Mystery Economic Theater 2015

[only_human]

Originally Posted by Fusion_power

As a beekeeper, I'm in favor of everyone knowing that 1/3 of the food we consume relies on bees. Do you like steak? Cattle are fed a lot of alfalfa which requires pollination to produce seed. It took a bee to make that steak! Yes, I know that corn is also a preferred feed for cattle and it is wind pollinated.

And the cows just wait around for a handout! Do they pollinate? Do they pick their own corn?

Grexit is back on the front burner. There comes a point where the most obvious solution to a problem is to apply the axe. Greece has financially abused and misused EU membership. IMO, it is about time they were kicked out on their ear. Will it be painful? Yep. Will the market twang like a bow fired without an arrow? Yep. Will we live over it? Yep.

The Lone Ranger at the Battle of Big Horn: "We are surrounded!"
Tonto: "What do you mean by 'we,' white man?"

Painful times are indeed coming and it will effect an effect that will affect the future landscape.

[only_human]

City controller: L.A. paid Wells Fargo for 'nonexistent' check printing

Los Angeles City Controller Ron Galperin says the city paid more than $500,000 to Wells Fargo Bank for “nonexistent services” -- charges for printing checks that the city was actually printing itself.
//...//
The city controller's office scrutinized invoices and tallied up more than $500,000 in charges for printing vendor and payroll checks between February 2012 and March 2015, despite the fact that Los Angeles prints such checks using its own systems, Galperin wrote.

Galperin aides said the total amount that the city was billed for such services may be higher because the bank contract dates from 2008.

Under that contract, Wachovia Bank -- which was acquired by Wells Fargo -- was to provide a wide range of banking services, including direct deposit services, payroll tax processing and electronic receipt and payment platforms.

But it's only half a million. IMO, there's stuff like this all over: blah, blah, blah; it's only money. Why should a bank be honest?

[ewmayer]

Why the Uber ruling shows the ‘sharing economy’ is bunk - MarketWatch

An NC reader comments:

Those of us working in this area (i.e. alternative economics) have been saying this since the beginning. It’s not sharing if money is required to change hands!

There is, however, a real sharing economy composed of practices like time-banking, free stores, offers-and-needs markets, creative commons licensing, community gardens, etc. Heck, even this here blog counts, seeing as how the content is provided free and the bills are paid largely by donations.

I just hope this whole Uber/AirBnB stuff doesn’t turn everyone off to the idea of sharing as a real economic practice (that doesn’t involved the demand for Federal Reserve notes). There is a real sharing economy out there–I just hope it doesn’t get buried under all the BS…

All the folks on this site who contribute in some way to the free software movement, or in freecycling, donate their time/money to worthy causes &c are participants in the above "real sharing economy".

[only_human]

Greece debt crisis: Eurozone refuses bailout extension
11 minutes ago, BBC News

Eurozone finance ministers have rejected a Greek request to extend a bailout programme beyond 30 June.

Eurogroup head Jeroen Dijsselbloem said talks on a new bailout had been ongoing on Friday when Greece called a surprise referendum over the terms of any deal.

By doing so they broke off the process, he said.

[Nick]

Originally Posted by only_human

Greece debt crisis: Eurozone refuses bailout extension
11 minutes ago, BBC News

This time, the situation could be serious.

[ewmayer]

Tsipras' Bailout Referendum Sham | naked capitalism

This has a summing-up which is worth a lengthier excerpting than I normally use:

Let us consider the standards by which Tsipras’ and Syriza’s conduct should be judged. Syriza knew that Merkel rejected a request by the the Samaras government to have more time to implement politically toxic (and economically damaging) pension and labor market “reforms”. Merkel saw them as unfinished business of the so-called second bailout of 2012. Syriza came into power as a result of this outtrade, promising to negotiate better treatment after the old government had failed while staying in the Eurozone.

The creditors are known thugs. They have engaged in harsh austerity, putting it in one of the very worst downturn in an economy not in a state of war , used Greece to launder bailouts to French and German banks, not given Greece credit for having implemented numerous “reforms” and broke the last government. Paul Mason is correctly very critical of how the creditors behaved last week. Even I was surprised that they’d press their advantage so far when Tsipras has already crossed a red line while desperately trying to pretend he hadn’t by claiming he wasn’t cutting pensions when actually doing so by requiring increased contributions from retirees.

But again, this goes back to the underlying and still apparently unresolvable gap between the creditor and Greek positions: many of the governments, all of which must approve a bailout, need to have Greece make what they see as meaningful pension cuts. Greece, as Samaras told Merkel in 2014, can’t go as quickly down that path as the creditors demand. And the IMF rejected the Greek finesse of tax increases because Greece has been told for years to fix its collection apparatus and has failed to do so. However, the brutal response should have been no surprise. Anyone who followed how Cyrpus was treated in its banking crisis would know how ruthless Eurozone institutions can be (in that case, the heavy was the ECB)

Among Sun Tsu’s rules of war are “Know your enemy” and “Know yourself”. Syriza appears to have not bothered understanding what they were up against They have seemed to be in denial for the last two months that the creditors were not afraid of a Greek default. Their assumption appears to have been that the national governments would find it too politically toxic to recognize losses on the debt they had extended to Greece through the EFSF and the Greek Bailout Fund. But maturities on these facilities have been extended and payments deferred. And the national governments do not have to mark to market. They will recognize losses only if and when Greece fails to make payments, which is years down the road. And even then, the pain is spread out over decades. That means Greece’s supposed nuclear weapon turns out to be a pop gun.

Thus the question is, will the course of action that Syriza has chosen make the lives of ordinary Greeks better? Are partial defaults on pensions and salaries good for the extended Greek families that Syriza professes to care about? Are capital controls and the likely failure of the Greek banking system, which includes depositors taking near-total losses on any funds they weren’t able to extract? Remember, the parties that are most likely to be stuck in that position are medium-sized businesses, meaning the impact will be seen in even more business failures and loss of jobs (remember, capital controls and bank holiday alone will go that, as the recent example of Cyrus attests).

And a big piece that I have yet to see commentators acknowledge: Greek defiance of its creditors will make it more, not less dependent on them in the next year. How badly things turn out for Greece will depend in significant degree on how much they do to ameliorate the impact of the implosion of the banking system, whether they take extreme measures to keep Greece in the Eurozone, and if Greece tumbles out, how much they provide in humanitarian aid and targeted trade financing (most important, for petroleum imports).

Let us look at the alternate scenario and assume that a large percentage of the Bundestag gets brain transplants in the next day or for other reasons decided to be uncharacteristically kind to the Greek ruling coalition. Greece miraculously gets its bailout extension and so the July 5 vote is not moot. Doesn’t that redeem Tsipras as a leader?

In a word, no. What the did Greek government know as of this weekend that it did not know earlier to justify delaying a referendum so long that it it will probably be moot? As Costas Lapavitsas of Syriza’s central committee pointed out in early March, it was evident that the Troika and Eurogroup were not willing to negotiate a new deal, in both senses of the word, with Greece. Tsipras’ strategy had failed and it was time to change course.

Given Syriza’s now clearly contradictory campaign promises, the party could have done extensive, rigorous polling or held a referendum to determine what to do. Tsipras was clearly aware of that as an option; he kept bringing it up in talks with creditors, apparently thinking it was a threat. But Tsipras already had a fresh election and strong popular approval and yet the creditors were not moved. It did not appear to occur to him that they had an easy defense: that Greece may be a democracy, but so to are the 18 other nations that have to agree to a bailout. As misguided as the beliefs of their electorates might be, they have as much of a right to a say as Greece. But Syriza remained fixated on its domestic needs and never even made a decent argument for why there were some legitimate reasons its pension spending was so high, giving it the appearance of having more generous pensions than those of the countries being asked to fund them. The Wall Street Journal made a better case, for instance, than I ever saw from Greek officials.

If the ruling coalition had any doubt that the creditors would not relent in this game of chicken, they should have been settled as of mid-May. In early May, as we mentioned, Schauble taunted the Greek government, suggesting they have a referendum, a clear statement that Germany was indifferent to a Greek default or exit. In mid-May, Tsipras told Merkel and Hollande that Greece would not be able to make an IMF payment due May 11. He claimed later not to know that the government could do what it did, borrow from an IMF reserve as an emergency source of funds. From Merkel’s and Hollande’s vantage, the default threat was no doubt real and they did not blink.

Similarly, Tsipras should have held a referendum long before he stripped the Greek government of funds to keep paying the creditors, since a default is better managed with some cash on hand.

So the only conceivable excuse for waiting this long is for Tsipras to attempt to save himself. If he were to reject the bailout, the decision is unquestionably his and that of his allies. That it precisely the sort of decision that government leaders are expected to make. Or he could just as well accept the bailout, recognizing that as bad as things are, that the country would be plunged into an even deeper economic sinkhole, putting the survival of even more citizens at risk. It would take forming a new coalition with To Potami and New Democracy, and that would mean that his and Syriza’s position would become far more tenuous and he would be fiercely denounced by many if mot most Syriza MPs.

Thus the referendum ruse looks to be about trying to spare Tsipras and Syriza the worst consequences of his having underestimated the creditors and not preparing for worst-case scenarios, which is another responsibility of leadership that he and his party have neglected.

Greece and Germany are operating from deep cultural impulses. One of Greece’s greatest achievements is creating different dramatic types, among them, the tragedy. No matter how the bailout power struggle winds up, Greece is unlikely to obtain any relief. But the country has yet to experience its moment of tragic recognition. By contrast, one of Germany’s cultural touchstones is Wagner’s Götterdämmerung. In it, Brünnhilde loses her divine status and to remove the curse of the ring at the center of the plot, creates a bonfire in which she immolates herself. The fire she has created burns down the gods themselves. We’ve said that Germany’s refusal to relent on its contradictory policies, that of running sustained trade surpluses, not being willing to finance its trade partners, and not supporting more European integration, most of all Federal-level fiscal spending, will burn down Germany’s export markets and eventually engulf Germany itself. Will Merkel be cut down to size in the estimation of history from her current revered status? Götterdämmerung has a much longer running time than any of the great Greek tragedies, so it will take some time to see if the Germans play true to form.

(I provided the needed umlauts in the last paragraph's Wagner references.)

Monday is going to be ... interesting.

[ewmayer]

Musings for a July 4th weekend ... 100 years of corporatist-sponsored patriotism:

Why Don't Americans Take More Vacations? Blame It on Independence Day | naked capitalism

The outbreak of World War I was a Godsend to the Americanization movement. The war stoked nationalist sentiment and with it, suspicion of obvious aliens as at best “un American” and at worst, subversive. President Wilson spoke at a highly staged “patriotic” event for 5000 recently naturalized citizens in spring 1915. This event was so successful that the movement leaders succeeded in forming local Americanization committees all over the US. Quoting Carey:

The CIA [Committee for Citizens in America, not the post-WW2-created spook agency] also produced a brilliant propaganda strategy to involve every American in an annual ritual of national identification. This ritual would embed the cultural intolerance of the Americanization movement with an identification that was formally and officially sanctified. The CIA thereby launched its campaign for the fourth of July 1915 to be made a national Americanization Day, a day for a ‘great nationalistic expression of unity and faith in America’.

Besides being a corporatist tool and bankster lackey (Federal Reserve Act, WWI follow the money) Wilson was also an execrable human being when it came to civil liberties ("exigences of war make it necessary that we suspend certain sections of the Bill of Rights ... well, most of it, actually" -- see reader PhilK's excerpt from Walter Karp's Buried Alive – Essays on Our Endangered Republic in the above NC piece's comments section) and black Americans:

Remembering President Wilson's Purge of Black Federal Workers | Talking Points Memo

[ewmayer]

o Pyrrhussieg: Noch so ein Sieg und Griechenland ist verloren - Die Welt

Sanity check on your auto-translate result: 'Pyrrhusssieg' = Pyrrhic victory, and 'Seine Siege waren in der Tat lauter Kadmeische' = 'His victories were in fact all like those of Cadmus', about whom my dictionary app says:

Cadmus |ˈkadməs| Greek Mythology
the brother of Europa and traditional founder of Thebes in Boeotia. He killed a dragon that guarded a spring, and when (on Athena's advice) he sowed the dragon's teeth, there came up a harvest of armed men; he disposed of the majority by setting them to fight one another, and the survivors formed the ancestors of the Theban nobility.

Aside from the obvious 'Ray Harryhausen was a big fan' angle, it's not entirely clear to me why the writer invokes Cadmus, since Cadmus slew both the dragon and most of the armed dragons-tooth warriors ... perhaps in the sense of the survivors outliving Cadmus and going on to found the Theban upper crust, i.e. 'what did not kill your opponent, makes him stronger.' If so, why not just invoke your fellow German, Nietzsche, except perhaps to show off your classical larnin'?

Pair of Torygraph links:

o Meet Euclid Tsakalotos, the man who has replaced Yanis Varoufakis as Greece's new finance minister | The Telegraph

Please, please, please let his name be pronounced 'Talks-a-lot-us', otherwise we'll have to resort to geeky 'Euclidean financial geometry' quips, and that could get ugly in a hurry.


o On the 'how will Greece replace the troika funding?' front (though note that most of the troika loans actually went to bail out French and German banks with large Greek sovereign debt holdings), note some outlets - of course including the "we never saw a wild rumor we didn't like" folks at ZeroHedge - have claimed that Greece can simply print all the physical Euros it likes. Aside from the questionable legality of that (and that would surely cause the ECB to halt any ELA-aid to Greece immediately, and basically ignite a full-on financial war between Greece and the rest of the EMU), there is the practical issue that the Greek printing facility is apparently only set up to print 10-Euro notes, and surely there are not enough of the needed materials for printing the literally billions of such notes which would be needed to replace the Greek-targeted portion of the troika bailout lending facilities.

So various forms of parallel currencies come into play, such as

Greece's Yanis Varoufakis Euclid Tsakalotos Prepares for Economic Siege as Companies Issue Private Currencies | The Telegraph

Businesses in Thessaloniki and other parts of the country are already creating parallel private currencies to keep trade alive and alleviate an acute shortage of liquidity.

Vasilis Papadopoulos, owner of the Maxi paper mill in Katerini, said the situation was becoming desperate for his industry. "I have enough raw materials to last until July 14. If I don't get any more pulp, I will have to close the factory. It is a simple as that. I have 183 employees and I will have to start laying them off," he said.

I wonder if Mr. P. is a distant relative of our own jasonp?

Expect to see a huge rise in local-cooperative initiatives, barter and local scrip. Hopefully enough of the post-Nazi-occupation generation are still alive to help show the youngsters how it's done.

And to reward readers patient enough to make it to the end of this post, from the UK analog of The Onion: Greeks apologise with huge horse | Daily Mash

"Perhaps we could build a large wooden badger..."

[only_human]

Originally Posted by ewmayer

I wonder if Mr. P. is a distant relative of our own jasonp?

I don't know but I intend to be more sensitive and restrained this time around.
(from shutdownarama 2013 thread

Originally Posted by jasonp

Oh, and remember all the schadenfreude around here about Greece? That was my family too.

[ewmayer]

o Europe is blowing itself apart over Greece - and nobody seems able to stop it - Telegraph

If the subhead of that piece about Mr. Tsipras is true, it's a 'WTF?' of the highest order.

o Nuland's Nemesis: Will Greece Be Destroyed to Save Her From Russia, Like Ukraine? | naked capitalism

It became clear in June that the mood among the creditors had hardened and that they had decided the current Greek government had to go. I e-mailed something to that effect to some colleagues in mid-June, but with the benefit of hindsight, the commitment among the Europeans probably took place at the so-called “mini summit” of June 1. We’ll never know whether the Tsipras Le Monde op-ed, which appeared just before that confab took place, played into that dynamic. The Administration clearly backed the lenders against Greece in its G-7 remarks a week later.

Even so, Obama and Treasury Secretary Jack Lew have been far more quiet than you’d expect given their attentiveness to the needs of the investing classes and the threat that protracted wrangling with Greece might pose to that. Of course, they might believe that Draghi’s bazooka is more effective than Hank Paulson’s proved to be in the runup to the final phase of the financial crisis. But John Helmer indicates below that the Greek referendum has intensified the Administration’s interest in regime change in Greece. He confirms what we’d noticed, that Putin has been quite pointedly avoided being seen as meddling in Greece now; he can always pick up any pieces later. Also note that the anti-Greek government interests have connections to Hillary Clinton.

o But Greece aside, as I've noted here on several occasions in the past few years, my top candidate for a true economic-world-shaking black swan is China, which has blown multiple interlocking bubbles - in their property markets, their huge shadow banking sector, and most recently, their local sharemarkets (I was dumbfounded at the government pulling out all the stops in terms of promoting the recent market bubble, apparently in a misguided attempt to distract from the ongoing real-economic slowdown there) - during the past decade. Well, the latter bubble, which peaked just last month, is now in what appears to be full-on crash mode. Here is the latest on this morning's fun (local time) courtesy of the Sydney Morning Herald:

Chinese share market: Stocks plunge, half of listed stocks suspended from trading

Is it still a market if selling is banned? Suggestion: keep a ban on selling, but allow buying. /sarc

[jasonp]

'Papadopoulos' is an extremely common greek name, on par with 'Smith' in the US.