Saturday, February 28, 2015

Today's links

1-Greece seeks negotiations on ECB bond repayment, Reuters

Greece called into question on Saturday a major debt repayment it must make to the European Central Bank this summer, after acknowledging it faces problems in meeting its obligations to international creditors.
Finance Minister Yanis Varoufakis said Athens should negotiate with the ECB on 6.7 billion euros ($7.5 billion) in Greek government bonds held by the Frankfurt-based bank that mature in July and August.
Varoufakis did not say what he hoped to achieve in any talks, but he accused the ECB of making a mistake in buying the bonds around the time Greece had to take an EU/IMF bailout in 2010.
"Shouldn't we negotiate this? We will fight it," he said in an interview with Skai television. "If we had the money we would pay ... They know we don't have it." ...

Varoufakis argued that if the bonds had remained in investors' hands, their value would have been cut by 90 percent under a restructuring of Greece's privately held debt in 2012, reducing the burden on the state.
The ECB bought the bonds at a deep discount and made large profits because their value rose as the euro zone debt crisis eased. Under Greece's second bailout deal, these profits were due to be returned to Athens to help it repay debt.
Athens received a partial payment in 2013 but euro zone countries are withholding a further 1.9 billion euros pending the review of Greece's economic plans. Varoufakis wants this money sent directly to the IMF to meet the March payment.

2---Greece debt: PM Alexis Tsipras rules out third bailout, BBC

Greece will not need a third international debt bailout when its current programme ends in four months, the country's prime minister has said.

Alexis Tsipras vowed his government would "start working hard" to change the country, which is saddled with a debt 175% of its GDP.

3--Greece runs out of funding options despite euro zone reprieve, Reuters

 despite the acceptance of the reform plan by the euro zone, it has been criticized by two major creditors - the ECB and the IMF - for lacking detail and it is not clear how much flexibility Athens has in veering from its original bailout. ....

Shut out of debt markets and faced with a steep fall in tax revenues, Athens is expected to run out of cash by the middle or end of March. Its finance minister has warned that Greece will struggle to repay creditors starting with a 1.5 billion euro IMF loan repayment due in March....

Other options all appear to have problems. One possibility - the transfer of 1.9 billion euros worth of profits that the European Central Bank made on buying Greek bonds - will not be allowed until Greece has completed the bailout program.
Greece had also hoped it could tap the almost 11 billion euros of leftover money in the Greek bank stabilization fund, but euro zone finance ministers have decided the money would be returned to the Luxembourg-based euro zone bailout fund.

While it would still be available for Greek banks, it could only be released on the say-so from the ECB.
The only source of quick cash left to the Tsipras government now is issuance of Treasury bills, or short-term debt that matures in three or six months. But Athens' creditors have set a 15 billion euro cap on such debt and it has already been reached.
The euro zone has so far ruled out any raising that ceiling, partly on concerns that it is tantamount to central banks financing governments. That's because Greek banks have been using the T-bills as collateral to tap central bank funding and then using the cash to invest in more T-bills, helping the state cover short-term needs.

One person familiar with ECB thinking said that any extension of the T-bill limit was "very unlikely". A senior Greek banker said the expectation in Athens remained that the ECB would relent and allow some leeway on T-bills.
"The Greek state is pinning all its hopes on the ECB allowing an extra T-bill auction," the banker said.

4--The Incredible Debacle Left Behind By NATO In Libya, ZH

In retrospect, Obama’s intervention in Libya was an abject failure, judged even by its own standards. Libya has not only failed to evolve into a democracy; it has devolved into a failed state. Violent deaths and other human rights abuses have increased severalfold. Rather than helping the United States combat terrorism, as Qaddafi did during his last decade in power, Libya now serves as a safe haven for militias affiliated with both al Qaeda and the Islamic State of Iraq and al-Sham (ISIS). The Libya intervention has harmed other U.S. interests as well: undermining nuclear nonproliferation, chilling Russian cooperation at the UN, and fueling Syria’s civil war.?

As bad as Libya’s human rights situation was under Qaddafi, it has gotten worse since NATO ousted him. Immediately after taking power, the rebels perpetrated scores of reprisal killings, in addition to torturing, beating, and arbitrarily detaining thousands of suspected Qaddafi supporters. The rebels also expelled 30,000 mostly black residents from the town of Tawergha and burned or looted their homes and shops, on the grounds that some of them supposedly had been mercenaries. Six months after the war, Human Rights Watch declared that the abuses “appear to be so widespread and systematic that they may amount to crimes against humanity.”?

As a consequence of such pervasive violence, the UN estimates that roughly 400,000 Libyans have fled their homes, a quarter of whom have left the country altogether. ?

5--Fed Minutes: Janet Yellen Walks a High Wire Greased With Oil , WSOP

Secondly, the Fed’s happy talk about the solid growth in the U.S. economy that may warrant a rate hike sometime this year just doesn’t comport with the reality of the situation. On February 10, Steve Ricchiuto, Chief U.S. Economist at Mizuho Securities USA, who has a Masters Degree in Economics from Columbia University, appeared on CNBC to succinctly explain that reality. Ricchiuto had this to say:

“…I keep hearing over and over again in the financial press about this acceleration in economic growth. That isn’t happening. Last month we had a horrible retail sales number. We had a horrible durable goods number. We’re likely to have a very disappointing retail sales number coming forward. This month we’ve had a strong payroll number – we say everything’s great. It’s not great. It’s running where it’s been. It’s been the same thing for the last five years. There’s no improvement in the economy.”

The unprecedented nature of this period has been captured by David Papell and Ruxandra Prodan, Professor of Economics and Clinical Assistant Professor of Economics, respectively, at the University of Houston. Writing at Econbrowser, the pair had this to say:

“While the Great Recession of December 2007 to June 2009 ended over five years ago, the recovery has been characterized by very slow growth. The Congressional Budget Office has recently released projections of real (inflation adjusted) GDP growth through 2025. If these projections turn out to be correct, real GDP for the U.S. will never return to its pre-Great Recession growth path. This projected decrease in potential GDP is unprecedented, as almost all postwar U.S. recessions, postwar European recessions, slumps associated with European financial crises, and even the Great Depression of the 1930s were characterized by an eventual return to potential GDP.”
The authors do not offer answers as to why GDP growth cannot be restored to pre-financial- crisis levels but we, as many others, believe it is a result of the unprecedented wealth and income inequality in the U.S. Until Congress takes decisive action to rebalance the gap, we’ll remain in this economic twilight zone.

6---Repo Blues: "It’s sobering to be six years beyond the crisis and still be trying to solve its core problem. Repowatch

Director Richard Berner explained in his blog:
The project focuses on repurchase agreements, or repos, which are a major source of short-term funding for the financial system. A repo is essentially a collateralized loan — one party sells a security to another party with an agreement to repurchase it later at an agreed price.
Repos are instrumental in providing funding and liquidity — the lubrication that helps to keep the global financial system operating. The U.S. repo market efficiently provides more than $3 trillion in funding every day.

However, vulnerabilities in repo markets can also contribute to risks to financial stability. The concern arises because of the potential for shocks to the financial system during times of market turbulence to cause repo liquidity to dry up.

The repo market is divided into three parts: (1) the triparty repo market, where transactions are centrally settled by two large clearing banks; (2) the general collateral financing, or GCF, market, where interdealer repo transactions are centrally cleared; and (3) the bilateral market, where repo transactions are conducted privately between two firms....
It summarizes:
... several threats to financial stability have risen over the past year. This report highlights three specific risks. First, we see material evidence of  excessive risk-taking during the extended period of low interest rates and low volatility. Second, markets have become more brittle because liquidity may be less available in a downturn and the risk of asset fire sales and runs in short-term wholesale funding markets remains unresolved. Third, we are concerned that financial activity is migrating toward areas of the financial system where threats are more difficult to assess because information is not available, and that activity may be consequential. Gaps in analysis, data, and policy also persist, despite progress in narrowing them. If left unaddressed, these threats could adversely affect financial stability. 

7--2014 Continues a 35-Year Trend of Broad-Based Wage Stagnation, EPI

8--Dudley: Why Fed may need to get 'more aggressive', CNBC

"The fact that market participants have set forward rates so low has presumably led to a more accommodative set of financial market conditions, such as the level of bond yields and the equity market's valuation, that are more supportive to economic growth," he said, according tp prepared remarks.
"If such compression in expected forward short-term rates were to persist even after the FOMC begins to raise short-term interest rates, then, all else equal, it would be appropriate to choose a more aggressive path of monetary policy normalization as compared to a scenario in which forward short-term rates rose significantly, pushing bond yields significantly higher," he added.

9--Thus spake Yanis V

Is the memorandum over? It’s over. Allow me to explain what memorandum means to me. Borrowed funs and austerity are permanent darkness. The terms of the memorandum undermine the concept of reform in Greek society. We hit pensioners and hairdressers while reforms were mishandled....

What did you achieve?
We put the humanitarian crisis on the agenda for the first time. I am here because there are kids starving out there.
How will you achieve this? You signed a deal that doesn’t allow you to act unilaterally? You would need the approval of institutions… 
The gang of technocrats won’t be here. It won’t be the same. We have said that there will be no unilateral actions of negative fiscal consequence. For such activities as overdue debts we don’t need approval. We will also move in other directions as we don’t want honest taxpayers to feel duped.
Do you have a plan?
We will finalize it over the weekend. With the agreement we reached, the memorandum ended and unacceptable behavior has ended. We are in a Europe that has undermined itself. I had said earlier that at the Eurogroup there is not even discussion. We are changing Europe. I was in Frankfurt with five secret policemen. I asked to go to the toilet and one of them had to come with me. “I want to thank you because Europe needs to change for us Germans too,” he said

10--Merkel’s Truths Lead Greece to Unavoidable Deal on Euro Bailout, Bloomberg

In office for a month, Tsipras and his finance minister, Yanis Varoufakis, have largely shelved the promises that got them elected, irritated key euro-area collaborators and stoked doubt about their intentions. In return, they got a four-month bailout extension and the certainty they’ll be back at the edge of the financial abyss before the first half of 2015 is over.

“They were amateurs, but they are adapting,” said Theodore Pelagidis, a senior fellow at the Brookings Institution and a professor at the University of Piraeus in Athens. “The negotiation showed that Greece had no leverage.”

11---Don't mention the war, Fawlty Towers

12--GDP, Pending home sales, Chicago ISM, Consumer Sentiment, warren mosler

No ‘surge’ happening and Q1 GDP at risk as well from collapse of oil and gas investment:

GDP Growth Slows to 2.2% in 4Q, revised lower but still better than expected

Latest figures indicate breakout pace of growth in the second and third quarters was unsustainable. The latest figures indicate the breakout 5% pace in the third quarter and 4.6% in the second quarter were unsustainable. For 2014 as a whole, GDP expanded 2.4%, slightly better than the average 2.2% growth of 2010-2013. By comparison, the economy grew an average 3.4% a year during the 1990s. Real personal consumption expenditures increased 4.2% in the 4Q, compared with an increase of 3.2% in the 3Q.

 13--The Self-Enrichment of the Elites--Economic Hegemony and the Federal Reserve, Rob Urie, cp

In his book Globalization and Its Discontents former World Bank economist Joseph Stiglitz details the ignominious history of IMF ‘structural adjustment’ programs inflicted around the globe in the 1990s. While the IMF has admitted that economic austerity is both theoretically flawed and socially destructive it remains a core IMF policy and is currently being forced on peripheral Europe. This institutional persistence is characterized by the Western economic mainstream as an accident of history, as flawed theories driving bad policy decisions. Another explanation that also fits the facts is that the IMF is a tool of Western economic power used to extract wealth from poor countries under the contrived apologetics of the ‘market’ economics it claims as its goal....

Before the 1980s forty percent of corporate earnings or borrowed money was invested in productive capacity—in future economic production. Today less than ten percent is with the difference going into the pockets of executives who borrow money on the corporate dime or use corporate earnings to raise the value of the stock options they have granted themselves.....

Interest rates are the ‘price’ of borrowed money— the lower the price the cheaper that borrowing money is. The premise is that cheap money spurs companies to borrow to invest in their businesses. Left apparently unconsidered is that corrupt insiders would load up ‘their’ companies with cheap debt to enrich themselves while gutting the productive economy. Mason and Lazonick argue that this is precisely what is going on. ....

QE had the added effect of raising financial asset prices by reducing the available supply as I explain here and the Bank of England explains here. The main beneficiaries of rising financial asset prices are the rich who own most financial assets and corporate executives who grant themselves stock options. And central to this self-enrichment are low interest rates that allow companies to fund stock repurchases using cheap debt. This practice leaves a gutted, overleveraged corpse of an economy behind. It also explains the remarkable recovery in the fortunes of the 0.1%.
Graph (3) above: what mainstream economists call a conspiracy theory, the relation of QE to the rise in financial asset prices, was common knowledge on Wall Street within weeks of its inception in 2009. In addition to the ‘portfolio balance channel’ explained by former Fed Chair Ben Bernanke here, stock repurchases funded with cheap debt by self-dealing corporate insiders worked to tie the rise in the Fed’s balance sheet to rising stock prices. Articulation of the ‘portfolio balance channel’ makes it clear that Mr. Bernanke intended to raise financial asset prices with QE— it wasn’t an unintended consequence. Source: St. Louis Fed....

The theoretical frame that supports Federal Reserve (and IMF and ECB) policies works by compartmentalizing causes and effects. The contention that elite self-enrichment is either a market outcome or is socially neutral leaves aside the mechanisms used and the broader effects. The Federal Reserve has always based its policies on banker economics, on ‘managing’ Western economies to protect the value of bank assets from inflation. The result is that economic life is now substantially arranged around what supports Wall Street’s interests.

14---Economist Stephen Roach made a good point in a recent article at Project Syndicate. He said, “In the 22 quarters since early 2008, real personal-consumption expenditure, which accounts for about 70% of US GDP, has grown at an average annual rate of just 1.1%, easily the weakest period of consumer demand in the post-World War II era.” (It’s also a) “massive slowdown from the pre-crisis pace of 3.6% annual real consumption growth from 1996 to 2007.” (“Occupy QE“, Stephen S. Roach, Project Syndicate)

15--No changes to greek programe, wsws

Schäuble’s position was eventually sanctioned by all 19 Eurogroup finance ministers, including Greece’s Yanis Varoufakis. Syriza will now begin to impose more cuts, coming after five years of devastating EU austerity measures adopted by previous Greek governments.
Introducing the vote, Schäuble said, “We’re not talking about new billions for Greece... It is not about changes to the programme, rather it’s about providing or granting extra time to successfully end this programme.”...

Gysi’s claims were belied by his acknowledgment that under Greece’s existing austerity programme, which he just voted to extend, “90 percent of the 240 billion euro for Greece went to the banks and creditors. Among them was also the Deutsche Bank. Among them were also French banks. 90 percent of this sum didn't go to the Greeks; they have seen almost nothing of it.”
The Left Party is in reality now openly behind the demands of the ruling elite that the Greek people be bled dry, in order that its debt mountain of more than €320 billion be paid off. “We must help rebuild Greece, continued Gysi , so it can repay its debts, .....

In March, Athens must make a €1.5 billion loan repayment to the IMF and then pay a further €800 million in interest payments in April. In the summer, €8 billion in debt repayment falls due, including €6.5 billion to the ECB. The Greek state is bankrupt and cannot access funding through international capital markets. Its’ banks remain on the verge of collapse and are being propped up only by temporary access to high interest rate loans from the ECB. Greece is totally reliant on funding from the Eurogroup, ECB and IMF to meet these payments.

16--The anti-Marxism of Yanis Varoufakis, Nick Beams, wsws

17--US economy in deflation and slump, wsws

18--William Engdahl on Operation Gladio, Fethullah Gülen & One World Government, Boiling Frogs

So in a true sense we can say that the Gülen Cemaat is the nothing more than the projection of an idea from Langley Virginia CIA headquarters, an idea from essentially stupid people there who believed they could use him and they could abuse religion as a cover to advance their design for global control, what David Rockefeller calls One World Government. Unlike the CIA’s Mujahideen Jihadists like Hekmatyar in Afghanistan or Naser Oric in Bosnia, the CIA decided to give Fethullah Gülen a radically different image. No blood-curdling, head-severing, human-heart-eating Jihadist.
No, Fethullah Gülen was presented to the world as a man of “peace, love and brotherhood,” even managing to grab a photo Op with Pope John Paul II, which Gülen featured prominently on his website. The Gülen organization in the US hired one of Washington’s highest-paid Public Relations image experts, George W. Bush’s former campaign director, Karen Hughes, to massage his “moderate” Islam image - See more at:

In the USA and Europe, CIA-influenced media like CNN gave him beautiful free publicity to overcome opposition to open his schools across America. For the CIA it was one more tool to destroy not only an independent secular Kemalist Turkey, but to advance their Afghan drug trade worldwide and to use Gülen’s people to destabilize opponent regimes that CIA network in Washington, the “deep state” wanted to get rid of. Sibel Edmonds, former FBI Turkish translator and “whistleblower,” named Abramowitz, along with Graham E. Fuller, as part of a dark cabal within the US Government that she discovered were using networks out of Turkey to advance a criminal “deep state” agenda across the Turkic world, from Istanbul into China. The network that she documented included significant involvement in heroin trafficking out of Afghanistan. -...

Graham E. Fuller had been immersed in the CIA’s activities in steering Mujahideen and other political Islamic organizations since the 1980’s. He spent 20 years as CIA operations officer in Turkey, Lebanon, Saudi Arabia, Yemen, and Afghanistan, and was one of the CIA’s early advocates of using the Muslim Brotherhood and similar Islamist organizations like Gülen Cemaat to advance US foreign policy. - See more at:

How does CIA work via Gulen schools at Middle-Asia? WE: First it should be noted that Russia moved swiftly to ban the Gülen schools when the CIA began the Chechyn terror in the 1990’s. In the 1980’s when the Iran-Contra scandal broke in Washington (a scheme authored by Fuller at CIA), he “retired” to work at the CIA and Pentagon-financed RAND think-tank. There, under RAND cover, Fuller was instrumental in developing the CIA strategy for building the Gülen Movement as a geopolitical force to penetrate former Soviet Central Asia. Among his RAND papers, Fuller wrote studies on Islamic fundamentalism in Turkey, in Sudan, in Afghanistan, Pakistan and Algeria. His books praise Gülen lavishly. After the fall of the USSR, Fetullah Gülen’s cadre were sent to establish Gülen schools and Madrasses across newly-independent former Soviet states in Central Asia. It was a golden chance for the CIA, using the cover of Gülen religious schools, to send hundreds of CIA agents deep inside Central Asia the first time. In 1999 Fuller argued, “The policy of guiding the evolution of Islam and of helping them against our adversaries worked marvelously well in Afghanistan against the Russians. The same doctrines can still be used to destabilize what remains of Russian power, and especially to counter the Chinese influence in Central Asia.” - See more at:

 I believe that Turkey today can play a very positive role in a new world that is emerging to replace the world of CIA wars, terror and chaos. Turkey is a geopolitical crossroads which has the possibility to play a very positive role in the emerging Eurasian system of China and Russia, the countries of the Shanghai Cooperation Organization, in building energy and rail infrastructure. By herself, Turkey will be isolated and broken as Ukraine, and by the same people. In a principled economic and political alliance with Russia and China, she can play a pivot role in building a new world free of the debt of the collapsing Dollar System that also included the stagnating Europe. Turkey has a beautiful opportunity to partner with Russia and change the world power balance. It will require a lot of will. But if done in a good open way, Turkey could enjoy prosperity as never before and be a genuine “good neighbor.” - See more at:

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