ECB Shuts Off Direct Funds to Greece, World Stocks Plunge

(Jeff Black)  The European Central Bank heaped pressure on Greece’s new government by restricting access to its direct liquidity lines, citing concerns about the country’s commitment to existing bailout pledges.
The decision marks an escalating standoff between Greek politicians and other officials in the euro area. It came hours after new Greek Finance Minister Yanis Varoufakis met ECB President Mario Draghi to garner support for his government’s plans to tear up its 240 billion-euro ($272 billion) rescue package and renegotiate the nation’s debt.
“The ECB today decided to lift the waiver affecting marketable debt instruments issued or fully guaranteed by the Hellenic Republic,” the Frankfurt-based central bank said in an e-mailed statement on Wednesday. “The Governing Council decision is based on the fact that it is currently not possible to assume a successful conclusion of the program review and is in line with existing Eurosystem rules.”
Greek lenders, who since 2010 had been able to access funds from the ECB against junk-rated collateral, must now apply for funding from their national central bank at higher rates. While a similar shut-off occurred briefly in 2012, the government and its creditors are this time at odds on how to proceed and the current move risks precipitating a Greek exit from the euro.
The single currency fell after the statement and traded at $1.1339, down 1.2 percent, at 10:59 p.m. Frankfurt time.
Greek government debt currently pledged as collateral under ECB refinancing operations will no longer be eligible as of Feb. 11 when the current operation matures, the ECB said.

Early Move

A Bank of Greece spokesman said that liquidity will continue as normal, as existing ECB financing will be converted into Emergency Liquidity Assistance. The official asked not to be named in line with policy and declined to answer all other questions. A spokesman for the Greek government didn’t respond to two phone calls seeking comment.
The ECB hadn’t publicly signaled that it would take such action so soon. On Jan. 8, the central bank said it would continue the waiver on the assumption that Greece would conclude a review of its current bailout program, and negotiate a successor to it. The existing aid program is scheduled to expire on Feb. 28.
“The ECB’s move is coming a couple of weeks before we anticipated,” Marc Chandler, global head of currency strategies in New York at Brown Brothers Harriman & Co., said in an e-mail. “I imagine Greek bonds and stocks will get hit hard on Thursday.”

‘No Surprises’

Even so, ECB Vice President Vitor Constancio said on Saturday that if a nation has ratings below investment grade, “then a waiver is granted provided that the country is under a program” and that “there will be no surprises if we find out that a country is below that rating and there’s no longer a program that that waiver disappears.”
“This decision does not bear consequences for the counterparty status of Greek financial institutions in monetary policy operations,” the ECB said in its statement. “Liquidity needs of Eurosystem counterparties, for counterparties that do not have sufficient alternative collateral, can be satisfied by the relevant national central bank, by means of Emergency Liquidity Assistance.”
ELA is priced at an annual interest rate of 1.55 percent compared with the current ECB refinancing rate of 0.05 percent, Bank of Greece Governor Yannis Stournaras said in an interview with Kathimerini newspaper in November.

Harder Stance

The ECB also has the power to refuse permission for the Greek central bank to supply funds under ELA, and reviews the procedure every two weeks.
As Greece’s creditors line up to oppose the country’s demand for a debt restructuring, Prime Minister Alexis Tsipras’s refusal to accept more bailout loans may result in a cash crunch as early as next month, two people familiar with the country’s financial position said.
The ECB’s move may be the harbinger of a harder stance by Greece’s European creditors. In order for the government to pay its bills beyond next month, it needs the so-called troika of ECB, European Commission and the International Monetary Fund to agree to lift a 15 billion-euro ceiling on the amount of short-term debt it can issue.

CME closing most of its futures trading pits in NY, Chicago

Tim Boyle | Bloomberg | Getty Images

A trader signals orders on the financial floor at the Chicago Board of Trade in Chicago.

CME Group says it will close most of its futures trading pits in Chicago and New York City by July 2, 2015.

It will maintain its options trading pit and the S&P 500 futures market.
"Equity index futures pits and the DJIA ($10) and NASDAQ-100 options pits will close following the expiration of the June 2015 contract on June 19, 2015," the company said in a release.
CME Group says it will try to offer booth space to those who want to trade electronically following the closures.
Click here for the latest on the markets.

1 in 5 jobs now held by foreign workers… American tech employees forced to train immigrants hired to replace them

Fewer US-Born Americans Have Jobs Now Than In 2007
Fewer Americans born in the U.S. have jobs now than were employed to November 2007, despite a working-age population growth of 11 million.
The amazing drop in employment highlights President Barack Obama’s slow recovery from the deep 2008 shock, but also spotlights many companies’ growing reliance on foreign migrant labor.
Almost one in every two jobs added since 2009 have gone to foreign-born workers.
In November 2014, one in every five U.S. jobs was held by a foreign-born worker, up from one-in-six jobs in January 2010, according to federal datahighlighted by the Center for Immigration Studies.
Since November 2007, the number of working legal and illegal migrants has risen by two million, from 23.1 million in November 2007 to 25.1 million in November 2014.
But the number of Americans with jobs has fallen by 1.5 million, from 124 million in November 2007 to 122.6 million November 2014.
http://dailycaller.com/2014/12/19/fewer-us-born-americans-have-jobs-now-than-in-2007/

American tech employees forced to train immigrants hired to replace them
Information technology workers at Southern California Edison (SCE) are being laid off and replaced by workers from India. Some employees are training their H-1B visa holding replacements, and many have already lost their jobs.
The employees are upset and say they can’t understand how H-1B guest workers can be used to replace them.
The IT organization’s “transition effort” is expected to result in about 400 layoffs, with “another 100 or so employees leaving voluntarily,” SCE said in a statement. The “transition,” which began in August, will be completed by the end of March, the company said.
“They are bringing in people with a couple of years’ experience to replace us and then we have to train them,” said one longtime IT worker. “It’s demoralizing and in a way I kind of felt betrayed by the company.”
SCE, Southern California’s largest utility, has confirmed the layoffs and the hiring of Infosys, based in Bangalore, and Tata Consultancy Services (TCS) in Mumbai. They are two of the largest users of H-1B visas.
http://www.computerworld.com/article/2879083/southern-california-edison-it-workers-beyond-furious-over-h-1b-replacements.html

Past Bush Comments Shock Conservatives:
http://www.cnn.com/2015/02/04/politics/bush-immigration-conservatives-detroit/

‘Not possible’ to ‘completely control border’…
http://www.cnn.com/2015/02/04/politics/bush-immigration-conservatives-detroit/

‘Repopulate’ Detroit with immigrants…
http://www.cnn.com/2015/02/04/politics/bush-immigration-conservatives-detroit/
‘Ridiculous’ not to give ‘accelerated citizenship’ to young illegals…
http://www.cnn.com/2015/02/04/politics/bush-immigration-conservatives-detroit/

Under The New World Order

Under The New World Order

Greece Softening On EU Exit Hurts Safe-Haven Gold Bid – Peter Hug | Kitco News

Gold is under pressure early this week as Peter Hug takes a look at why, on this edition of For Pete’s Sake! Touching on Greece’s newly elected left-wing government, Hug points out that the safe-haven bid has been taken out of gold a little bit, due to the party’s recently softened stance on distancing itself from the EU. “Greece seems to be backing away from its aggressive stance and they’re trying to negotiate some type of package that would allow them to be less austere, but at the same time stay within the EU,” he says. Hug also touches on whether or not gold prices are lacking fresh bullish news, how the markets misread the Fed’s – deemed hawkish – meeting and whether gold prices will be stuck in a range for the next little while. Kitco News, February 3, 2015.

World Heading For Financial Crisis Worse Than In 2008

Primo Piatto Et Secondo Piatto:
I have been suggesting for quite some time that what we saw in 2008 was just the appetizer ahead of the main course.   Globally, including and especially in the U.S., the level of debt and derivatives stashed way on big bank, hedge fund and financial firm (insurance companies, mutual funds, public pension funds) balance sheets is staggering.  Multiples of what it was in 2008.
Fuses have been lit all over the globe, including crashing currencies, collapsing industries (think:  oil shale/fracking) and de facto defaulting sovereign debt.  Even the U.S. Government has de facto defaulted on its debt because the only way it makes payments are via money printing and forced rollover by existing holders.
The head of China’s Dagong Rating Agency has finally stated the obvious in a public forum:

I believe we’ll have to face a new world financial crisis in the next few years… the situation is even worse than ahead of 2008.

You can read the article here:   LINK

GDP Growth Slows Sharply in 4th Quarter: 2015 to be Worse

Staples to acquire Office Depot for $6.3 billion

(Sarah Halzack)  Staples announced Wednesday that it will acquire Office Depot for $6.3 billion, a move that underscores how much harder it’s getting to make a big-box store viable in the e-commerce era.
The deal comes as the retailers are seeing massive upheaval in their industry: Demand for paper-based office supplies is dwindling as more business functions become digital, and a diverse array of competitors, including Amazon and Wal-Mart, are selling these kinds of goods.
With their sprawling square footage, big-box stores typically have very expensive leases and require a large staff, expenses that are harder to grapple with as more shoppers move online. The math eventually didn’t work for onetime big-box giants such as Circuit City, Linens ‘N Things and Borders.  Even giants such as Wal-Mart and Target, while sticking with their big-box formats, are looking to smaller-format versions of their stores for future growth.
Staples chief executive Ron Sargent said Wednesday that a merger would help the brands compete more effectively.
“I think this is kind of a historic opportunity to reset pricing,” Sargent said Wednesday morning on a conference call with investors, a signal that the merged companies would aim to compete more aggressively on price with Amazon. Together, the brands would have about $39 billion in annual sales and about 4,000 stores.
The companies said that they expect to dramatically cut costs on advertising, marketing and administrative functions if the merger is completed.
“We expect to recognize at least $1 billion of synergies as we aggressively reduce global expenses and optimize our retail footprint,” said Sargent. “These savings will dramatically accelerate our strategic reinvention, which is focused on driving growth in our delivery businesses and in categories beyond office supplies.”
Both stores say they plan to continue with previous plans to close some of their outposts. Staples said last year it would close 225 of its stores by mid-2015; Office Depot has said it would close 135 stores this year. While executives did not say exactly how the proposed merger would affect their store count, they said that about half of Staples stores are within five miles of an Office Depot store, giving them good reason to rethink the quantity and location of many of their outposts.
The companies said their talks began in September and that they hope to complete the merger by the end of 2015.  The proposal is awaiting the review of federal regulators, who blocked a merger between the retailers nearly two decades ago.  Still, Office Depot was permitted to buy OfficeMax in 2013, a signal that the emergence of new e-commerce players in the office supplies market may have changed the way such a deal would be viewed.
“It’s really not our place, nor could we even possibly handicap what the FTC might say,” Sargent said.
Staples says much of its revenue –46 percent last year — came from products that were not office supplies, and they expect that share to grow to 48 percent this year.  In other words, Staples, too, is a much different store than it was the last time the FTC weighed a potential merger.
Executives said they plan to keep Staples’ headquarters in Framingham, Mass., and “plan to evaluate maintaining a presence” in Boca Raton, Fla., where Office Depot’s headquarters are located. Sargent is to be the chief executive of the merged companies.

Man killed himself after benefit changes left him owing £800, inquest told

Malcolm Burge, 66, had previously written to Newham Council telling them he was 'depressed, stressed and suicidal' because of the demand

A retired gardener took his own life after begging for help when changes to his benefits left him owing more than £800 – in a case that highlights the bureaucratic cruelty of the welfare system.

Malcolm Burge, 66, killed himself at Cheddar Gorge, Somerset, after being pursued for the sum by his local authority, an inquest into his death has heard.
He had previously written to Newham Council telling them he was “depressed, stressed and suicidal”.
“I have no savings or assets. I am not trying to live, I am trying to survive. I can’t remember the last time I had £800.”
West Somerset Coroner Michael Rose said he would write to Newham Council to encourage them to establish a system to help the “most vulnerable” residents deal with the benefits system, after examining the case of the pensioner, who took his own life on 28 June last year.
Letters presented to the inquest revealed Mr Burge had tried repeatedly to seek help and telephone the council but had been bounced around an electronic switchboard.
Government changes to welfare in January 2013 meant his weekly housing benefit, paid by Newham, should have been slashed from £89.39 to £44.75 – but this was not implemented due to a “backlog” at the authority. Mr Burge continued to receive the higher amount – and was shocked when the authority issued a demand for an £809.79 overpayment.
Describing the case as “tragic”, the coroner said: “Mr Burge had obviously been caught up in the change of the benefits system. In fairness to the council they have admitted failure due to a backlog.”
Mr Rose continued: “People of this age don’t always have laptops or iPads and can’t use the internet. It is almost an excuse now to ignore one’s responsibilities and say ‘look up the website’.”
In his ruling Mr Rose criticised the response of Newham Council, which sent 10 letters asking for the money. “They didn’t fully address Mr Burge’s queries and their tone was not appropriate,” he said. “It seems clear he was a man who needed help and was in distress. Unfortunately, Newham Borough Council were unable to give it to him.
“There was no deliberate attempt to avoid payment, he was overwhelmed by the sum. The council were overwhelmed by the number of cases that they had.” The coroner concluded that Burge had taken his own life.
Mr Burge’s niece Sharon Watts said the man had lived in the City of London cemetery with his parents throughout his life. In 1992 his mother died and so Mr Burge became a full-time carer for his father. “He devoted his entire life to helping his father,” Mrs Watts said. “None of us knew. His pride kept him away from asking us and we would have helped him.”
A Newham Council spokesperson said: “Our thoughts are with the family and friends of Mr Burge. In our submission to the coroner, we acknowledged delays and deficiencies in our extensive correspondence through letters and phone calls with Mr Burge. We are sorry if this contributed to his death in any way.”
Suicide is a preventable cause of death and anyone who feels they may be at risk should contact The Samaritans on 08457 90 90 90.

1929: recession->depression-> currency war->trade war->world war. Sound familiar?

ECB Money Printers At Work: As Europe Slides Into Recession—–Lending Standards Keep Deteriorating
For the first time in thirty-five months, overall lending in Europe was higher year-over-year. Not since January 2012 had that been the case, as shrinking in lending was a de facto monetary limit on where the ECB wants the European economy to go. And while one month is not necessarily the start of a durable trend, indications had been for some time that total lending activity had at least been flattening out after the long decline.
image: http://www.alhambrapartners.com/wp-content/uploads/2015/02/ABOOK-Feb-2015-Europe-Lending.jpg
While we don’t know for sure how much the T-LTRO’s had as an effect on any net increase in lending, however tiny, the disappointment over the takeups in September and December does not mean there was no effect at all. And that is precisely the problem, as the monetary pathway for all of this monetarism is intended to ease any restraints on lending as if restraint were everywhere and always a negative outcome. In other words, the ECB practically begged banks to lend, to the tune of hundreds of billions in indirect funding, including €212.44 billion in T-LTRO’s cumulative, interbank rates persistently below zero, yield curves collapsed everywhere and the result was December 2014 lending was just €5.1 billion above December 2013.
http://davidstockmanscontracorner.com/ecb-money-printers-at-work-as-europe-slides-into-recession-lending-standards-keep-deteriorating/

Currency Wars Heat up as Central Banks Race to Cut Rates
The Chinese Year of the Ram will kick off at the end of this month, but for now it looks as if 2015 will be the Year of the Central Banks.
I spend a lot of time talking about gold, oil and emerging markets, and it’s important to recognize what drives these asset classes’ performance. Government and fiscal policy often have much to do with it. But in the past three months, we’ve seen central banks take center stage to engage in a new currency war: a race to the bottom of the exchange rate in an attempt to weaken their own currencies and undercut competitor nations.
Indeed, amid rock-bottom oil prices, deflation fears and slowing growth, policymakers from every corner of the globe are enacting some sort of monetary easing program. Last month alone, 14 countries have cut rates and loosened borrowing standards, the most recent one being Russia.
A weak currency makes export prices more competitive and can help give inflation a boost, among other benefits.
“The U.S. seems to be the only country right now that doesn’t mind having a strong currency,” says John Derrick, Director of Research here at U.S. Global Investors.
Since July, major currencies have fallen more than 15 percent against the greenback.
image: http://67.19.64.18/news/2015/2-3fh/image002.png
http://news.goldseek.com/GoldSeek/1422975900.php

Gregory Mannarino: Cracks in the Debt Bubble – World War III has Started

“This is being done on purpose to punish the Russian economy. This is economic warfare 101, and it’s going to lead to a shooting war. Not only is it going to lead to a shooting war, this is the grand plan…What people need to understand is the collapse is here now. World War III has started, so this is it people. There is no more waiting.”

Four Trade War Questions; PMI Reports; Currency Manipulation Chargeshttp://globaleconomicanalysis.blogspot.com/2015/02/four-trade-war-questions-pmi-reports.html#hfec9hOVdEhSAfbU.99
“A trade war brewing between India & the US?
http://www.livemint.com/Opinion/JJtdXFRyKSf87rTIQQoAKP/A-trade-war-brewing.html
S**t is getting real…this is the start of a trade war. NYT: New Rules in China Upset Western Tech Companies
http://www.nytimes.com/2015/01/29/technology/in-china-new-cybersecurity-rules-perturb-western-tech-companies.html
Superpowers Battle Over Greece As Europe Trembles With Fear Of World War III
http://kingworldnews.com/superpowers-battle-greece-europe-trembles-fear-world-war-iii/
U.S. Gov/Central Bankers Are Accelerating War To Cover Up The Economic Collapse

 

The Parasite Economy

Government handouts make parasites out of many of us.

 

Politicians and lawyers pretend that they are important people doing important work. But often they're important because they are parasites. They feed off others, while creating no wealth of their own.

We all complain about businesses we don't like, but because business is voluntary, every merchant must offer us something we want in order to get our money. But that's not true for politicians and their businessman cronies. They get to use government force to grab our money.
Those people who take instead of producing things make up "the parasite economy," says Cato Institute Vice President David Boaz. It's my favorite chapter in his new book, The Libertarian Mind. The parasite economy, says Boaz, thrives wherever "you use the law to get something you couldn't get voluntarily in the marketplace."
That includes much of the military-industrial complex, "green" businesses that prosper only because politicians award them subsidies, banks that can borrow cheaply because they're labeled "too big to fail," and—unfortunately—me.
All of us are parasites if government granted us special deals. Some parasites (not me) lobbied for their deal. "You might use a tariff to prevent people from buying from your foreign competitors or get the government to give you a subsidy," says Boaz. "You might get the government to pass a law that makes it difficult for your competitors to compete with you."
This quickly creates a culture where businesses conclude that the best way to prosper is not by producing superior goods, but by lobbying. Politicians then tend to view those businesses the way gangsters used to view neighborhood stores, as targets to shake down.
Says Boaz, "You have politicians and bureaucrats and lobbyists coming around to these companies and saying, hey, nice little company you've got there, too bad if something happened to it. ... They start suggesting that maybe you need to make some campaign contributions, maybe hire some lobbyists, and maybe we'll run an anti-trust investigation, and maybe we'll limit your supply of overseas engineers. And all of these things then drag these companies into Washington's lobbying culture."
And as I mentioned, it's not just companies that get dragged in. I built a house on the edge of the ocean. People weigh the costs and benefits of building in risky places like that. Without government's encouragement, I would have just built someplace else. But because politicians decided that government should be in the flood insurance business, and then other politicians decided that government's insurance business should offer cheap rates, I did build on the beach.
Even though my property was obviously a high flood risk, my insurance premiums never exceeded $400 a year. Ten years later, my house washed away, and government's insurance plan reimbursed my costs. Today, the federal flood insurance program is $40 billion in the red.
In other words, you helped pay for my beach house. Thanks! I never invited you there, but you paid anyway. I actually felt entitled to the money. It had been promised by a government program! But it was wrong, and I won't collect again. I don't want to be a parasite.
But it's tough, because government keeps making offers. Government handouts make parasites out of many of us.
Compare politicians and politicians' cronies to tapeworms and ticks. Like parasites in nature, the ticks on the body politic don't want to kill the host organism—meaning us. It's in politicians' and regulators' interest to keep the host alive so they can keep eating our food and sucking our blood.
After watching members of Congress applaud President Obama during his last State of the Union address, I came to think that politicians were worse than tapeworms and ticks. The president bragged about American energy production being up. Domestic energy is up, but it's up because of private sector innovation, not government. In fact, it's up in spite of administration rules that make it harder to extract oil from public lands. Yet many in Congress applauded the president's misleading claim.
At least tapeworms and ticks don't expect us to clap.

How Uncle Sam Became a Bank Robber

Civil forfeiture and money laundering laws let the IRS seize the accounts of legitimate businesses.

During her confirmation hearings last week, Loretta Lynch, President Obama's choice to succeed Eric Holder as attorney general, called civil forfeiture, a form of legalized theft in which the government takes people's property without accusing them of a crime, "a wonderful tool." Lynch, currently the U.S. attorney for the Eastern District of New York, suggested that innocent owners need not worry about getting hammered by this tool, because forfeiture "is done pursuant to supervision by a court," and "the protections are there."

In light of a forfeiture case that Lynch's office had abruptly dropped the previous week, her assurances rang hollow. The case, involving $447,000 that the government stole from a Long Island business and sat on for nearly three years, illustrates the injustice inflicted by seizures in which a "crime" that harms no one becomes an excuse for bank heists that enrich the agencies perpetrating them.
Since 1970 the humorously named Bank Secrecy Act has required financial institutions to report deposits of $10,000 or more to the Treasury Department, because such large sums of cash are obviously suspicious. You know what else is suspicious? Deposits of less than $10,000, because they suggest an attempt to evade the government's reporting requirement, which has been a federal crime, known as "structuring," since 1986.
In 2012 a Nassau County, New York, detective decided the banking records of Bi-County Distributors, a family-owned business that sells cigarettes and candy to convenience stores, were "consistent with structuring." That judgment was enough to trigger an IRS seizure of all the money in the account, which caused an immediate financial crisis for Bi-County's owners, brothers Jeffrey, Richard, and Mitch Hirsch. 
For the next 32 months, the Hirsches struggled to keep their business afloat, relying on credit extended by longtime vendors. In all that time, the brothers never got a hearing before a judge. Instead they received a series of offers from Lynch's office, which refused to give the money back but said the Hirsches could have part of it if they surrendered the rest.
In the end, with her confirmation hearings looming and the case generating negative publicity, Lynch agreed to return all the money. "Nobody in America should have to live through the nightmare we've experienced," says Jeffrey Hirsch. "Civil forfeiture nearly destroyed our business, even though we did nothing wrong."
The Bi-County case is by no means unique. The Institute for Justice, which represented the Hirsches, has lent its pro bono assistance to several other owners of cash-intensive businesses who inadvertently aroused the government's suspicion by making insufficiently large deposits, including an Iowa restaurateur and a Michigan grocer.
In all of these cases, there was no evidence that the money came from illegal activity, that the business owners were deliberately trying to hide their deposits, or that they knew doing so was illegal. Yet under civil forfeiture rules, their frequent deposits below the $10,000 threshold supplied "probable cause" to seize their hard-earned money.
From 2005 to 2012, according to a new report from the Institute for Justice, the IRS seized $242 million based on suspected structuring in more than 2,500 cases. During that period, the number of cases rose fivefold and revenue increased by 166 percent, but the gap between the amount seized and the amount ultimately forfeited also grew, suggesting the IRS has becoming increasingly reckless with the rights of innocent owners.
After The New York Times started asking questions about these money grabs last October, the IRS said it "will no longer pursue the seizure and forfeiture of funds associated solely with 'legal source' structuring cases unless there are exceptional circumstances." Legislation introduced last week by Sen. Rand Paul (R-Ky.) offers a more reliable solution, requiring prompt probable-cause hearings for people whose money is seized and allowing forfeiture only when they "knowingly" sought to avoid bank reports of "funds not derived from a legitimate source."
Contrary to Lynch's assurances, the protections are not there. But they could be.

 

More Greeks Approve Of Russia's Leadership Than Europe's

You know Merkel, Draghi, Dijsselbloem et al. have a problem when... More than one in three Greeks (35%) in 2014 approved of Russia's leadership, while fewer than one in four (23%) approved of the EU's leadership.


As Gallup reports,

Greeks' higher approval ratings may reflect the cultural, religious and economic ties that Greece has enjoyed for years with Russia, one of the country's major trading partners. But they also echo Greeks' strong displeasure with the EU's leadership, which they are more likely to have an opinion about than Russia's. Nearly as many Greeks have no opinion of Russia's leadership (30%) as approve (35%) or disapprove (35%).

*  *  *
It would appear the people will not be too pupset should the Putin Pivot provide the next level of financial aid?

Germany's worst nightmare has come true

The Germans never wanted the single currency in the first place - they knew what it would lead to 

It’s Germany’s worst nightmare. Increasingly isolated, ganged up on, and even hated by much of southern Europe, it is fast losing the argument over the future of the euro.

Even the Governor of the Bank of England, Mark Carney, has been at it. This week he joined in the German bashing with a full-frontal attack on Berlin’s austerity agenda. And it’s causing confusion, dismay and resentment in equal measure in this most stable, disciplined and civilised of nations.

To understand the decisive shift in narrative that has taken place in Europe over the last couple of weeks – from the defeat Germany has suffered at the hands of the European Central Bank, to the Syriza victory in Greece and its demands for debt forgiveness – you have to go back to the euro’s origins and Germany’s place in it.

Germans never wanted the single currency in the first place, for like Britain, they instinctively understood where it would lead – to a fiscal, or transfer, union which Germany, as Europe’s dominant economy, would be forced to bankroll. If given a referendum, they’d have said no.

But European monetary union was the price Germany had to pay for reunification; it was a way, other European nations naively believed, of containing the newly enlarged country and ensuring that it was properly integrated into the rest of Europe. To them, it seemed the answer to Europe's historic problem - Germany was too large and economically powerful ever to be properly defeated, but the potential threat it poses to the rest of Europe could perhaps be defused through economic integration. Most Germans, now a peace loving people, broadly go along with this "solution" to the problem. The point of dispute is rather about the degree of integration.

To buttress itself against economic pollution from the south, Germany surrounded the new currency and its institutions with safeguards. Fiscal and monetary transfers between nations were specifically banned, and rules were put in place that would supposedly ensure fiscal discipline. None of them has proved equal to the task, and none of them is ultimately compatible with a single currency that actually works.
Since the onset of the financial crisis, Germany has suffered one defeat after another. Every line in the sand has been breached, culminating last week in the Bundesbank’s failure to block ECB money printing, a remedy which may or may not have some merit for the beleaguered economies of the south but is culturally anathema to Germans as well as largely inappropriate for their economy. It's also a money transfer by the backdoor.
The bottom line is that the single currency hasn’t worked for anyone. It’s proved as unsatisfactory for Germany as it has for Greece, Spain and Italy. Happy families are all alike, begins Tolstoy’s Anna Karenina; every unhappy family is unhappy in its own way. The observation could have been written for Europe’s experiment in monetary union.
If something cannot go on forever, it will stop. So said Herb Stein, one time economic adviser to President Richard Nixon. So far, the euro has defied this truism. Unsustainable it may be, but the single currency has also proved remarkably resilient. Despite the damage, nobody wants to give it up, including the Germans, who grudgingly admit to a huge export dividend from participation. What’s more, the last thing Berlin wants is to be seen as blowing up Europe for the third time in a century.
War guilt ensures that Germany will not be the first to pull the plug. Somehow, it has to try to make it work. Berlin is therefore doomed to persist with a project which fundamentally Germans don’t want and has caused economic ruin throughout much of the rest of Europe.
By the by, Germans again find themselves depicted as the Continent’s bad guys, with the new Greek government demanding reparations for wartime afflictions and repeatedly reminding Germany of the hypocrisy of its position by pointing to its history as a serial defaulter. A currency meant to unite Europe has only further divided it.
From the start of the crisis it has been obvious to all dispassionate observers that it can only really end in two ways. Either the eurozone must move rapidly towards the sort of transfer union which Germany has spent the last 15 years resisting, or it must be reconstituted in more sustainable form – that is the monetary separation of Germany and its satellites from the less competitive south, arguably including France.
European elites have been in a state of denial about this choice, with their response to the crisis characterised by grudging incrementalism. There are too many egos, too many careers and too much vested interest bound up in it all to admit the reality.
Now up pops little Syriza to speak truth to power. Whatever you might think about Syriza’s substantially unrealistic economic agenda, and its apparent love affair with the brutish Vladimir Putin, on monetary union at least, its leaders have told it as it is.
“The eurozone is going to be toast within a couple of years”, says Greece’s new finance minister, Yanis Varoufakis, unless it can create “shock absorbers and what I call surplus recycling mechanisms”. No monetary union that demands its debtor nations constantly shrink their economies in order to keep up with the repayments can last for long. The current situation is indeed a form of debtors prison, and a completely counter-productive one, for if you deny the debtor the ability to work off his debts, he'll never repay them anyway.
Germany as much as Greece - virtually the whole of Europe, managed to deceive itself when the euro was formed. Everyone feels bruised and wronged by the experience. To blame disciplinarian Germans is as pointless as profligate Greeks. It is half-formed monetary union which is the problem, not the wicked Germans, and it has proved a catastrophe for all involved. The more important question now is whether unwinding it would be an even greater one, or whether something more durable might be salvaged from the wreckage. The geo-political stakes are as important as the economic ones. If Greece is thrown to the wolves, what does that mean for a country with a history of military coups? What does it mean for democracy, and for Europe's already ineffectual role as a buttress against Putin's imperial ambitions? Germany has some big decisions to make.

 

Fed TRAPPED as QE Fails! Congress Discuss NOT Bailing Out Pension Funds!

Sources:
“Economy grew 2.6% in the fourth quarter”
http://www.usatoday.com/story/money/b…
“Q. and A. With Charles Plosser of the Fed: Raise Rates Sooner Rather Than Later – NYTimes.com”
http://www.nytimes.com/2015/01/30/ups…
“You need to make $108,092 a year to live comfortably in D.C., report says – The Washington Post”
http://www.washingtonpost.com/news/lo…
“Salary it takes to live comfortable in these expensive cities”
http://data-wrapper.s3.amazonaws.com/…
H Res 41 pension fund
http://www.gpo.gov/fdsys/pkg/BILLS-11…
“Eurozone alarm grows over Greek bailout brinkmanship”
http://www.cnbc.com/id/102387514#.
shanghai composite index stock market crash collapse
http://www.zerohedge.com/sites/defaul…
brazil economy growth deflation inflation http://www.zerohedge.com/sites/defaul…
http://www.zerohedge.com/sites/defaul…