Inquiring minds are watching an interview by Max Keiser with Hugo Salinas Price on a plan to back Greek currency with silver.
In the first half of the video below, Max discusses unelected bureaucrats "running a gulag casino state" for their own benefit, financial terrorism against Ireland, and the simple-but-true (yet seldom initiated) concept that "bad debt banks should go bankrupt".
Max also blasts Christine Lagarde who herself pays no taxes yet harasses Greek citizens to pay theirs.
In the second half of the video, about 13 minutes in, Max interviews Hugo Salinas Price regarding silver.
I asked my friend Pater Tenebrarum at the Acting Man Austrian Blog for some comments on proposal to reintroduce silver coins as currency. Pater responded ...
At first glance, giving the coins a higher monetary than bullion value might seem a bit strange, but right now we have money with no value at all except the legally determined face value.
With silver coins you'd at least have coinage that not only has a face value, but also a commodity value. Obviously if one wants the money to be used in payment, the silver in it must not be worth more than the face.
Hugo is correct that one can not have silver and gold currency at a fixed ratio. In principle, a dual monetary system with silver and gold, but no fixed relationship between them seems feasible to me.
Unfortunately, the proposal probably won't fly because the government is not interested in making money honest. Just think about the size of the federal debt. It's over $15 trillion and growing at over $1 trillion per year.
If this debt were to be redenominated in silver and/or gold, the government would be forced to stop spending. It won't stop that until the market forces it to. So Hugo is right; it's only going to happen once the current system crashes and burns.
That does not mean that his proposal wouldn't be feasibly in principle - it certainly would be.
A crisis has not hit the US yet but what about Greece?
I received Pater's response before Syriza, led by Alexis Tsipras caused a deadlock in the last Greek election.
Would a radical left party be open to a metal-backed currency?
The idea may seem far-fetched but there is certainly everything to gain and nothing to lose by trying.
Having sensible discussions is always beneficial if for no reason than to plant seeds of worthwhile ideas that may sprout at some unknown time in the future.
On June 17, Stathis Potamitis, managing partner at an Athens law firm, plans to break a promise he has kept since his participation in a 1970s clandestine student group that opposed Greece’s military dictatorship. He will vote for the right.
“I’m now driven to the dreadful situation of having to vote for this man who is one of the causes of the problems we have right now,” he says, referring to Antonis Samaras, New Democracy’s leader. His friend, Niki Siropoulou, a marketing executive, is more succinct. “I have to vote for a complete idiot,” she says.
Polls show New Democracy running a close race with Syriza – but it is hardly inspiring. “Terror-mongering will only get you so far,” Mr Potamitis complains.
In a troubling sign for Mr Samaras, the MRB research firm found last week that educated voters aged 45 to 55 were tilting toward Syriza. Such voters – with children, mortgages and other duties – would normally seem unlikely supporters of a self-described “radical” party.
Dimitris Mavros, head of MRB, speculates that the scale of Greece’s crisis has left many believing it is now too risky to stick with the status quo. “They have no room to go back and say, ‘Ok, let’s wait three or four years for Greece to re-set,’” Mr Mavros says.
Close allies view Mr Samaras’ predicament with a sense of tragedy. He opposed the austere terms of Greece’s first bailout, arguing it would strangle the economy, before eventually signing under pressure from EU leaders.
At the party’s headquarters in a sleek Athens office building, Chryssanthos Lazarides, Mr Samaras’ chief adviser, calls the May 6 contest “the last of the post-dictatorship era”.
He defends his boss’s decision to press for early elections, arguing that the rapidly deteriorating economy was benefiting Syriza by swelling the ranks of the unemployed.
“This is a pool of desperate people. They have lost everything – or think they have lost everything,” he says. “We wanted elections soon because after June there would be a Bolshevik government.”
Four Possibilities
Although I believe the Radical left will win the election it is entirely possible "known idiots" win.
The election might be stolen.
People might legitimately decide to give New Democracy one more chance.
Lastly, the military might forcibly takeover shortly after the election if it does not like the results.
The worst outcome is a military takeover.
The best outcome for Greece is if the Radical Left wins, cancels the bailouts, and riots do not ensue. Then from the depths of the depression, perhaps new leaders with sensible policies emerge.
Near-term, regardless of who wins (or takes over), there is going to be a lot more pain for Greece.
The stubbornness of economic writers, nannycrats, and eurocrats is nothing short of amazing.
No matter how many times Merkel rejects eurobonds and other transfer mechanisms, the vast preponderance of economic writers, nannycrats, and eurocrats keep proposing the same futile actions, over and over, and over again.
One does not even have to read the article to know his proposal will never fly. Nonetheless, I did suffer through it. My conclusion is "it will never fly".
The reason it will not fly is that it requires both legislative changes and treaty changes, something rather obvious from the title I might add.
Would the German supreme court allow it? Of course not. Would all the Northern states vote for it in this economic malaise? Of course not. Would German citizens vote for it? Of course not.
Even if the answer to all those questions was different, here is one more key question:
Will the market wait for it? Of course not.
Impossible to Keep a Nannycrat Down
Nonetheless, it is impossible to keep a nannycrat down.
Münchau concludes with "I am, however, mildly encouraged by the sheer number of people in Brussels, Frankfurt, Paris and in Rome, who are now openly advocating a multi-stage fiscal union. There really is no alternative."
No doubt Münchau will be even more encouraged by the June 3 Wall Street journal headline Germany Signals Crisis Shift However, inside the article, the details are the same collection of fluff promises found elsewhere.
The issues on the table fall broadly into two categories. There are ideas such as creating joint European bonds, a European-wide deposit insurance and more broadly a "banking union," which fall into the category of mutual liability for sovereign debt and European banks. These are ideas French President François Hollande backs, but have been anathema to Ms. Merkel unless power to enforce budget discipline is shifted to Europe, which would mean a sacrifice of sovereignty.
Germany is pushing again for far-reaching European control of national budgets, a fiscal-policy union, which would require member states to cede control of national budgets to some future European fiscal authority, an idea France staunchly opposes. There is little chance of a breakthrough in June, but German officials said a process is beginning.
"There will be no big bang at the June summit," said a German official. "But it would be a big step for Europe if we succeed in creating a structure for the discussion, establishing a method, asking the right questions and putting it all into a certain timetable hat would be significant for Europe."
Speaking to reporters at a summit of Baltic Sea Coast leaders last week, Ms. Merkel suggested she is willing to engage in discussion about any idea on the table.
"Of course, it is possible to consider how we are going to develop over the next five to 10 years," she said. "But if we are constantly censuring our ideas it won't work."
Got that?
Merkel wants control over national budgets (something she actually cannot promise without a referendum), and France does not.
One look at the nannycrat participants led by Van Rompuy and Jean-Claude "lie when it's serious" Juncker, is all you need to do to know the plan has far more holes than Swiss Lorraine cheese.
I would have thought that no one could possibly take this seriously, even if such a meeting were agreed to.
There is no plan. There is not even a plan for a plan. The secret plan is to develop a secret plan at the already scheduled June summit with "meat on the bones" coming later.
For some inexplicable reason Münchau is mildly encouraged by all this hot air from nannycrats. I propose the only way to be encouraged by useless talk by nannycrats is to be a nannnycrat.
The least disruptive route Europe can take is to sharply lower the value of the euro. This will help improve the trade deficit in the peripheral countries and bring some relief to their downward spiralling economies. Euro depreciation would push the German trade surplus even higher and cause some inflationary pressures in those few European countries that are still near full employment. Given the strong German labour market, a lower euro would be likely to raise German wages and help close the gap between German and other European labour costs. The mild inflationary effect of a euro closer to dollar parity would be far less painful for all concerned than forcing austerity or internal devaluation on the peripheral countries.
Obvious Problems
There are two obvious problems with Siegel's proposals.
Germany will not go along with higher inflation
It would not help if Germany did
A devaluation of the euro while leaving the eurozone intact would do very little if anything for the relative competitiveness of Spain, Greece, or Italy vs. Germany.
Reportedly, Greece needs a 60% devaluation of the Drachma. Spain may need a 30% or 40% devaluation of the peseta. What does Italy need?
See the problem? Even IF Germany were to agree to higher inflation, it cannot agree to differing rates simultaneously. The practical side says Germany would not agree to higher inflation in the first place and even if it would, certainly 30% is not in the ballpark.
How long would it take Spain to be competitive to Germany if inflation in Germany was 6% and inflation in Spain 0%? My answer is forever.
The notion that inflation in and of itself cures anything is fundamentally flawed, and especially flawed between countries on the same currency.
Obama's Imaginary "Crisis Cloud"
President Obama got into the act, warning Europe to end the "Crisis Cloud".
There is no cloud, only clouded judgements by economic writers, nannycrats, eurocrats, prime ministers, and presidents.
The euro project is a failure. It was ill-conceived in the beginning, poorly executed throughout, and together with fractional reserve lending helped destroy Ireland, Spain, Portugal, and Greece.
With such a dismal track record it is somewhat a mystery why anyone would want the damn thing.
No alternative? Really?
Wolfgang Münchau says "There really is no alternative."
Of course there is an alternative. How about a serious discussion of how best to breakup the eurozone?
Focus on the Obtanium not the Unobtanium
It is time to focus on reality instead of the impossible. The reality is the eurozone is going to bust up and nannycrats better get used to the idea or the markets will impose that break-up in their own messy way.
The "obtanium" is a eurozone breakup.
The "unobtanium" is a fiscal nannyzone. And without a fiscal nannyzone and common bonds, the eurozone cannot stay intact.
Eurozone Breakup is Destiny
A breakup is destiny. The important question is "how?"
The main topics were US GDP, hyperinflation, Ireland, and a eurozone breakup.
Slow-and-Painful or Over-and-Done?
The slow, painful, and highly disruptive breakup is for Greece to exit, followed by Spain, followed by Portugal, followed by Ireland, and ultimately Italy.
The least painful way is for Germany to exit now.
Why?
Germany would immediately have a credible currency. Greece and Spain would not. Greece is highly likely to experience hyperinflation if it exits.
If Germany and the Northern countries exit, then the ECB can print at will. It can do what Spain and Greece wants.
Hollande can then have his fiscal union. However, would he still want that union if France instead of Germany is the main country backstopping the euro?
The "Real Alternative"
The choice is not between pain and no pain, but on how soon to get it over with. Bear in mind, Spain, Italy, and Greece have much to do whether the choice is slow-and-painful or over-and-done.
The PIIGS in general need to address work rules and pension reform. So does France.
The immediate irony is Spain's prime minister Rajoy says he wants this "Nannyzone", but would he actually obey the dictates of the Nannycrats if they ordered Spain to live within it's means and change union work rules as well?
Clearly the answer is no, yet Rajoy argues forcefully for a "central nanny" enforcer.
Germany is Going to Suffer
No one should think Germany will get off Scot-Free. It's export machine is going to break down either way. Debts owed to Germany will be paid back in depreciated euros not Deutschmarks.
German banks can somewhat prepare for this scenario by dumping all external debt immediately.
There are hundreds of other details to work out.
However, there are thousands of very disruptive details to work out case-by-case if the nannycrats succeed in throwing billions or trillions more euros down the drain hoping to save the unsavable.
Enough is enough. It's time for economic writers to end these silly nannyzone proposals and instead concentrate on an intelligent discussion on how best to break apart the eurozone. The market is certainly moving in that direction even if the current crop of politicians is not.
TOKYO: Asian shares tumbled on Monday, pushing the broader Tokyo market to a 28-year low, as investors extended a rout of global stocks and worried about a nightmare scenario of euro-zone breakup, U.S. economic relapse and a sharp slowdown in China.
Tokyo's broader Topix index lost 2.1 percent to 693.35, a level not seen since late 1983, as Asian markets plumbed new lows for 2012. Japan's Nikkei average fell 2 percent after last week marking its ninth straight week of losses, the longest such losing streak run in 20 years.
"It's not an issue of risk-on or risk-off anymore, it's nervousness all over until a clear direction emerges on a long-term trend," said Hisamitsu Hara, chief FX manager at Bank of Tokyo-Mitsubishi UFJ.
The preponderance of recent Greek polls show a tight election. However, the latest Public Issue Survey stands out, and I happen to think that is the most accurate one.
In the last opinion poll to be published by Kathimerini before the June 17 elections, leftist SYRIZA maintains a clear lead over New Democracy, although short of enough support for a clear parliamentary majority.
According to the Public Issue survey, SYRIZA garners 31.5 percent of the vote, 1.5 more than just a week ago. Support for New Democracy is largely unchanged at 25.5. PASOK has lost 2 percent and falls to 13.5. It is followed by Democratic Left (DIMAR) on 7.5 percent and the weakening Independent Greeks on 5.5. The Communist Party (KKE) also has 5.5 percent, while the neo-Nazi Chrysi Avgi (Golden Dawn) has fallen to 4.5 percent. The liberal alliance of Dimiourgia Xana (Recreate Greece) and Drasi attracts 2.5 percent.
In terms of parliamentary seats, this translates into 134 for SYRIZA, 68 for New Democracy, 36 for PASOK, 20 for DIMAR, 15 for KKE, 15 for Independent Greeks and 12 for Chrysi Avgi. Most would fall slightly if the liberals reach the 3 percent parliamentary threshold.
Most Greeks, however, are not convinced that SYRIZA will win. The poll indicates that 58 percent believes ND will come first and only 34 percent see the leftists triumphing.
Speaking to reporters on Thursday, IMF spokesman Gerry Rice said that the Washington-based fund is willing to listen to “any new ideas” that the next Greek government has with respect to how the fiscal targets agreed as part of the bailout can be achieved more effectively.
Rice also said IMF managing director, Christine Lagarde, regretted recent remarks concerning tax evasion by Greeks and comparing their suffering to children in Niger. “She regrets her remarks were misunderstood and caused offense, that was not her intention.”
I see no reason to change my mind about the statements made by Deutsche Bank. Is the apology by Lagarde an admission of a huge gaffe? Possibly, but take a look at the statement once again.
Asked whether she is able to block out of her mind the mothers unable to get access to midwives or patients unable to obtain life-saving drugs, Lagarde replies: "I think more of the little kids from a school in a little village in Niger who get teaching two hours a day, sharing one chair for three of them, and who are very keen to get an education. I have them in my mind all the time. Because I think they need even more help than the people in Athens."
"I think they should also help themselves collectively." Asked how, she replies: "By all paying their tax."
Those statements are clearly quite inflammatory. Regardless of her intention, I strongly believe those statements will swing votes to Syriza.
For all the fluctuations polls showed in the support for SYRIZA and ND, PASOK has remained anchored to its feeble showing on May 6. The Socialists have hardly moved from around 13 percent and seem unable to convince their former supporters to return to the fold. In contrast, Democratic Left shows a modest rise, but this has not come at the expense of SYRIZA. There has been a drastic fall in the number of people intending to vote for parties that won’t get into Parliament. If SYRIZA and Democratic Left are drawing support from this pool and not from each other, then Tsipras’s party doesn’t face a strong threat from the left side of the political spectrum.
The Public Issue poll indicates that SYRIZA is fishing support from an even larger tank. Over the last few months, a growing proportion of Greeks has positioned itself on the left wing of Greek politics. According to the latest survey, half of those questioned said they identified with the left. This was up from 39 percent just over a month earlier. Those identifying with the right, however, are at 28 percent, which has remained virtually unchanged for the last six weeks.
This presents a serious problem for New Democracy. These numbers suggest its potential appeal has a much lower ceiling than SYRIZA and that it has almost reached it. The conservatives have tried to pull out all the stops to build on the slim lead of 2 percent they had over the leftists on May 6. This included welcoming back Dora Bakoyannis, who suspended the operation of her Democratic Alliance party, and several members of the Popular Orthodox Rally (LAOS) and Independent Greeks, all of which had been a drain on ND’s support. However, now that’s been done, ND leader Antonis Samaras has nowhere else to turn to generate support. He’s brought in the reinforcements but still seems outnumbered by Tsipras’s amassing troops.
The last vestige of hope for Samaras has been to polarize the campaign, to turn it into an all-out battle between the responsible conservatives who would keep Greece on an even keel and in the euro and the reckless leftists who dream impossible schemes that would ensure the return of the drachma and deep misery. So far, the euro-vs-drachma dilemma has had only limited appeal and time is running out for Samaras to state his case convincingly.
The presentation of his party’s economic program on Thursday lacked the pomp and circumstance of previous addresses at Zappeio Hall but, more crucially, seemed to carry little weight. Media interest was scant and the ideas presented were tired. It had the air of an inconsequential conference, where everyone was staring at the clock for the last speaker of the day to finish. Compare this with the heightened expectation for Tsipras’s address on Friday, and the SYRIZA leader seemed like the guy with all the momentum. Brighter and fresher, he even got his audience of their seats a couple of times. Maybe the body language and aura meant very little but one imagines the conservatives would have gladly swapped places with the leftists at this stage of the campaign.
One encouraging sign for the conservatives could be that almost twice as many Greeks think that ND will win the elections as those who believe SYRIZA will come first. The leftists want to break with the past but they have to conquer it first by making people believe a SYRIZA-led government is possible and viable. It may be the only thing left standing between them and what until recently was an election result nobody could have predicted.
Greece's conservative New Democracy Party led the radical left Syriza Party in three polls released Friday, the last to be published before crucial June 17 elections that are widely seen as a de facto referendum on the country's future inside the euro zone.
According to a survey of voter intentions for the privately owned ANT1 channel released late Friday, New Democracy had a razor-thin 0.7 percentage point lead over Syriza, with 22.7% favoring the conservatives and 22% favoring the radical leftists.
A survey released earlier Friday in the newspaper Ta Nea showed 26.1% of respondents intend to vote for New Democracy, up from 25.8% in the previous poll just over a week ago, versus 23.6% who said they would vote for Syriza. The poll, conducted by Kapa Research between May 29-31, showed an increase in undecided voters, with those yet to make a final decision rising to 14% from 10.8%.
The Socialist party, Pasok come in third place, with 9.9%. The survey showed the Communists, Independent Greeks, Democratic Left and the ultra-nationalist Golden Dawn all set to gain more than the 3% support required to return lawmakers to parliament.
Another poll published in the newspaper Eleftheros Typos also showed New Democracy ahead, backed by 26.5% of respondents versus 24.2% who supported Syriza.
The three polls confirm a broad trend shown by more than half-a-dozen similar surveys in the last week that give the conservatives a slight advantage. But in each poll the difference separating the two parties is less than three percentage points and within the statistical margin of error. That suggests the race remains too close to call.
In last month's elections, Syriza was catapulted from a small fringe party with about 5% of the vote into a surprise second-place finisher.
A fourth survey published Friday in the newspaper Kathimerini adjusts the results for undecided voters. It shows Syriza ahead, gathering 31.5% of the vote versus 25.5% for New Democracy.
Throw the Bums Out
European voters have an overwhelming tendency to throw the bums out.
Nicolas Sarkozy a centrist went down in flames to Socialist Hollande in the French presidetial election.
Socialists were thrown out en masse in the last elections in Spain.
In spite of German chancellor Angela Merkel's popularity, her party, the Christian Democratic Union, has been trounced in recent elections in Germany.
Expect Syriza to Win
Take the tendency to blame the party in power along with the fact that New Democracy and Pasok have been ruling Greece for years, then add in the exceptionally inflammatory remarks by Lagarde, and one should expect Syriza to be in the lead.
I rate Syriza a 2-1 favorite to win the election with a similar chance of actually forming a coalition government if they do.
If so, Greece will default on payments to the Troika, and funds to Greece will be shut off.
A story is making the rounds that suggests leaders are going to get together and hammer out a "fiscal union".
The story appears to have originated on the Welt Online, a German tabloid. The article mentions a Secret Plan for a New Europe.
EU institutions should design the master plan
At their informal meeting on 23 May had given the leaders a work order to the EU Council President Herman Van Rompuy, Commission President Jose Manuel Barroso, on the Euro Group President Jean-Claude Juncker and the head of the European Central Bank (ECB), Mario Draghi.
The four are to design a roadmap "for the EU to a new level" can be lifted. "Three or four conversations," President of the round was planned in the coming weeks, there will be conference calls, the institutions were in close contact.
Van Rompuy will present key elements of the plan at the summit in late June. They should be included in the final declaration. By the end of the year, the Heads of State and Government of the "roadmap" and decide then officially in black and white. It could be a revolutionary document.
More Holes Than Swiss Cheese
One look at the nannycrat participants led by Van Rompuy and Jean-Claude "lie when it's serious" Juncker, is all you need to do to know the plan has far more holes than Swiss Lorraine cheese.
I would have thought that no one could possibly take this seriously, even if such a meeting were agreed to.
After falling short with her "fiscal compact" on budget discipline, German Chancellor Angela Merkel is pressing for much more ambitious measures, including a central authority to manage euro area finances, and major new powers for the European Commission, European Parliament and European Court of Justice.
The goal is for EU leaders to agree to develop a road map to "fiscal union" at a June 28-29 EU summit, where top European officials including European Council President Herman Van Rompuy will present a set of initial proposals.
European countries would then put the meat on the bones of the plan in the second half of 2012, several European sources have told Reuters, including a timetable for overhauling EU treaties, a step Berlin sees as vital for setting closer integration in stone.
Nothing But Hot Air
The "meat on the bones will come in the second half of 2012". The plan is "so secret" that no one has any details now other than an alleged proposal to agree to agree sometime down the road.
This is what it boils down to: The secret plan is to develop a secret plan at the already scheduled June summit. Yeah right.
Add Stockton, California (population 292,000) to the list of cities bankrupted because of bad management and over-generous public union wages and benefits.
The Stockton City Council announced Wednesday that they will look at bankruptcy contingency plans after Wells Fargo seized the new city hall building.
The city paid $35 million to buy the 8-story building, but was not able to move in because of its money problems, and recently stopped making debt payments all together. This is the fourth building that was repossessed by Wells Fargo; the bank seized three city parking garages for the same reason.
At the June 5 Stockton City Council meeting, members will look at a contingency plan if mediation between the city and creditors failed, city spokesperson Connie Cochran said. For the past two months, the city, under AB 506, has been in a mediation process with creditors to come up with a payment plan in order to avoid bankruptcy.
Incompetent City Management and Unions to Blame
The firefighters' union put together a list of 10 wasteful things the city has done wrong totally about $116 million, including $48 million for the new city hall.
$417 Million Healthcare Liability
The union does not tell you that Stockton has a $417 million liability for its "pay-as-you go retiree health care system"
And that's just healthcare. What about pensions and untenable salaries?
So who is more to blame here?
Bondholder Mediation
Mediation with bondholders and unions is now underway, the outcome of which will determine whether or not the city files for bankruptcy.
Wall Street lawyers are likely taking the hardest line in mediation with Stockton, waiting for the closed-door talks to play out with their arms folded, but seated at the table.
"It's one thing to be forced by a court to give up your rights," said Matt Fabian, a bond analyst at Municipal Market Advisers in Connecticut. "It's another thing to give them up willingly."
Stockton entered mediation March 27, and it agreed with its creditors and labor groups to continue until June 25. Mediation is the last-ditch effort to avoid bankruptcy.
The conversation in mediation starts with Stockton's general fund deficit of $26 million, a fourth multimillion dollar shortfall year. The city must chip away at that figure with an eye on restructuring its obligations and forecasted deficits for years to come.
These are Stockton's major obligations next year, absent any concessions:
Bondholders will get $13 million, an amount that has increased 600 percent in four years. Payments have ballooned just like homeowners who took adjustable-rate mortgages;
Stockton must fund its pay-as-you go retiree health care system at $9 million annually, something City Manager Bob Deis has compared to a Ponzi scheme. To begin funding this $417 million liability, the city would have to put aside $18 million next year;
A few things are known about mediation. There are 18 parties involved, and they are represented by 100 attorneys and accountants combing Stockton's finances.
They are the city's labor groups, retired city employees, CalPERS, Wall Street investors, Wells Fargo Bank and insurers responsible for paying bond holders if and when Stockton defaults.
My Take?
The best course of action for the city is to seek bankruptcy. The city is indeed clearly bankrupt so there is no point in delaying. Delays will only serve the bondholders at taxpayer expense.
In bankruptcy court, the city should win the right to unilaterally modify the pension and healthcare agreements made with public union workers as well as terminate all collective bargaining rights. 50% or even 75% haircuts on pension and healthcare plans may be necessary. So be it.
Bondholders must also take a hit. I suggest 100% on the new city hall (minus whatever it can recover from the seized building). Wells Fargo deserves to be punished for being stupid enough to lend Stockton money.
If Stockton files bankruptcy it will be the largest city in the US to seek Chapter 9 bankruptcy protection. Don't worry, that record will fall soon enough. LA and Oakland cannot be that far behind.
