Financial fuckery thread

[LMNO]

Just in case anyone was wondering about that whole "debt forgiveness" thing...

http://slatest.slate.com/posts/2011/10/19/student_loans_federal_reserve_bank_of_new_york_data_shows_studen.html

To put the $1-trillion figure into some perspective, that total means that Americans now owe more in student loans than they do on their credit cards.

Even when adjusting for inflation, students are borrowing at roughly twice what they did a decade ago, and total outstanding debt has doubled in the past five years alone, the data shows. Full-time undergrads borrowed an average of $4,953 in 2010, a 63-percent jump from the previous decade even when inflation is factored in.

[Precious Moments Zalgo]

World Economy Collapse explained in 3 minutes - Mind Blowing!!!!!
It may seemed hilarious but this is actually what's happening. The real truth behind Euro crisis.

https://www.facebook.com/video/video.php?v=10150860012110261

   

[PopeTom]

What direction are the barbarians going to come from this time around?

[Triple Zero]

So, in the year 2000, apparently they were afraid they would have too little debt:

http://www.npr.org/blogs/money/2011/10/20/141510617/what-if-we-paid-off-the-debt-the-secret-government-report

[Precious Moments Zalgo]

So, in the year 2000, apparently they were afraid they would have too little debt:

http://www.npr.org/blogs/money/2011/10/20/141510617/what-if-we-paid-off-the-debt-the-secret-government-report

[Cain]

Two good pieces from Naked Capitalism

http://www.nakedcapitalism.com/2011/10/marx-versus-capitalism-versus-you.html

It is a measure of how un-self critical modern economics has been, that the Marxists are starting to appear to be making the most sense of the current crises. The supine acceptance that "the market is always right" — a truism only to traders and vested interests — means that there has been precious little understanding developed about how markets can go wrong. Or what is wrong, as well as right, with markets and the modern practices of capitalism. An article in the London Review of Books came to my attention recently by Benjamin Kunkel that shows how Marxist analysis is actually looking quite pertinent to the current mess.

In particular, it highlights the imbalance between capital and labour, a perennial obsession of the Marxists, of course:

The full cash value of today's product can therefore be realised only with the assistance of money advanced against commodity values yet to be produced. 'The surplus value created at one point requires the creation of surplus value at another point,' as Marx put it in the Grundrisse. How are these points, separated in space and time, to be linked? In a word, through the credit system, which involves 'the creation of what Marx calls "fictitious capital" – money that is thrown into circulation as capital without any material basis in commodities or productive activity'. Money values backed by tomorrow's as yet unproduced goods and services, to be exchanged against those already produced today: this is credit or bank money, an anticipation of future value without which the creation of present value stalls. Realisation (or the transformation of surplus value into its money equivalent, as profit) thus depends on the 'fictitious'.

There has certainly been an excess of "fictitious" capital created over the last two decades, far more than Marx, or anyone else, could have anticipated. Money made out of the money made out of money. $600 trillion of derivatives. High frequency trading insanity with trades reduced to micro-seconds. As Adam Curtis observes in his excellent documentary "All Watched Over by Machines of Loving Grace", the heart of the insanity has been the belief that systems run by machines are inherently more stable than systems with humans at the centre. This has greatly skewed the system towards the egregious self interests of capital, as against labour. Curtis lays much of this greed at the feet of Ayn Rand and Alan Greenspan.

Now before I get a knock on the door from grey suited men asking me "Are you, or have you ever been, a member of the Communist Party?" I should explain that I regard Marxism as wicked, directly responsible for some of the worst horrors of the twentieth century. I have many other objections to it, which I will come to later. There is, however, a difference between Marxism and what Marx wrote. And there is a difference between Marx's critique of capitalism, which has some prescience and relevance, and Marx's political prescriptions and revolutionary impulses, which were riddled with contradictions and, in practice, wholly pernicious.

The value of applying what Marx wrote is an identification of an imbalance between capital and labour:

So, as The Limits to Capital implies without quite stating, the special allure and danger of an elaborate credit system lie in its relationship to class society. If more capital has been accumulated than can be realised as a profit through exchange, owing perhaps to 'the poverty and restricted consumption of the masses' that Marx at one point declared 'the ultimate reason for all real crises', this condition can be temporarily concealed, and its consequences postponed, by the confection of fictitious values in excess of any real values on the verge of production. In this way, growth and profitability in the financial system can substitute for the impaired growth and profitability of the class-ridden system of actual production. By adding over-financialisation, as it were, to his model of overaccumulation, Harvey means to show how an initial contradiction between production and realisation later 'becomes, via the agency of the credit system, an outright antagonism' between the financial system of fictitious values and its monetary base, founded on commodity values. This antagonism then 'forms the rock on which accumulation ultimately founders'. In social terms, this will take the form of a contest between creditors and debtors over who is to suffer more devaluation.

This is basically what is wrong in the developed world. There needs to be a balance between wages and investment returns for the system to function well. Henry Ford paid his workers well not because he was a generous man, but because then they could buy Fords. Globalisation has, of course, undone this compact, and although it has led to some productivity improvements, it is also having the effect of gutting the middle classes in the developed world. In Europe it is seen in the shape of unemployment, in America, the same as well as in the shape of rising poverty and the evaporation of the middle class.

And http://www.nakedcapitalism.com/2011/10/eurozone-rescue-going-off-the-rails.html

In the runup to the crisis, it was striking to read the undertone of worry in quite a few of the articles in the Financial Times, and I don't mean only Gillian Tett's fixation on collateralized debt obligations. It was palatable that a lot of writers were uncomfortable with how frothy the markets were, yet couldn't say anything too much at odds with what their largely cheerleading sources were telling them.

Even though the overall mood at this juncture is far more downbeat, there is again a reporting gap between the pink paper and the two major US print business outlets, the Wall Street Journal and the New York Times on the expected crisis nexus, the Eurozone. Both US media outlets have a prominent article on the latest Euro exercise in rescue brinksmanship. And they are almost the same story; indeed, at this hour, they perversely use identical photos of Merkel and Sarkozy conferring. They present the formerly aligned core nation leaders as being at odds, then widen the frame to explain the divisive issues. First,, the Germans want a deeper but voluntary haircut of at most 50% of Greek debt; the French do not want to go beyond the 21% reduction structured last July. The steeper writeoff would, of course, lead to a bigger hit to French banks. Second France (effectively) wants the ECB to provide further leverage to the EFSF directly, while Germany and the ECB itself are decidedly opposed (Germany wants individual states to be responsible for their banks, with the ECB acting as a guarantor). The Journal was thinner on details and focused on the hardening political stances, not just between France and Germany, but other states as well. Per the Journal:

People familiar with the negotiations said Germany and France remain so far apart on key issues that Ms. Merkel couldn't get a green light to sign a deal from her increasingly assertive parliamentarians.

If you rated these articles as sobering, the far more detailed coverage at the Financial Times has an undertone of despair. And one story emphasizes an issue absent from the times and mentioned only in passing in the Journal: the experiment in Greece in radical austerity is killing the patient. From the Financial Times:

Greece's economy has deteriorated so severely in the last three months that international lenders would have to find €252bn in bail-out loans through the end of the decade unless Greek bondholders are forced to accept severe cuts in their debt repayments.

The dire analysis, contained in a "strictly confidential" report by international lenders and obtained by the Financial Times, is more than double the €109bn in European Union and International Monetary Fund aid agreed just three months ago.

Under a more severe test run by economists for the so-called "troika" of lenders – the IMF, European Central Bank and European Commission – Greece's bail-out needs could balloon to €444bn, the study said.

Now before you attribute this shortfall to civil disobedience, which has been a contributor, an even bigger factor seems to be a major breakdown of a wide range of critical operations, such as power and garbage collection. And the bailout plan had some absurd assumptions, such as forecasting proceeds from infrastructure sales that were three times the level private sources expected them to fetch.

A must-read set of on-the-ground accounts in the Guardian (hat tip reader FlyingKiwi) gives a sense of how bad things are:

The poor and middle classes are being asked to pick up the bill for the excesses of the rich and corrupt; those who have declared their taxes correctly continue to be taxed more than those who don't; and in a country with one of the highest cost of living, wages are being cut and taxes being raised....

I live in chaos. Chaos is a Greek word and aptly describes life in this country. I have been a good citizen of this country and have worked hard in the 25 years that I have lived here. I work from 2pm to 10pm daily. I put in 40 teaching hours per week. If you add the lesson planning and marking it's nearly 50 hours per week. I only see my husband for half an hour a day as he teaches in a state school in the morning but because his salary is so low he needs to supplement his income in the evenings. How many of our European colleagues work so many hours?...

I can't get to work easily most days because public transport is usually on strike three days every week. The streets are piled high with rubbish...

I work with a local council in Crete. There is an increasing sense of the country having fallen apart. All temporary contracts have been arbitrarily cancelled so we can't run any sports or arts programmes, even those which are profit-making. No one answers the phones in the central offices in Athens because of the sit-ins, so we can't work our way round the red tape.

The town hall itself has been occupied by strikers for the last week. The rubbish hasn't been collected for three weeks. Standard processes are paralysed. This includes the payment of staff – many are owed over six months.

Now remember the earlier prevailing assumptions. Even though Greece was widely understood last year to be deeply underwater and independent observers all said a bond writedowns of at least 50% were in order, it was also assumed that Greece alone was a manageable problem. The danger was seen as contagion to bigger economies, particularly Spain and Italy.

[Cain]

Ha ha ha

http://www.defensenews.com/story.php?c=SEA&s=TOP&i=7988787

German industry and politicians have attacked a proposed French warship deal with the near-bankrupt Greek government, according to the magazine Spiegel.

State-owned French naval shipyard DCNS is offering to deliver up to four new stealth frigates to the Greek Navy but defer the 300 million euro ($412 million) payments for five years and even allow the Greeks to hand the warships back, the German magazine reported Oct. 17. Under the deal, Greece will have the option of paying up after five years with a 100 million-euro discount, or even returning the warships to be used by the French Navy, the magazine says.

What Greece really needs right now is stealth frigates.  No, really.

[Don Coyote]

Ha ha ha

http://www.defensenews.com/story.php?c=SEA&s=TOP&i=7988787

German industry and politicians have attacked a proposed French warship deal with the near-bankrupt Greek government, according to the magazine Spiegel.

State-owned French naval shipyard DCNS is offering to deliver up to four new stealth frigates to the Greek Navy but defer the 300 million euro ($412 million) payments for five years and even allow the Greeks to hand the warships back, the German magazine reported Oct. 17. Under the deal, Greece will have the option of paying up after five years with a 100 million-euro discount, or even returning the warships to be used by the French Navy, the magazine says.

What Greece really needs right now is stealth frigates.  No, really.

Two words:

Ninja Pirates

[Cain]

Two words: bankrupt nation.

Eight more words: being made to buy super expensive military hardware.

We've successfully turned an EU nation into a corrupt, third world client state, a banana republic.

[Faust]

Two words: bankrupt nation.

Eight more words: being made to buy super expensive military hardware.

We've successfully turned an EU nation into a corrupt, third world client state, a banana republic.

With Greeces military history I doubt it took much of a push.

What do you think of the iceberg they hid on the next bailout they will need? They pretended the problem wasn't as bad as it looked and now it looks like they need an 80% write down which makes a French banking collapse a certainty.

[Cain]

True, re: Greece's military, but it still leaves a bad taste in the mouth.  "Greece must accept punitive measures.  Not a penny on anything less than essential.  Slash spending everywhere.  Oh, but you have to buy these, top of the range, hi-tech military boats, too.  You know, in case Turkey decides to invade."  Given one of Greece's major problems is its bloated military spending, it is hardly helping.

I think we're heading for a default, to be perfectly honest.  I think European finance elites will resist this until it becomes the only possible option, but that is where this is all ultimately heading.  Of course, a default is not necessarily as bad as they would have us believe.

[deadfong]

Ha ha ha

http://www.defensenews.com/story.php?c=SEA&s=TOP&i=7988787

German industry and politicians have attacked a proposed French warship deal with the near-bankrupt Greek government, according to the magazine Spiegel.

State-owned French naval shipyard DCNS is offering to deliver up to four new stealth frigates to the Greek Navy but defer the 300 million euro ($412 million) payments for five years and even allow the Greeks to hand the warships back, the German magazine reported Oct. 17. Under the deal, Greece will have the option of paying up after five years with a 100 million-euro discount, or even returning the warships to be used by the French Navy, the magazine says.

What Greece really needs right now is stealth frigates.  No, really.

It could work out okay for them, if Greece uses the stealth frigates to pirate French shipping in order to pay for the stealth frigates that the French require them to buy.

[Faust]

Ha ha ha

http://www.defensenews.com/story.php?c=SEA&s=TOP&i=7988787

German industry and politicians have attacked a proposed French warship deal with the near-bankrupt Greek government, according to the magazine Spiegel.

State-owned French naval shipyard DCNS is offering to deliver up to four new stealth frigates to the Greek Navy but defer the 300 million euro ($412 million) payments for five years and even allow the Greeks to hand the warships back, the German magazine reported Oct. 17. Under the deal, Greece will have the option of paying up after five years with a 100 million-euro discount, or even returning the warships to be used by the French Navy, the magazine says.

What Greece really needs right now is stealth frigates.  No, really.

It could work out okay for them, if Greece uses the stealth frigates to pirate French shipping in order to pay for the stealth frigates that the French require them to buy.

They should really get those delivered before they default, or you know, they might actually have to pay for them one day.

[Scribbly]

Greek debt holders are being asked to take a 60% loss.

According to Olivier Sarkozy, head of the Global Financial Services group, European banks need to raise $800 bn in cash each month to meet current obligation on debt. Which is a fairly terrifying figure. If you want to prevent a run on the banks, extrapolating from the US model when it was in a similar situation, the Eurozone would need to spend $2,000 bn - at the moment they are considering less than $500 bn. And that would be to bail out rotten banks in the same kind of way the US government did.

That's going to be a much harder sell given that people have seen what the results of that have been once before.

The alternative seems to be banking collapse...

Oh, a lot of banks have also used dodgy accounting practices to make it seem like they've achieved far greater profits in the past month or two than they actually have.

I can scour the internet for links for these things if people like. Otherwise, I'm retreating to my bunker. 

[Cain]

EU talks on financial reform have been delayed.

Also, the talk was of building a reserve of two trillion Euros for the EFSF.  Obviously, that aint anywhere near large enough, going by the above figures.