuts Spain’s AAA rating to Aa1.

Oct. 4: Greece announce draft budget plan to cut the deficit to 7 percent of GDP in 2011.

Oct. 18: German Chancellor Angela Merkel and French President Nicolas Sarkozy meet in Deauville, France and agree that private investors must contribute to future EU bailouts and Sarkozy backs Merkel’s call for a permanent rescue mechanism from 2013.

Nov. 4: Trichet signals concern that forcing bondholders to take losses will drive up borrowing costs.

Nov. 12: Seeking to calm markets, finance ministers of France, Germany, Italy, Spain and the U.K. issued a statement at a G-20 in Seoul saying any private sector involvement would not apply to outstanding debt and would only come into effect from 2013.

Nov. 14: Irish Enterprise Minister Batt O’Keefe says Ireland doesn’t need a bailout, refutes talk of crisis.

Nov. 21: Ireland says it will apply for a bailout.

Nov. 23: S&P Cuts Ireland two steps to A from AA-.

Nov. 28: Ireland gets 85 billion-euro bailout. European leaders scale back proposals to inflict losses on bondholders.

Dec. 23: Fitch cuts Portugal to A+.

2011 

Jan. 14: Fitch follows S&P and Moody’s in cutting Greece to junk.

Jan. 24: Spain announces new capital requirements for banks. Salgado says the capital shortfall won’t be more than 20 billion euros.

Feb. 11: Axel Weber resigns from Bundesbank after opposing the ECB’s crisis policy.

Feb. 25: Ireland holds general election, with the ruling Fianna Fail swept from power in the worst result in its history.

March 11: EU summit agrees to expand powers of EFSF to allow it to buy debt in primary markets and tap its full 440 billion euros in firepower. EU also reaches preliminary agreement to cut the rates on emergency loans to Greece by 100 basis points for first three years and extend maturities of the loans to 7.5 years.

March 21: EU finance ministers decide on mechanisms for allowing the region’s permanent bailout mechanism, the ESM, lend 500 billion euros from 2013. The ESM will draw on 80 billion euros of paid-in capital, enabling it to lend a full500 billion euros.

March 23: Portugal’s Prime Minister Jose Socrates resigns after opposition rejects austerity package.

March 25: European Union leaders cut the start-up capital for the future permanent euro emergency aid mechanism, the ESM, after German demands to make smaller upfront payments.

April 6: Portuguese Prime Minister Jose Socrates requests EU bailout, saying he “tried everything” to avoid seeking aid.

April 15: Papandreou announces 76 billion euros of austerity measures, later increased to 78 billion euros, running through the end of 2015. The program pledged to raise 50 billion euros from state asset sales and aims to cut the budget deficit to 1 percent of GDP in 2015.

April 17: True Finns, who oppose euro bailouts, win 19 percent of the vote in Finnish elections.

May 6: Finance ministers from Spain, France, Germany and Italy hold unannounced meeting in Luxembourg that prompt press reports that Greece will leave the euro. Trichet walks out, refusing to attend any meeting that discusses Greek haircuts. Luxembourg Prime Minister Jean-Claude Juncker, who chairs finance ministers’ meetings, says possible further aid for Greece was discussed.

May 9: S&P cuts Greece two levels to B from BB-, threatens further cuts.

May 11: German Chancellor Angela Merkel signals that she will support Mario Draghi’s candidacy to succeed Trichet as president of ECB.

May 13: EU published new debt and deficit forecasts and predicts that Ireland, Portugal, Greece will all to have debt of more than their total GDP in 2011.

May 16: Portugal’s 78 billion-euro bailout approved by finance ministers. ECB’s Executive Board member Juergen Stark says restructuring would be “catastrophe” and wipe out Greek banks. Bini Smaghi says no difference between soft-hard restructuring.

May 17: European finance ministers for the first time float the idea of talks with bondholders to extend Greece’s debt-repayment schedule.

May 18: IMF Managing Director Dominique Strauss-Kahn resigns after being charged with attempting to rape a New York hotel maid. The case is thrown out three months later by a Manhattan judge.

May 20: ECB’s governing council member and Bundesbank President Jens Weidmann says central bank won’t take Greek bonds as collateral if maturities extended.

May 22: Spain’s ruling Socialists suffer worst local election defeat in 30 years.

May 24: Greece announces details on additional 6 billion euros of 2011 budget cuts, plan to speed asset sales. ECB governing council member Christian Noyer says Greek restructuring would be ‘horror story.’

May 27: Greek Cabinet passes another 6 billion euros in austerity measures and gave some details on planned assets sales.

June 5: Social Democratic and People’s Party win majority in Portuguese election, routing Socrates’ Socialists.

June 7: EU Monetary Affairs Commissioner Olli Rehn says June may be the “beginning of the end” of the crisis.

June 13: S&P Cuts Greece to CCC, the lowest rating for any country it reviews in the world.

June 15: Papandreou announces Cabinet reshuffle and confidence vote.

June 17: Papandreou appoints Defense Minister Evangelos Venizelos to replace Papaconstantinou as finance minister.

June 22: Papandreou survives confidence vote in his government.

June 24: Draghi appointed to succeed Trichet as president of the ECB.

June 28: French Finance Minister Christine Lagarde is named the first female head of the IMF with a mandate starting July 5.

June 30: Greek lawmakers approve the 78 billion-euro austerity plan after two votes in two days marred by violent protests outside parliament. Berlusconi’s Cabinet approves 47 billion euros in deficit-cutting measures to try to balance the budget by 2014 and protect Italy from the fallout of Europe’s debt crisis.

July 5: Moody’s cuts Portugal to junk.

July 12: Moody’s cuts Ireland to junk.

July 21: EU summit passes second bailout package for Greece and agrees to expand the powers of the EFSF. Bankers agree to take losses of 21 percent on the net present value of their Greek bond holdings.

July 29: Spanish Prime Minister Jose Luis Rodriguez Zapatero sets Nov. 20 as date for early elections that polls show he will lose. Moody’s places Spain’s rating on review for a downgrade.

Aug. 2 Spain’s 10-year bond reached euro-era record 6.46 percent.

Aug. 4 The ECB votes to resume its bond-buying program, buys Portuguese and Irish debt.

Aug. 5: ECB sends secret letter to Italy asking for more austerity measures and a plan to balance budget in 2013 rather than 2014. Berlusconi announces he will seek a balanced budget amendment and pledges more austerity Italian yields rise above Spanish yields for first time since May 2010.

Aug. 7: After emergency conference call, ECB signals it will begin buying Italian and Spanish bonds in secondary markets as part of its Securities Markets Program. The next day Spain’s 10- year yield falls 88 basis points to 5.16 percent, Italy’s drops 80 basis points to 5.23 percent.

Aug. 12: Italy’s Cabinet approves by decree a 45.5 billion euro austerity package to balance the budget in 2013 that helped secure ECB support for the country’s bonds. France, Spain, Italy and Belgium impose bans on short-selling after shares in European banks, including Societe Generale SA, hit their lowest level since Lehman’s collapse.

Aug. 16: Finland and Greece strike agreement on collateral to guarantee bailout contributions. The agreement was opposed by other euro members such as Austria and the Netherlands and had to be re-negotiated.

Aug. 19: Spain’s Cabinet passes another 5 billion euros of savings and cuts VAT on new home purchases.

Aug. 29 Berlusconi bows to pressure from his allies to overhaul the August austerity package and drop a tax surcharge on Italians earning more than 90,000 euros a year.

Aug. 31: Portugal raises capital gains taxes and increases levies on corporate profit and high earners.

Sept. 2: Inspectors from the European Union, European Central Bank and International Monetary Fund suspend Greece’s fifth review after finding delays in the implementation of the medium term fiscal plan and structural economic reforms. Spain adds budget-discipline amendment to constitution, the second change in its 30-year history.

Sept. 6: Italian unions hold general strike.

Sept. 9: Juergen Stark resigns from ECB after opposing the bank’s bond purchases.

Sept. 11: Papandreou approves new emergency measures to plug a gap in the budget for 2011.

Sept. 14: Italian parliament gives final approval in a confidence vote to a 54 billion-euro austerity package to balance the budget in 2013.

Sept. 15: ECB offers banks unlimited dollar loans for three months as worsening debt crisis sparks concern some institutions struggling to access U.S. currency.

Sept. 16: Spain brings back wealth tax scrapped in 2008.

Sept. 17: U.S. Treasury Secretary Timothy F. Geithner urges European officials to deal with the crisis and avoid “catastrophic risks” after flying to a meeting of European Union finance chiefs in Poland.

Sept. 19: Standard & Poor’s cuts Italy’s credit rating for the first time in almost five years, downgrading it to A from A+.

Sept 30: Spanish bank bailout fund takes over three more savings banks, valuing them between zero and 12 percent of book value and saying the overhaul of the financial industry is complete. Portugal revises up 2010 budget deficit to 9.8 percent.

Sept. 22: Italian Finance Minister Giulio Tremonti skips a parliamentary vote on whether to permit the arrest of his long- time aid Marco Milanese, straining relations with Berlusconi and key coalition allies.

Oct. 2: Greece’s government approves the draft budget for 2012 which targets a budget deficit of 8.5 percent of gross domestic product and announces it will miss revised deficit target for 2011.

Oct. 3-4: EU finance ministers work out a revamped deal on collateral for Greek loans that satisfies Finnish demands and those of other euro-region governments opposed to abilateral deal for Finland. Leaders also hint that private investors may have to accept a bigger haircut on their Greek bonds than what was included in a July 21 agreement.

Oct. 4: Moody’s cuts Italy for the first time in almost two decades, lowering the rating to A2 from Aa2.

Oct. 6: Spain says banking industry rather than the taxpayer will absorb losses incurred from bank bailouts.

Oct. 7: Fitch cuts Spain to AA- and Italy to A+

Oct. 10: Greece’s central bank activates a rescue fund set up under the May 2010 bailout to restructure Proton Bank SA, with the Hellenic Financial Stability Fund becoming its sole shareholder.

Oct. 11: Troika releases statement on fifth review of Greek economy and suggests the sixth tranche of the bailout payments worth 8 billion-euro be paid.

Oct. 14: Berlusconi survives a confidence in vote in parliament that he was forced to call to prove he still had a working majority after losing a routine vote earlier in the week.

Oct. 18: French bonds yield 112 basis points more than German equivalents.

Oct. 21: Papandreou wins parliamentary approval of latest austerity bill, which includes wage and pensions cuts and plans to lay-off 30,000 state workers. His majority falls by one lawmaker to 153 after he expels Louka Katseli for voting against one of the articles. EU, ECB, IMF issue draft sustainability report on Greece which said debt dynamics remain “worrying.”

Oct. 23: European leaders say a summit on the euro crisis won’t produce decisions and set another meeting for Oct. 26. Greek 10- year yields trade at 25 percent. Merkel and Sarkozy smile at a news conference when asked whether Berlusconi can fix Italy’s finances.

Oct. 26-27: EU leaders hold 14th crisis summit in 21 months. After more than 10 hours of talks, leaders agreed to leverage the EU’s temporary bailout fund to boost its firepower to 1 trillion euros, force private investors to accept a 50 percent haircut on Greek bonds, push European banks to raise 106 billion euros in new capital, and extend a new aid package worth 130 billion euros for Greece.

Oct. 31: Papandreou stuns EU politicians and Greek lawmakers by calling a referendum on the second bailout agreement.

Nov. 1: Stocks and bonds plunged worldwide on concern an unsuccessful referendum will push Greece into a disorderly default. The yield on Greece’s two-year bond rises to a record 84.7 percent. Draghi succeeds Trichet as ECB president.

Nov. 2: European leaders cut off aid payments to Greece and say Greece must decide soon whether it wants to stay in the euro. The ultimatum is at odds with the Maastricht Treaty’s assertion that monetary union is “irrevocable.”

Nov. 3: Papandreou backs down on euro referendum. Draghi’s ECB unexpectedly cuts interest rates at his first meeting.

Nov. 6: Papandreou agrees to step aside to make way for a government of national unity.
Greek 10-year bonds yield 25.52 percent. Spanish 10-year bonds yield 5.56 percent. Italian 10-year bonds yield 6.35 percent. German 10-year bonds yield 1.80 percent.

 

Links worth reading.

Greece and Italy Seek a Solution From Technocrats

It's not the break-up of the euro that will bring Armageddon, Vince, it's carrying on as now 

A Symptom Of the Crisis: Greeks Vexed By Growing Crime

The euro is being held together only by fear 

Merkel’s Greek Strategy Risks Backfiring as Euro’s Exit Routes Are Mapped

Barclays Says Italy Is Finished: "Mathematically Beyond Point Of No Return"

European Endgame, Gimme Some Drachmas!!!!

Have been very busy juggling many professional balls so this will be a quick one.

At the end of the 14th Summit we got....
EU Sets 50% Greek Writedown, $1.4T in Crisis Fight




The main aim of the charade last week reduced bond yields in debt markets thereby allowing the bankrupt and indebted to borrow more but on the cheap. More on that at the end, but first lots of links.

Initial European Reactions
This was the week that European democracy died (this was a few days before Greem PM, The G Pap woke up and said ένθετο αυτό στον πρωκτό σας  but its a good primer as to why he did it)


ένθετο αυτό στον πρωκτό σας ("stick it in your *rse")
The modern leaders of the birthplace of democracy, finally realise WTF democracy actually means.
Greece announces a euro referendum – hark what discord follows
EU Shocked and Furious at Greek Referendum Plan  (German publication too)
Revenge of the Sovereign Nation
Greece Replaces Top Brass in Army, Navy, Air Force in Surprise Move; Is Papandreou Preparing for a Military Coup or Afraid of One?(Hmmm)
EU Deal Unravels from Many Sides; Italy, France Bond Spreads Hit Record High vs. Germany; Bund Yield Drops Most on Record; All Out Bond Crisis
Europe Undeniably in Recession; Germany Manufacturing PMI Contracts for First Time in Two Years, New Orders Collapse


 The bailout from the summit is finished.
Asian Stocks Drop as Europe Stops Greek Aid on Vote, Fed Cuts U.S. Outlook
Brilliant Moves by Papandreou; EMU Mentions Eurozone Exit Possibility First Time Ever; Who the Hell is Merkozy to Dictate Terms of a Greek Referendum?
Dutch Government Calls Timeout on Euro Bailout Deal

The Greeks leaving the Euro is a gimme, the Italians leaving will be the surprise. Financial contagion is "in the mail".


Berlusconi's Bunga Bunga parties coming to an end?
Italy's crisis deepens on eurozone slump, bail-out doubts


Portugal, the 'P' in PIIGS
Europe's rescue euphoria threatened as Portugal enters 'Grecian vortex'

The Sublime

“We Europeans showed tonight that we reached the right conclusions.”

Angela Merkel


The ridiculous
Italian government buys 19 Maserati supercars despite austerity cuts



And. those borrowing costs which the summit was meant to ease?
Greek 1 year bond yield over 220%
Italian 10 year bond yield over 6%

Chinese Bears Getting Bigger

In June I wrote Chinese Bears.

All the waffle on the Chinese economy being based on exports and manufacturing is just smoke and mirrors.

China is a "housing-led economy", says UBS economist Jonathan Anderson, who estimates that property construction alone accounted for 13 per cent of gross domestic product in 2010, twice the share of the 1990s.

While China's anticipated growth is still well above that of other large economies, any reduction could have deep consequences.

The global economy is now even more dependent on China for demand for anything from commodities to luxury goods, given the tepid recovery in the US and Europe's continuing sovereign-debt problems.

If the Chinese housing market slows faster than people had expected, the impact would be felt in a number of markets that export heavily to China.

Many Latin American and African economies have shifted their focus toward Chinese demand for their raw materials, and many Western firms, including US retailers and fast-food chains, now bank on Chinese consumers feeling wealthier to make up for stagnating sales elsewhere.

This was sent to me the other day (h/t Paddy).
Shanghai Homeowners Smash Showroom in Protest of Falling Prices; Developer Warns on Price Drops; "Twilight Zone" of Phony Accounting and Shadow Money

 The property bubble in China has finally burst. Denial has turned to anger as Shanghai Homeowners Smash Showroom in Protest Over Falling Prices

22% Drop Overnight

The drop from 18,000 to 14,000 yuan is a 22% overnight drop and that is just a down payment on the carnage that is coming.

Read the juicy bits in the link.

Then read Chinese, Japanese, Money Please, the parallels are uncanny.

The Red Rat

First a song (Chaser's "war on everything" I think)





Where Alan Joyce "fits". Consider that the only industrial action that Qantas's international pilots took was wear red ties and the along with the domestic pilots, made PA announcements about Qantas pilots for Qantas aircraft. Thats it, no strike action by the pilots. He locked them out anyway.

1. Is Your Boss a Corporate Psychopath?
2. Corporate Psychopaths

Would the little Irishman get a perfect score?
Quiz: Is Your Boss a Psychopath?

For each question, score two points for "yes," one point for "somewhat" or "maybe," and zero points for "no."

[1] Is he glib and superficially charming?

Is he a likable personality and a terrific talker -- entertaining, persuasive, but maybe a bit too smooth and slick? Can he pass himself off as a supposed expert in a business meeting even though he really doesn't know much about the topic? Is he a flatterer? Seductive, but insincere? Does he tell amusing but unlikely anecdotes celebrating his own past? Can he persuade his colleagues to support a certain position this week -- and then argue with equal conviction and persuasiveness for the opposite position next week? If he's a CEO, can he appear on TV and somehow get away without answering the interviewer's direct questions or saying anything truly substantive?
SCORE__

[2] Does he have a grandiose sense of self-worth?

Does he brag? Is he arrogant? Superior? Domineering? Does he feel he's above the rules that apply to "little people"? Does he act as though everything revolves around him? Does he downplay his legal, financial, or personal problems, say they're just temporary, or blame them on others?
SCORE__

[3] Is he a pathological liar?

Has he reinvented his own past in a more positive light -- for example, claiming that he rose from a tough, poor background even though he really grew up middle class? Does he lie habitually even though he can easily be found out? When he's exposed, does he still act unconcerned because he thinks he can weasel out of it? Does he enjoy lying? Is he proud of his knack for deceit? Is it hard to tell whether he knows he's a liar or whether he deceives himself and believes his own bull?
SCORE__

[4] Is he a con artist or master manipulator?

Does he use his skill at lying to cheat or manipulate other people in his quest for money, power, status, and sex? Does he "use" people brilliantly? Does he engage in dishonest schemes such as cooking the books?
SCORE__

[5] When he harms other people, does he feel a lack of remorse or guilt?

Is he concerned about himself rather than the wreckage he inflicts on others or society at large? Does he say he feels bad but act as though he really doesn't? Even if he has been convicted of a white-collar crime, such as securities fraud, does he not accept blame for what he did, even after getting out of prison? Does he blame others for the trouble he causes?
SCORE__

[6] Does he have a shallow affect?

Is he cold and detached, even when someone near him dies, suffers, or falls seriously ill -- for example, does he visit the hospital or attend the funeral? Does he make brief, dramatic displays of emotion that are nothing more than putting on a theatrical mask and playacting for effect? Does he claim to be your friend but rarely or never ask about the details of your life or your emotional state? Is he one of those tough-guy executives who brag about how emotions are for whiners and losers?
SCORE__

[7] Is he callous and lacking in empathy?

Does he not give a damn about the feelings or well-being of other people? Is he profoundly selfish? Does he cruelly mock others? Is he emotionally or verbally abusive toward employees, "friends," and family members? Can he fire employees without concern for how they'll get by without the job? Can he profit from embezzlement or stock fraud without concern for the harm he's doing to shareholders or pensioners who need their savings to pay for their retirements?
SCORE__

[8] Does he fail to accept responsibility for his own actions?

Does he always cook up some excuse? Does he blame others for what he's done? If he's under investigation or on trial for a corporate crime, like deceitful accounting or stock fraud, does he refuse to acknowledge wrongdoing even when the hard evidence is stacked against him?
SCORE__

Total____

If your boss scores:
1-4 | Be frustrated
5-7 | Be cautious
8-12 | Be afraid
13-16 | Be very afraid

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