IMF And The Greek Chorus
Courtesy of Elaine Supkis at Culture of Life News
Bill Gross says that the biggest bubble we are in is a bond bubble. He is, of course, not quite right. It is a bubble but isn’t the biggest bubble. The closely related bubble that is far bigger and grew the fastest is the Derivatives Beast Bubble. This hellish monster is based on all the monetary/debt bubbles and is why they were able to grow massively, flooding the planet with easy debt. The tide seems to be changing as faith in the Derivatives Beast is fading after it ate up trillions of dollars in ‘wealth’.
Right now, we are sailing past the many corporate and private defaults that has destroyed many trillions in dollars and are now entering the true danger zone: defaults of many sovereign nations. The underpinning system here is the US dollar and the US government but these are leading the way to destruction as the US sucks down immense amounts of red ink. Obama, this week, is doing what he promised he would not do: ask for ’supplemental funds’ for our expanding wars. $33 billion this time around.
An astonishing fund! Again, the GOP tried to stop $7 billion from going to the unemployed working class, claiming we need to tighten our belts. The IMF forces nations to do this but US warmongers run the IMF and a great way to take over the IMF’s top slots is to be a US war criminal who spends money like a literal fiend. Of course, the IMF is also Home Base to all good Bilderberg conspirators. It is virtually one and the same.
We will talk more about the IMF but first, some news: EU, IMF Deal Reduces Greek Default Risk; Euro Rises – BloggingStocks
As expected, Germany and France resolved their differences and agreed to a Greece stabilization plan than includes a mix of both EU loans, and, if needed, International Monetary Fund loans.
Actually, before today, it was not all that expected which is why everyone was on pins and needles concerning who was going to do what the US did for AIG: pay for all the losses.
The euro rallied about 1.2 cents versus the dollar to $1.3390 on the news in Friday afternoon trading. Europe’s bond market took the action in stride with the interest rate on Greece’s 10-year bond dropping 6 basis points to 6.25% In comparison, Germany pays 3.27% to borrow money for 10 years.
Germany is content to see the euro drop in value. At $1.6, it was killing Germany’s best foreign trade deals outside of the EU: exporting stuff to the US.
Under the deal worked out by German Chancellor Angela Merkel and France President Nicolas Sarkozy, each eurozone country will provide non-subsidized loans to Greece based on that nation’s stake in the European Central Bank, Bloomberg News reported Friday. Europe would account for about one-half the loans, and the IMF would issue the rest, and the plan would only take effect if Greece has no other fund-raising options.
The reason Greece needs these sorts of loans is, the open market sets a much higher interest rate on any lending and this lending has to come from some entity that has capital. Now, an immense boatload of ‘capital’ in the form of FX values (ie: paper money) came from the Japanese carry trade. Now that this has faded (thus, the ‘credit crunch’) few people are talking about this thing!
I remember very clearly, years ago, trying to explain this business and seeing little interest in others. The only people interested in this business were….the privateer pirates operating out of various Crown islands. This was the greatest money making machine, ever, and they pumped it like crazy and lent money to anyone who signed the bottom line because the differential between any loans handed out and the super ZIRP loans from Japan were the easiest profits in history.
And fatal! Totally useless! Destructive! To insure this wouldn’t collapse, these privateers insured these loans with AIG and we know what happened: the US public got stuck with all the losses as we now are AIG, it is our entire nation. So, the chances of Greece being forced to use IMF loans is about 100%…unless the Chinese decide, for geopolitical power plays, to be the banker of last resort before the IMF. This is possible. But so far, Greece hasn’t asked China.
UPDATE 2-IMF scrambles to figure out role in Greece | Reuters
The dilemma for the IMF is that Greece falls under the jurisdiction of European Union rules and is a member of the euro zone where monetary and foreign exchange policies are dictated by the European Central Bank.
That makes it difficult for the IMF to set policy prescriptions backed by its money….Analysts have said Greece could be allowed to borrow between 20 billion to 22 billion euros from the IMF. Greece would be the first country in the euro zone to borrow from the IMF, breaking new ground for the world’s lender of last resort.
The IMF always forces cuts in social services and pensions. Usually, nations apply for aid after ravaging these via inflation as we saw in Zimbabwe. A major German export to Zimbabwe for a while was Zimbabwe dollars which had to add zeros at an increasingly mad rate, even surpassing the infamous Weimar hyperinflation. I would suggest Zimbabwe’s inflation would have ended sooner if the Germans didn’t support this by printing money faster than it devalued for a while.
Here is the IMF back on the 18th of March: Transcript of a Press Briefing by Caroline Atkinson, Director, External Relations Department, IMF
QUESTIONER: I will burden with one more on Greece. Next week on Thursday and Friday, it’s the regular European Union Summit. The finance ministers this week postponed any decision on Greece for the summit. Chancellor Merkel seems to be reluctant to go ahead with any kind of assistance. So the Greek prime minister speaking at the European Parliament today said although Greece prefers some kind of not financial assistance as you say, they’re not asking for it, but some kind of backup from the Europeans. If they do not get that at the summit, everybody agrees that the IMF is a possible or a potential solution.
Can you briefly tell us how does it work, assuming Greece in a week or 2 weeks at the beginning of April decides that it’s not working with the European Union and they want to go to the IMF? What’s the time –because we have loans that are running that have to be paid off– so how long does it take, and what’s the process if a country decides, like the situation of Greece, decides to come to the IMF?….
Basically, last week, no one knew if Greece could go to the IMF for loans.
MS. ATKINSON: If I can just repeat again that of course, we haven’t received any request for financial assistance; we are working closely with the E.U. Commission; and I believe we’ve often said that we expect the E.U. and the Eurozone countries to want to and to plan to resolve this question by themselves.
See? Just last week, the IMF was refusing to do anything and was trying to force Germany to bankroll these loans because frankly, the US and UK can’t. Yet both run the IMF at the top, for the most part. And the IMF lends in US dollars and this has a strong effect on everything as I will look into later.
….QUESTIONER: Could it be like days? A year?
See the urgency of time here! And the international reporters were very anxious for an answer.
MS. ATKINSON: If you look at our experience, sometimes we move very quickly and sometimes not. It’s not just whether we move quickly, it’s what the conditions are with the country.
QUESTIONER: We have been waiting for a mission date for the mission to go to Greece for technical assistance. Has a date come up yet?
MS. ATKINSON: I don’t think it’s a matter of just a single date because there are different teams on different issues. We have some people there now for instance who have been looking at the banking system, but it’s just a small team and it’s a different issue.
The entire IMF transcript of this press conference ran from one issue to another but the European reporters were very focused on a timeframe for the Greek bail out. And we can see from the many questions (I posted only a little of this here) shows that there was great anxiety and this revolved around not only if the IMF would lend but when. Only two days ago, did these things finally become clear.
Time is money! Dubai dropped its debt payments but refused to go bankrupt due to existing in a Muslim matrix which allows this sort of goofy thing. The US is entangled in an immense mess due to wanting to glide over an army of US homeowners who stupidly used their houses as ATM machines and thus, went very,very deep into debt and now need to be bailed out. You can’t bail them out, it is impossible. The last bail out attempt at rewriting these debts had an over 50% default rate in one year!
Impossible! The nations going into debt are in a similar fix: too much debt that can only be escaped via bankruptcy. And this is what a depression is all about: money ‘vanishes’ due to debtors unable to honor their loans. Even if desperate matters are tried to keep things afloat, these fail due to too much debt which is why debt is not to be taken lightly: it is a dangerous brew, nearly a poison. It works only if taken in smaller doses. Guzzle it and you die!
Transcript of a Press Briefing by Caroline Atkinson, Director, External Relations Department, IMF
MS. WROUGHTON: I have a follow-up. Yesterday in Congress lawmakers were saying that the IMF should take a bigger role in trying to defuse the situation on the yuan. Are there any talks that you know of that are scheduled with the IMF to try or plans to try and intervene here in some way? That’s being the Fund’s role in financial stability– that’s coming in and being a mediator in how to fix this problem.
MS. ATKINSON: I think the global imbalances issues, which really this is a part of, is a very big and important issue which of course the IMF is working on and we’re working with our member countries. We have in the context of that frequently commented on the kinds of measures that we think are needed to rebalance demand both with more reliance on domestic demand and consumption in China and in some other countries. The surplus countries include Germany in the E.U., China in Asia and others, and then deficit countries also have to rebalance their demand. So this is part of a global issue. The Fund is obviously a good place to have those discussions. We make our views known and we have done that and continue to do that and I think that’s an important part of it. There is also the G-20 process, as you know, where issues of how best to support strong, sustainable and balanced growth going forward are very important ones for the G-20 ministers and leaders.
And what is the engine of ‘global imbalances’? HAHAHA. There are three: free trade, the floating fiat currency regime and ZIRP lending! This troika of economic horses have taken off at a fast trot and now are foaming at the mouth while being whipped along and are going lame. When the ZIRP horse dies, all hell will break loose. The drivers of this mad troika have kept the floating fiat currency dollar regime alive via feeding it ZIRP loans and holding excess dollars in FOREX accounts.
Demanding China balance things when Japan has zero desire to do this is futile. The Chinese won’t do it. When I went to the IMF to see Japan’s FOREX holdings, it was well over a trillion dollars! Well, well, well. China’s is even bigger, maybe twice as big! But if we want no FOREX holdings to be bigger than the US holding which is now at $100 billion, then we have to set rules in trade and to do this, the US, which is the biggest trade deficit, by volume, than any nation on earth, must put up barriers to prevent trade. Ahem. We could kill the dollar (shoot the middle horse in the troika!) or we could pull on the reins and slow the troika down to a slow walk (global depression).
Well, HAHAHA…the troika of horses DID slow down to a walk! Due to lameness. The IMF and the US want to have it run madly again because the international bankers loved the fast troika. They loved the past. I repeat: THEY LOVED THE PAST. They want it back. They do NOT want the present, the present is tolerable but no fun and dangerous. They want the past. Anyone saying otherwise is fooling themselves and their readers. Ask anyone at the top of the economic pyramid. They will tell you in no uncertain terms, they want the bubble back. They want it to be forever and ever!
Pimco’s Bill Gross Says Bonds Have Seen Best Days (Update2) – Bloomberg.com
Excess borrowing in nations including the U.S., U.K. and Japan will eventually lead to inflation as governments sell record amounts of debt to finance surging deficits, Gross said. Pimco, which announced in December that it would offer stock funds for the first time, is advising that investors buy the debt of countries such as Germany and Canada that have low deficits and higher-yielding corporate securities.
Of course, the profits from holding safer debts is very little. Everyone wants a big fat spread! But the danger is, all of this is in DOLLARS! If the dollar collapses into Zimbabwe territory, any spreads will be meaningless. The loss of value will be faster than the gain in value by holding bonds. This is a classic way countries get rid of government debt: kill the middle troika horse!
“Bonds have seen their best days,” Gross said in a Bloomberg Radio interview today from Pimco’s headquarters in Newport Beach, California. “We are focused more in spread space than in yield space. Durations should be shorter than index and you should be taking a little more risk in terms of spreads.”…
This is the increasing yawning gap not only between currencies, the value of government promises and future possible tax revenues but also, inflation. The goddess of inflation can move faster than the speed of light, you can never catch up with her once she spreads her golden wings and takes off. You can constrain her only at the very beginning, when she is nearby, not flying high in the heavens!.
Zimbabwe’s inflation didn’t end until all value and wealth in the country was totally eliminated and people were literally starving to death. Same with Haiti. All nations that fail to constrain inflation see the same thing. Greece can’t use this to get out of debt which is why the other restraint, depression, is being applied. The euro will be worth a lot but no one in Greece will have these euros and they will starve.
…“Real interest rates are moving higher,” said Gross, who co-founded Pimco, which manages about $1 trillion in assets. “That’s the main bear element in the bond market.”…
. …The U.S. budget deficit reached a record $1.4 trillion for the fiscal year that ended Sept. 30 amid falling tax revenue from the recession, a bailout of the banking and auto industries, and the $787 billion economic stimulus package. .
U.S. Treasuries have returned 0.9 percent this year, compared with 2.7 percent for German government bonds and 0.5 percent for U.K. gilts, according to indexes compiled by Bank of America Merrill Lynch….
And Germany is strong, not weak! The US and UK are both borrowing at near-ZIRP rates and as I noted in the past, the cheaper the credit, the deeper the debt. And the temptation to continuously roll over super-cheap debts instead of paying them off rises and eventually, the victim is stuck rolling an immense ball of debt forwards in time. And then, all it takes is a tiny, little, ittybitty rise in interest rates and the whole thing suddenly weighs a ton and can’t be budged and it rolls back and crushes the debtor!
…All Group of Seven countries, except Canada and Germany, will have debt-to-GDP ratios close to or exceeding 100 percent by 2014, John Lipsky, first deputy managing director of the International Monetary Fund, said in a speech March 21 at the China Development Forum in Beijing.
And this is key! Neither Germany nor Canada are in this fix! The G7 are a miserable example to the rest of the world, far from being the ‘engines of the world’s economy,’ these are now, except for energy export power, Canada, which is more like part of OPEC, and the world’s great dynamic industrial power, Germany, deep in debt. Below is the list of the G7:
Now, I went to the IMF to look at some statistics. Instead of seeing the FOREX holdings, I went lower down in the listings to see what is going on in the predetermined short-term net drains on assets. Back in the old days, the G7 was at $0 in these categories. But in the last year, this has changed tremendously. Except for the US. We lost nothing but then, we hold nothing. We are the middle horse in the international economic troika.
International Reserves and Foreign Currency Liquidity – UNITED STATES
I greatly compressed the image for the EU data here due to it being very long in size and hard to fit without making it unreadable. I wish the IMF staff would reset all their data so it is the same instead of having European data in this ungainly pdf form. So, here is the UK statistics for net drains on foreign assets: http://www.imf.org/external/np/sta/ir/gbr/eng/curgbr.pdf
WOW. Talk about losses!!!! Incredible. The UK is in a lot of trouble here. Losses of $13 billion? $333 million in interest losses? This is all new stuff, by the way. I roamed around these IMF statistics for years and usually didn’t even bother looking at these boxes since they usually were around zero. No more. Here is Germany’s statistics: http://www.imf.org/external/np/sta/ir/deu/eng/curdeu.pdf
Far, far less than the UK. London and New York wanted to be the world’s financial powerhouses, they wanted to be on top of the world. The US fiat dollar makes it look as if we are on top but we are certainly not this, we went from being creditors to being debtors. And ZIRP loans, the decline in interest rates over the last 30 years has killed us as a creditor nation. Now, onto G7 nation of Japan: International Reserves and Foreign Currency Liquidity – JAPAN
Zero, again! Earlier, we saw at the IMF press conference, the US reporters worried about the strong yuan. They wanted this fixed. And to fix this means going after ‘currency manipulators’ so to review who is what, here is a Fed Reserve graph that clearly shows how Japan manipulates the yen: St. Louis Fed: Series: JPINTDUSDJPY, Japanese Intervention: Japanese Bank purchases of USD against JPY
The plunge in 1998 is the Great Asian Currency Crisis. But after that, Japan intervened increasingly often and at great amounts. Here, in contrast, is Japan manipulating the rupee versus the yen and dollar: St. Louis Fed: Series: JPINTDUSDRP, Japan Intervention: Japanese Bank purchases of USD against Rupiah
Nada, zilch until the Great Asian Currency Crisis. Then, boom! Japan bought USD against this particular currency. To this day, few people can really understand how the Great Asian Currency Crisis started. But I view it as a warning bell. And Japan was very deep inside of this. Now, on to Canada: International Reserves and Foreign Currency Liquidity – Canada
London took more than twice as much in losses. Italy has a much smaller financial base than London or even Canada so its losses were much less than London’s losses but still in the billions. Here is Italy, one of the PIIGS: http://www.imf.org/external/np/sta/ir/ita/eng/curita.pdf
Before the Asian Currency Crisis, Italy had a crisis in late 1992. Otherwise, it has to balance its books mostly with the euro and it is one of the PIIGS in today’s bad economic news. Note that it is one of the G7 nations thanks to long-lost imperial powers. Certainly, it is way outside of its league at this point and instead of expanding the G7 to a G20 or G100, it is time to drop Italy from this group. If they want another ‘I’ nation in the G7, put in India. And since China is one of the top 3 economies on earth, it certainly needs to be not part of the G20 but rather, this elite group. After all, nearly everyone owes China money, anyway. China certainly should have veto powers in the IMF.
International Reserves and Foreign Currency Liquidity – FRANCE
France is also zero. This is interesting and I can’t tell why it, the US and Japan are at zero here. Especially since Japan and the US have very high government debt levels. This is something we should examine more, later. I need more information. I wish I could go to the IMF and ask questions at the press conferences in DC.
On to some side news. One of the PIIGS nations is Ireland. It is very odd, how everyone thinks entertainment systems and gambling can fix deep economic problems caused by too much easy credit! This probably explains why the very last things built in Rome were not defenses nor schools but rather, public baths and more sports arenas: Daniel Libeskind’s New Theater Opens, Offers Hope to Cash-Strapped Dublin
The opening this week of Daniel Libeskind’s new Grand Canal Theatre, a razzle dazzle production in its own right, threatened to upstage the gentle ballet on the building’s main stage. With its dramatic, four story glass facade, sharply angled roof line, and turbulent diagonal lines, the debut of Libeskind’s latest creation was a major cultural happening for Dublin, a city that’s been battered by the economy, and desperately needs something to cheer about.
And cheer they did. Ireland’s president, Mary McAleese, turned out for the Russian State Ballet’s performance of “Swan Lake,” along with Irish actor Brendon Gleeson (Hogwart’s professor “Mad Eye Moody” in the Harry Potter films) actress Rebecca Miller, and various other luminaries from sports, film, politics, arts, and business.
ALL PLAYHOUSES LIKE THIS ARE MONEY LOSERS! They have to be subsidized. They are immense fun. The Romans had fun all the way up until Rome was totally destroyed by barbarians. This playhouse is very stupid looking. It will age very badly. It probably was fun, making a solid building look like a drunk crashed his car into a house and then tried to fix it. Maybe Mr. Kunstler, a guy who lives an arrow shot away from me, can make fun of this stupid building. As someone who builds and fixes buildings, I can assure everyone, this new theater is a monstrosity for repairs and will not last very long. It isn’t even like the famous Opera houses in Australia. Those are solid. This is all glass and metals and loosely connected.
The main thing here is, Dublin is in trouble for trying to be a pirate cove. This failed. Now, they want to be entertainers? HAHAHA. The US boasts about how we can use Hollywood and Las Vegas to get out of our own hole. It isn’t working. Not at all. Much of this loses money. Everything isn’t a block buster. And Harry Potter books can’t save England from economic and financial collapse, either. Even if you tax Hogwarts at a 98% rate. Plus taxing the bats.
