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Commentary on The Capital Markets- Category [International]

If you read Leverage you know my view on trade: The United States must impose wage-and-environmental parity tariffs on goods and services produced for sale in the United States and which (1) are not produced in compliance with US wage and working condition laws and/or (2) arbitrage environmental regulations so to evade cost by imposing environmental expense on those in other nations.

It is trivial to become the "lowest cost" producer of any good or service by simply ignoring environmental responsibility (e.g. dumping your expensive-to-treat toxic waste in the nearest river) or abusing employees through either extraordinarily low wages that are only acceptable due to either generally-terrible economic conditions or worse, effective slave labor.

An example of the latter is destroying an agricultural society's ability to continue to farm for their subsistence, effectively forcing them into factories to survive.  Examples of both can be found in nations like Vietnam and China -- for openers.

There is utterly no reason for our nation to allow this other than intentional destruction of our middle class workforce and, ultimately, our economy for the benefit of a very few at the very top of large, multi-national corporations.

Now Reuters is weighing in:

Twenty-one years after NAFTA and four years after Obama’s 2011 U.S.-South Korea Free Trade Agreement, there is abundant data documenting how this trade model has been disastrous for most U.S. businesses, farmers and workers.

Since the pacts were implemented, U.S. trade deficits, which drag down economic growth, have soared more than 430 percent with our free-trade partners. In the same period, they’ve declined 11 percent with countries that are not free-trade partners. Since fast-track trade authority was used to pass NAFTA and the U.S. entrance into the World Trade Organization, the overall annual U.S. trade deficit in goods has more than quadrupled, from $218 billion to $912 billion.


The only real answer to this is to cut the crap with the so-called "free trade" paradigm and instead implement a tariff system that recognizes the differences in production cost that are driven by what amounts to arbitrage against people and the environment.

Neither the Republican or Democrat party is interested in this issue, and the reason is simple: The various business interests have only one thing they're concerned about: their bottom line.

This is not surprising, of course; the point of running a company is to make a profit.  But the government is supposed to represent people; corporations can lobby but they cannot vote.

The bottom line on this issue is that the failure is ours as citizens -- we refuse to put this issue front-and-center and demand that this rank giveaway to the 0.1% of Americans (never mind foreigners!) at the gross expense of American citizens be stopped.

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Someone needs to call these people out, and since nobody is in the media, I'll take my best shot.

"The problem is that Greece has lived beyond its means for a long time and that nobody wants to give Greece money anymore without guarantees," Schaeuble said, noting that Athens had to stick to agreed reforms to become competitive.

The problem is that all of these nations have been living beyond their means for a long time and Germany has been condoning both their budgetary frauds and financing them with full knowledge that they were occurring.

But what's worse is that nobody is actually reducing their debt loads anywhere in the developed world.  Not over there in Europe and not here in the United States.  The gross amount of federal government debt outstanding in the US, for example, rose by more than $1 trillion last fiscal year, while the claimed federal deficit was ~$400 billion.  The claimed deficit is a lie; the simplest and most-accurate means of determining how "in debt" you are is to subtract the amount outstanding at the end of the period from that at the beginning.

In this case that's $17,824 billion less $16,738 billion, or $1,086 billion dollars -- just over $1 trillion.

No "program" that does not lead to an actual reduction in debt is in fact operating at a "surplus"; it is simply piling on geometrically-larger amounts of debt and will eventually lead to the destruction of the economy and government in question.

The only argument is over when that occurs, not whether it occurs.

Schaeuble added that the new Greek government was behaving "quite irresponsibly" right now and that it was no help to insult others who have supported the country in the past.

Utter, complete, intentional crap.

In other words, a lie.

You are not "supporting" a drug addict when you're giving them ever-increasing amounts of money that they blow on drugs.

You are enabling their destructive behavior and in fact are complicit and approve of it; proof of same is found in the funds flowing out of your pocket.

Germany, along with other members of the "troika", seem to think they can hide behind the mantra of responsibility.  In point of fact Germany was no more acting "responsibly" than was the bank that gave a person in the US a mortgage based on knowingly fraudulent claims of income and assets, which in the United States was known by its proper name: A liar loan, or if you prefer, NINJA (No income, No job, No assets.)

Anyone giving someone a "loan" under such conditions, when they know that is the state of the "borrower", is in fact making a gift, not a loan, as they have no rational premise for believing they will ever get paid.

There must be recognition of this fact and there must be consequences for doing so, if for no other reason than there can be no such thing as a "free market" in anything, including debt, unless bad decisions result in bad outcomes.

The simplest consequence is for Greece to point out that all lending to a sovereign is in fact unsecured and therefore if you "lend" money to said government while in possession of knowledge that they never have and never will run a cash-basis surplus, that is they will never retire any of the debt taken on but will only roll over ever-increasingly large amounts of it then you have made no loan at all but instead have given money away because it is impossible, on an indefinite forward basis, for that debt to ever be paid off.

In other words the lenders to Greece knowingly participated in a fraud, in this case for their own economic and political purposes, and they deserve to lose every single dime they put in.

There is only one other interpretation of any such "loan": It was made with the intent of destroying the government it was made to; that is, it was an act of war (if made by an external party to that government) or an act of insurrection if made by entities inside said nation (including the central bank of same or commercial banks within said border.)

In that case the proper response is to treat said act of war as what it is and respond appropriately.

Greece should both default and stay in the EU.  They would then have to operate within their ability to tax as a government while still maintaining duty-free access to the European market area, whether Germany and others like it or not.  Their government could not devalue their way out of debt; instead, they would be forced to choose whether to pay or repudiate it.  They should repudiate at least all of that "given" to them since the bailout "program" started, and perhaps repudiate it all.

When called on their default Greece's response should be to point out that either the so-called "loans" were in fact gifts or they were an act of war intended to destroy the government and sovereignty of the nation.

Schaeuble is a pig, as are the rest of the Troika malfeasors.

I say let them eat the default they so richly deserve and if, in the fullness of time, they make statements or take actions making clear that their intent was to destroy the sovereignty of the Greek Government then they deserve to eat the just consequences of declaring war on a sovereign nation as well.

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You know which one too...


(Bloomberg) -- 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.

Fraudulent lending (lending to someone who is already bankrupt is fraud) was perfectly fine right up until there was a possibility that Greece would not agree to ever-ratcheting horsecrap -- which, by the way, ultimately ends with the nation being looted to its literal underwear and bare ground.

So now the law matters.  For the moment. But if Greece will just agree to break the law some more, then the ECB will too.

Greece needs to maintain its sack and tell Merkel and the ECB to***** off.  If it comes to it they need to back that up with some nice official threats of violence too; after all, it's perfectly ok when nations blow things up and shoot people, right? /sarc

/Long lamppost and boiled rope futures, and the popcorn is ready to go for the show.

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The game is afoot...

Money is increasingly tight. Throughout the crisis, Greece has been able to meet its obligations, even while locked out of international debt markets, by issuing short-term bills that local banks can buy and then pledge to the ECB as collateral for further funding.

The government faces a string of tests to its solvency over the next two months, like the repayment of about 2.2 billion euros ($2.5 billion) in bailout loans and interest to the International Monetary Fund, while the trusted route of rolling over treasury bills is becoming less certain.

Greek banks have already reached a 3.5-billion-euro limit on treasury bills that the ECB authorizes as collateral for loans. To make matters worse, tax revenue has slumped by more than 2 billion euros in the past two months, leaving the government more reliant than ever on the banks.

Greek banks’ eligibility for ordinary ECB cash facilities, using junk-rated Greek government bonds as collateral, has always been subject to the country being in a euro-area bailout program.

That's illegal under the ECB's charter, but they don't care.  The ECB, as with our Fed, is only allowed to take bonds that are actually repayable (in other words, by their charter and the EU's Constitution the ECB is forbidden to issue what amounts to financed spending through currency depreciation.)

Of course this has now been famously ignored with their so-called "QE" program, but the fact remains that it's blatantly in violation of the foundational documents of the union.

It happened anyway because it was the only way to continue to pretend that the EU is able to "live within its means."

The fundamental problem Greece (and most of the rest of the EU) has is that their government has thus far been incapable of running on their cash flow. You can not continue to run beyond your cash flow indefinitely; you can borrow from tomorrow's cash flow but if tomorrow never comes and is always extended then the funds you "borrowed" were actually stolen exactly as if taxed through the destruction of purchasing power of your citizens.

This is a mathematical truth and no amount of arm-waving can change it.  It is the reason that "QE" cannot work as claimed.  It can boost asset prices (for a while) and it can (and does) create bubbles but it cannot create sustainable demand because the destruction in purchasing power is immediate when the QE operation takes place.

That is, the claim that it will "stimulate demand" and that demand will in turn lead to more economic activity on a forward basis is a lie as the destruction in purchasing power is exactly equal to the so-called "stimulation."  It has to be as a matter of arithmetic.

Greece now has a finance minister willing to say this in public, and he has.  The citizens of Spain are now watching closely, and I suspect that's true in other parts of the European Continent as well.

There is no actual solution that does not come about as a consequence of governments living within the amount of money that can be taxed in the present tense irrespective of claims otherwise.

You can delay recognition of this fact but you cannot avoid it.

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