And so it begins …
– China’s Record Dumping Of US Treasuries Leaves Goldman Speechless (ZeroHedge, July 22, 2015):
On Friday, alongside China’s announcement that it had bought over 600 tons of gold in “one month”, the PBOC released another very important data point: its total foreign exchange reserves, which declined by $17.3 billion to $3,694 billion.
We then put China’s change in FX reserves alongside the total Treasury holdings of China and its “anonymous” offshore Treasury dealer Euroclear (aka “Belgium”) as released by TIC, and found that the dramatic relationship which we first discovered back in May, has persisted – namely virtually the entire delta in Chinese FX reserves come via China’s US Treasury holdings. As in they are being aggressively sold, to the tune of $107 billion in Treasury sales so far in 2015.
We explained all of his on Friday in “China Dumps Record $143 Billion In US Treasurys In Three Months Via Belgium“, and frankly we have been surprised that this extremely important topic has not gotten broader attention.
Then, to our relief, first JPM noticed. This is what Nikolaos Panigirtzoglou, author of Flows and Liquidity had to say on the topic of China’s dramatic reserve liquidation
Looking at China more specifically, it appears that, after adjusting for currency changes, Chinese FX reserves were depleted for a fourth straight quarter by around $50bn in Q2. The cumulative reserve depletion between Q3 2014 and Q2 2015 is $160bn after adjusting for currency changes. At the same time, a current account surplus in Q2 combined with a drawdown in reserves suggests that capital outflows from China continued for the fifth straight quarter. Assuming a current account surplus in Q2 of around $92bn, i.e. $16bn higher than in Q1 due to higher merchandise trade surplus, we estimate that around $142bn of capital left China in Q2, similar to the previous quarter.
JPM conclusion is actually quite stunning:
This brings the cumulative capital outflow over the past five quarters to $520bn. Again, we approximate capital flow from the change in FX reserves minus the current account balance for each previous quarter to arrive at this estimate (Figure 2). Continue reading »
– Define Irony: Greek Banks Refuse To Buy ESM Bonds To Fund Greek Bailout (ZeroHedge, July 21, 2015):
In the latest example of what happens when circular funding schemes begin to trip over each other, National Bank of Greece has refused to participate in an auction for paper issued by the bailout fund which is set to recapitalize the Greek banking sector.
– Greece Needs A €130 Billion Debt Haircut: Citi (ZeroHedge, July 21, 2015):
“The size of the required ‘upfront’ (i.e. to be introduced in 2016) principal haircut to be €110bn (60% of annual Greek nominal GDP in 2014). Note that we do not see much difference in an alternative scenario based on a ‘tranched’ principal haircut framework (of around €15bn per year), also starting in 2016. However, a ‘backloaded’ (i.e. to be introduced in 2022) approach relying on a single haircut would be more expensive, amounting to €130bn (72% of annual Greek nominal GDP in 2014).”
“Several days ago when we first calculated that the new Greek debt/GDP post bailout #3 will promptly hit 200%, something the IMF agreed with earlier today. But it won’t stop here, and as the following analysis from Michael Lebowitz at 720 Global shows, just based on the country’s negative growth rate and positive interest rate, Greek debt/GDP will keep rising indefinitely and will likely hit 336% in about one decade, at which point Greece will, for all intents and purposes, cease to exist.”
– Greek Debt/GDP: 336% By 2025 (ZeroHedge, July 14, 2015):
Back in 2012, when the IMF forecast that by 2022 Greek debt would become sustainable (under 120%) we laughed, and laughed, then laughed some more (see: The Farcical Tragicomedy Of The “Sustainable” Greek Debt/GDP “Denominator from November, 2012)
Three years later the IMF itself not only admitted its original Greek debt “sustainability” predictions were total garbage (hence our quarterly humor series presenting the latest and greatest IMF projections about world growth), of which the most humorous was its forecast of Greek 2016 GDP growth as the highest in the entire Eurozone…
… but the IMF itself, under pressure from Washington, has become the biggest advocate of debt forgiveness, just not its own debt: that of the ECB will do nicely. Continue reading »
– Japanese Investors Lose Faith In Draghi – Dump The Most Foreign Bonds In History (ZeroHedge, July 8, 2015):
Did the narrative just change? With the world’s investors having entirely lost faith in China’s ability to control its markets, it appears the omnipotence of global central banks is under scrutiny. First the so-called “contained” risks from Greek contagion are non-existent as despite the best efforts of The SNB (and ECB), European stocks and peripheral bonds have tumbled; and now Japanese investors have dumped over JPY 4 trillion foreign bonds in June – the most ever.
– Greece — The One Biggest Lie You Are Being Told By The Media (Global Research, July 5, 2015):
By Truth and Satire 3 July 2015
Every single mainstream media has the following narrative for the economic crisis in Greece: the government spent too much money and went broke; the generous banks gave them money, but Greece still can’t pay the bills because it mismanaged the money that was given. It sounds quite reasonable, right?
Except that it is a big fat lie … not only about Greece, but about other European countries such as Spain, Portugal, Italy and Ireland who are all experiencing various degrees of austerity. It was also the same big, fat lie that was used by banks and corporations to exploit many Latin American, Asian and African countries for many decades.
Greece did not fail on its own. It was made to fail. Continue reading »
Jul 4, 2015
In this episode of the Keiser Report, Max Keiser and Stacy Herbert discuss the Greek referendum, the 50 ways to not pay their creditors and the future for the “demerging” economy in which debts are repaid “parametrically.” In the second half, Max interviews Simon Dixon about what Bitcoin could do for Greece and whether or not, as Citi’s global chief economist says, it is the stupidest idea since Caligula made his horse a consul.
– The Greek Bluff In All Its Glory: Presenting The Grexit “Falling Dominoes” (ZeroHedge, July 4, 2015):
Earlier today, Yanis Varoufakis reiterated his core thesis driving the entire Greek approach from day 1 of its negotiations with the Eurogroup: “Europe [stands] to lose as much as Athens if the country is forced from the euro after a referendum on Sunday on bailout terms.”
This is merely a recap of what we said 4 years ago when in July of 2011 we explained “How Euro Bailout #2 Could Cost Up To 56% Of German GDP“, recall: Continue reading »
– The Troika Turns Europe Into A Warzone (The Automatic Earth, July 3, 2015):
So now they do it. Now the IMF comes out with a report that says Greece needs hefty debt restructuring.
Mind you, their numbers are still way off the mark, in the end it’s going to be easily double what they claim. Not even a Yanis Varoufakis haircut will do the trick.
But at least they now have preliminary numbers out. The reason why they have is inevitably linked to the press leak I wrote about earlier this week in Troika Documents Say Greece Needs Huge Debt Relief. If that hadn’t come out, I’m betting they would still not have said a thing.
It’s even been clear for many years to the IMF that debt restructuring for Greece is badly needed, but Lagarde and her troops have come to the Athens talks with an agenda, and stonewalled their own researchers. Continue reading »
– Goldman “Conspiracy Theory” Validated As ECB Expands QE Program (ZeroHedge, July 2, 2015):
The ECB has expanded the list of SSA securities eligible for purchase under PSPP. The updated list includes: Continue reading »
– Varoufakis Will Resign If Referendum Passes, Says Would Rather “Cut Off Arm” Than Sign (ZeroHedge, July 2, 2015):
“With banks shuttered and Greece’s economy hobbled by capital controls, Varoufakis said in a Bloomberg Television interview in Athens that he would “rather cut my arm off” than sign a deal that fails to restructure Greece’s debt.”
– Debt-Ridden Illinois Heading Toward State Government Shutdown (Government Slave, July 2, 2015):
(Emily Richards) Illinois is heading toward a state government shutdown after the legislature adjourned Tuesday without closing a $6.2 billion gap and passing a budget by the July 1 deadline.
Illinois currently has the largest deficit and lowest credit rating of any of the 50 states. According to the University of Illinois, its current annual deficit is $9 billion, which is projected to grow to $14 billion by FY 2026.
“We’ve got a mess,” Gov. Bruce Rauner told workers at the Illinois Emergency Management Agency on Tuesday. “It’s going to take a little while to fix. I hope we can get it fixed promptly.” Continue reading »
All of this is NOT just caused by greed, ignorance and stupidity.
This has all been planned by …
And the Obama, Merkel, Cameron and Hollande kangaroos are just doing what they are told to do by TPTB.
– In Big Boost To “No” Vote, Schauble Hints Greece Can Default And Stay In Euro (ZeroHedge, June 30, 2015):
In waht appears to be some level of German backing down, fiery FinMin Schaeuble has, reportedly said the following:
*SCHAEUBLE SAID TO SAY GREECE MAY BE ABLE TO TAP EU SUPPORT FUND
*SCHAEUBLE SAID TO SEE GREECE STAYING IN EURO EVEN IF ‘NO’ VOTE
Thus spurring the probability of a consequence-less “no” vote on Sunday enabling the increased negotiating position that The Greek government had hoped for. Of course, desperate for any excuse, stocks and EUR are rallying on this and bonds are selling off.
– Puerto Rico Announces Bond Payment “Moratorium” (ZeroHedge, June 29, 2015):
Having concluded last night that Puerto Rico debt is “unpayable,” and that his government could not continue to borrow money to address budget deficits while asking its residents, already struggling with high rates of poverty and crime, to shoulder most of the burden through tax increases and pension cuts, Padilla confirmed tonight that: PUERTO RICO TO SEEK “NEGOTIATED MORATORIUM”, ‘YEARS’ OF POSTPONEMENT IN DEBT PAYMENTS. Likening his state’s situation to that of Detroit and New York City (though not Greece), Padilla concluded, the economic situation is “extremely difficult,” which is odd because just a few years ago when they issued that bond – everything was awesome?
– This Insane Debt Chart Explains Why Chinese QE Is Inevitable (ZeroHedge, June 29, 2015):
Last week we took an in-depth look at how China’s bewildering hodge-podge of hastily construed easing measures can’t seem to get out of their own way. Perhaps the most poignant example of this is how the country’s massive local government debt swap effort — which, as a reminder, aims to restructure a provincial government debt load that amounts to 35% of GDP — is effectively making it more difficult for the PBoC to keep a lid on rates, even as the central bank has embarked on a series of policy rate cuts, with the latest effort coming over the weekend. Here’s how we described the situation last week: Continue reading »
– Greece Will Default To IMF Tomorrow, Government Official Says (ZeroHedge, June 29, 2015):
Earlier today, as the exchange between Greece and its creditors got increasingly belligerent, Estonian Prime Minister Taavi Roivas told public broadcaster Eesti Rahvusringhaaling in interview that a possible Greek decision to leave euro area wouldn’t soften stance of other EU countries and that Greece’s debt would still remain outstanding and creditors would expect this money back.”
“If Greece leaves, the value of their new national currency would decline very fast, so their solvency would still worsen further. They will either have to cut spending or improve their tax revenues. There are no other options.”
So did this latest antagonism change the Greek mind? According to a flash headline by the WSJ released moments ago, not all. In fact, Greece just made it official that it would default to the IMF in just over 24 hours. Continue reading »