until the morning crew arrives.

http://www.democraticunderground.com/111669720

http://yanisvaroufakis.eu/2015/07/21/europes-vindictive-privatization-plan-for-greece-project-syndicate/

On July 12, the summit of eurozone leaders dictated its terms of surrender to Greek Prime Minister Alexis Tsipras, who, terrified by the alternatives, accepted all of them. One of those terms concerned the disposition of Greece’s remaining public assets. Eurozone leaders demanded that Greek public assets be transferred to a Treuhand-like fund – a fire-sale vehicle similar to the one used after the fall of the Berlin Wall to privatize quickly, at great financial loss, and with devastating effects on employment all of the vanishing East German state’s public property.

This Greek Treuhand would be based in – wait for it – Luxembourg, and would be run by an outfit overseen by Germany’s finance minister, Wolfgang Schäuble, the author of the scheme. It would complete the fire sales within three years. But, whereas the work of the original Treuhand was accompanied by massive West German investment in infrastructure and large-scale social transfers to the East German population, the people of Greece would receive no corresponding benefit of any sort.

Euclid Tsakalotos, who succeeded me as Greece’s finance minister two weeks ago, did his best to ameliorate the worst aspects of the Greek Treuhand plan. He managed to have the fund domiciled in Athens, and he extracted from Greece’s creditors (the so-called troika of the European Commission, the European Central Bank, and the International Monetary Fund) the important concession that the sales could extend to 30 years, rather than a mere three. This was crucial, for it will permit the Greek state to hold undervalued assets until their price recovers from the current recession-induced lows.

Alas, the Greek Treuhand remains an abomination, and it should be a stigma on Europe’s conscience. Worse, it is a wasted opportunity. The plan is politically toxic, because the fund, though domiciled in Greece, will effectively be managed by the troika. It is also financially noxious, because the proceeds will go toward servicing what even the IMF now admits is an unpayable debt. And it fails economically, because it wastes a wonderful opportunity to create homegrown investments to help counter the recessionary impact of the punitive fiscal consolidation that is also part of the July 12 summit’s “terms.”

It did not have to be this way. On June 19, I communicated to the German government and to the troika an alternative proposal, as part of a document entitled “Ending the Greek Crisis”:



Our proposal was greeted with deafening silence. More precisely, the Eurogroup of eurozone finance ministers and the troika continued to leak to the global media that the Greek authorities had no credible, innovative proposals on offer – their standard refrain. A few days later, once the powers-that-be realized that the Greek government was about to capitulate fully to the troika’s demands, they saw fit to impose upon Greece their demeaning, unimaginative, and pernicious Treuhand model. At a turning point in European history, our innovative alternative was thrown into the dustbin. It remains there for others to retrieve.

http://www.ekathimerini.com/199738/article/ekathimerini/business/nearly-a-quarter-of-greek-firms-seek-move-abroad-survey-shows

Capital controls imposed by the Greek government are taking a heavy toll on the country's businesses, a survey showed Monday, with nearly a quarter saying they are seeking to move their headquarters abroad.

Endeavour Greece, a non-profit group that supports entrepreneurs, found that 58 percent of the 300 companies it surveyed between July 13 and July 17 reported a "significant impact on their operations caused by the limitations imposed to cross-border transactions."

"Many of these companies cannot import raw material or have access to foreign services and infrastructure," the group said in a statement, adding that 23 percent "plan to transfer their headquarters abroad for security, cash flow and stability reasons."

More than two thirds of the companies – 69 percent – reported a "significant drop in turnover," with 11 percent forced to decrease or suspend production due to shortages of raw materials...

at least those who can afford one!

http://libertyblitzkrieg.com/2015/07/21/no-capital-controls-for-oligarchs-warren-buffet-buys-greek-island/#more-25591

If you want to see what unrestrained parasitic financial oligarchy ultimately looks like, look no further than the humanitarian crisis in Greece turned unprecedented billionaire opportunity. With global wealth becoming more and more systemically concentrated in the hands of “insiders,” empty flats bought for tens of millions of dollars in London and Manhattan no longer cut it. These guys have billions of dollars to burn, which means they need to start buying countries; or at least parts of countries, once they’ve been intentionally run into the ground via vulture financial colonialism.

Enter Warren Buffett. Sure, he’s a harmless old grandpa, just like yours. He loves cherry coke, hamburgers, Dairy Queen, America and, you know, Greek islands.

From Newsweek:



Yes, they were busy plotting how best to fleece some more serfs. I’ve made my position on “Uncle Warren” very clear over the years. Here are a couple examples:

SEE LIST AT LINK OF ARTICLES ON BUFFETT

Of course, the ultimate FU to the Greek public will be when newly minted billionaire Lloyd Blankfein buys his very own Greek island. After all, Goldman Sachs played a crucial role in the entire debacle plaguing Greece. As the Washington Post noted back in 2010:



It’s not counterproductive at all you buffoon. Five years later they are buying Greek islands on the cheap. Get ready, Spain, I hear you’ve got some nice beaches.

but wants more.

http://openeurope.org.uk/blog/hollande-proposes-a-eurozone-government/

Almost inevitably, the Greek crisis has reignited the debate over the future of Eurozone integration. Whatever happens with Greece – the country’s euro exit is definitely not off the table – it is clear that, at least in terms of rhetoric and intentions, we are likely to witness a renewed push for closer ties among the countries sharing the common currency.

French President François Hollande has used a letter to Journal du Dimanche, in which he pays tribute to former European Commission President Jacques Delors (who turns 90 today), to argue the following:



He goes on,



Hollande concludes,



In many ways, Hollande is just reiterating a classic French vision of EU integration – a ‘two-speed Europe’ with the single currency bloc at its core. Indeed, the ideas floated by the French President – a Eurozone government with a dedicated budget, and even a separate Eurozone parliament – would certainly require EU Treaty change, something France has been keen to avoid in recent years.

In an interview published by Der Spiegel over the weekend, German Finance Minister Wolfgang Schäuble has also re-hashed the idea of a single finance minister for the Eurozone, saying,


It is far from obvious how many Eurozone countries would actually be prepared for such a big leap forward – especially considering how the recent Greek negotiations have exacerbated the North/South divide.

But the fact that the French President and the German Finance Minister are talking openly about their grand designs for the Eurozone – just a week after the single currency faced its toughest test – is indeed significant. Even more so if one compares their statements with the largely underwhelming proposals set out in the Five Presidents’ Report on the future of Eurozone integration published at the end of last month...

http://bilbo.economicoutlook.net/blog/?p=31389

A LONG DETAILED HISTORY OF THE EUROZONE DEVELOPMENT AND ITS FAILURES

http://www.the-american-interest.com/2015/07/20/poles-suddenly-far-less-interested-in-joining-euro/

For years, ever-closer integration into the European Union has been one of the driving forces in Polish politics, widely viewed as a process that would finalize Poland’s place in the Western order. But suddenly—what could have inspired this?—opinion has taken a sharp turn against the euro in the run-up to the country’s general election. As both the NYT and the Financial Times report, the events in Greece have become a flashpoint in Poland, where the Law and Justice party will face the Civic Platform party this October. NYT:



The Polish people, too, seem to oppose the euro, even though their country is legally required to adopt it; the FT cites one survey of Poles showing that 54 percent of respondents don’t want the currency. Even the ruling party, for its part, is defending itself in anti-Greek terms, characterizing Law and Justice as offering “populist” and “carefree” spending prescriptions that will lead to Greek-style ruin.

Germans who believed that making an example of Greece would encourage others to follow the rules will doubtlessly be pleased by the ruling party’s criticism of Law and Justice. But the popular opposition in Poland to the euro poses a serious challenge to the traditional view of the way the EU is meant to work. The pan-European project is supposed to be a one-way ratchet. As each element of European integration falls into place, it would by internal logic—and popular appeal—drive the next. This is why Poland is still legally obligated to join the euro—the idea of ‘opt-outs’ under such a mental rubric is almost tantamount to heresy. But the disaster that befell Greece, and the straightjacket that the single currency has proven since the crisis first struck, is impossible to deny. To see Poles telling the FT that “If the euro was good, English people would be the first to have it in their country” should send a chill down the spine of every good eurocrat (The English are, needless to say, the nation of heretics, from an orthodox Brussels point of view.)

The anti-euro sentiment in Poland points to why many experts claimed the Greek crisis would pose serious political risks to Europe no matter which way it was resolved. If Greece had been able to leave, the ideal of inevitable “ever-closer union” would have been falsified. But since it looks like it will have to stay under unpleasant circumstances, that ideal looks far less appealing to others.

The peoples of Europe will have plenty of opportunities to make their views felt in this ‘year of elections‘, as Poles, Spaniards, and perhaps even the Greeks (again) head to the polls. How they vote, and how the EU’s leaders respond, will tell us a lot about just how deep this crisis goes.

Dmitry Orlov tells it like it is this morning...

Over the past few months we have been forced to bear witness to a humiliating farce unfolding in Europe. Greece, which was first accepted into the European Monetary Union under false pretenses, then saddled with excessive levels of debt, then crippled through the imposition of austerity, finally did something: the Greeks elected a government that promised to shake things up. The Syriza party platform had the following planks, which were quite revolutionary in spirit.

• Put an end to austerity and put the Greek economy on a path toward recovery
• Raise the income tax to 75% for all incomes over 500,000 euros, adopt a tax on financial transactions and a special tax on luxury goods.
• Drastically cut military expenditures, close all foreign military bases on Greek soil and withdraw from NATO.
• End military cooperation with Israel and support the creation of a Palestinian State within the 1967 borders.
• Nationalize the banks.
• Enact constitutional reforms to guarantee the right to education, health care and the environment.
• Hold referendums on treaties and other accords with the European Union.

Of these, only the last bullet point was acted on: there was a lot made of the referendum which returned a resounding “No!” to EU demands for more austerity and the dismantling and selling off of Greek public assets. But a lot less was made of the fact that the results of this referendum were then ignored.

But the trouble started before then. After being elected, Syriza representatives went to Brussels to negotiate. The negotiations generally went like this: Syriza would make an offer; the EU officials would reject it, and advance their own demands for more austerity; Syriza would make another offer, and the EU officials would reject it too and advance their own demands for even more austerity than in the last round; and so on, all the way until Greek capitulation. All the EU officials had to do to force the Greeks to capitulate was to stop the flow of Euros to Greek banks. Some revolutionaries, these! More like a toy poodle trying to negotiate for a little more kibble to be poured into its dish, if it pleases the master to do so. Stathis Kouvelakis (a Syriza member) summed up the Greek government's stance: “Here’s our program, but if we find that its implementation is incompatible with keeping the euro, then we’ll forget about it.”

It is not as if revolutions don't happen any more. Just one country over from Greece there is a rather successful revolution unfolding as we speak: what used to be Northern Iraq and Syria is controlled by the revolutionary regime variously known as ISIS/ISIL/Daash/Islamic Caliphate. We can tell that it is a real revolution because of its use of terror. All revolutionaries deserving of the name use terror—and what they generally say is that their terror is in response to the terror of the pre-existing order they seek to overthrow, or the terror of their counterrevolutionary enemies. And by terror I mean mass murder, expropriation, exile and the taking of hostages. (Yes boys and girls. That's what a revolution is. Also, Dmitry seems to have overlooked Turkey. That's one country over from Greece).

Just so that you understand me correctly, let me stress at the outset that I am not a revolutionary. I am an observer and a commentator on all sorts of things, including revolutions, but I choose not to participate. Remaining an observer and a commentator presupposes staying alive, and my personal longevity program calls for not being anywhere near any revolutions—because, as I just mentioned, revolutions involve mass murder.

In the case of the French revolution, it started with liberté-égalité-fraternité and proceeded swiftly to guilliotiné. The Russian revolution of 1917 remains the gold standard for revolutions. There, thanks to Uncle Joe, so-called “red terror” went on and on, eventually claiming millions of victims. Mao and Pol Pot are also part of that revolutionary pantheon. The American revolution wasn't a revolution at all because the slave-owning, genocidal sponsors of international piracy remained in power under the new administration. Nor does the February 2014 putsch in the Ukraine qualify as a revolution; that was an externally imposed violent overthrow of the legitimate government and the installation of a US-managed puppet regime, but, as in the American Colonies, the same gang of thieves—the Ukrainian oligarchs—continue to rob the country blind just as before. But if the Nazi thugs from the “Right Sector” take over and kill the oligarchs, the government officials in Kiev and their US State Dept./CIA/NATO minders, and then proceed with a campaign of “brown terror” throughout the country, then I will start calling it a revolution.

Complete story at - http://cluborlov.blogspot.com/2015/07/so-you-say-you-dont-want-revolution.html

BY FAILING TO REGULATE, YOU MEAN, SHEILA?

http://finance.yahoo.com/news/sheila-bair--will-regulators-cause-the-next-crisis--a-response-to-jamie-dimon-141839724.html#



As we observe the fifth anniversary of the Dodd-Frank financial reform law, some of Wall Street’s most influential voices are warning of the possibility for another financial crisis, and they want you to know in advance that it isn’t going to be their fault. Rather, according to this new narrative, the problem is those pesky government regulators and their misguided efforts to de-lever and de-risk the financial system. The opening volley in this latest line of attack against financial reform was laid out in Jamie Dimon’s annual letter to JPMorgan Chase (JPM) shareholders. Not coincidentally, Dimon and others are taking aim at the reforms they seem to dislike the most: tougher capital rules which require banks to fund themselves with more common equity and less debt; and liquidity rules, which require banks to keep minimum levels of low-risk, easily-sellable assets on hand. Dimon and others argue that big banks will be unwilling to “stand against the tide” and be a source of strength to the economy during the next crisis because of all these new liquidity and capital constraints. For instance, Dimon points out that during a crisis, there is a “flight to quality” resulting in steep investor demand for safe assets like U.S. government securities. However, he argues, banks will be unwilling to sell such securities to investors because government rules now require that they hold on to them to meet new liquidity standards. He also notes that during a crisis, investors pour more money into FDIC-insured deposits, and draw down on credit lines to increase readily-accessible cash. But he says banks will refuse to allow this because the bigger their balance sheets, the more capital they will have to hold. Similarly, he says, banks will refuse to make new loans or otherwise make credit available because it will increase their capital requirements.

To support his argument, he points to significant decreases in big dealer banks’ bond holdings as evidence that they are poorly positioned to meet customer demand for safe assets during times of market stress. As proof, he references the extreme volatility that occurred in the Treasury market in October 2014. To be sure, big banks’ bond inventories have dropped since the crisis, but it is far from clear that is due to regulation. More likely, it is a result of their unattractiveness as an investment given their low yields, combined with a significant reduction in supply caused by aggressive central bank buying here and abroad. Changes in market structure are also playing a role, as new players have entered the Treasury market. Indeed, a recent report by the U.S. government found no conclusive evidence that regulation was responsible for last year’s volatility. It did, however, note the growing role of “principal trading firms” aka high-frequency traders (whose trading, I might add, is supported by the big banks through their prime broker operations) in the Treasury market.

While Dimon complains about regulation being too tough, it is difficult to see how loosening the rules would help. If anything, they need to be tougher. For example, the new “supplemental leverage ratio” requires big banks to maintain equity capital funding of 5%, still permitting 95% of their funding to come from debt. How would the problems Dimon identifies be addressed if that requirement was loosened to say 3% or 2%? Would that put the banks in a better position to accept new deposits, keep credit lines open, facilitate customer trading, and make new loans during economic turmoil? On the contrary, with razor-thin capital margins, and sudden and unexpected losses on their own investments and loans, they would be struggling to stay solvent and maintain access to credit themselves. They would hardly be in a position to “stand against the tide.” In fact, this is just what happened during the 2008 financial crisis. Going into the crisis, many big banks were over-levered and exposed to trillions in opaque, illiquid mortgage securities and derivatives instruments. This created widespread (and justifiable) concerns about their solvency, causing their own creditors to retrench en masse. Banks could not roll-over the short-term loans on which they heavily relied for funding, forcing the government to throw trillions of capital investments, loans, and loan guarantees at them to keep the financial system functioning. Even with this support, the country suffered a severe credit contraction, contributing to one of the worst recessions in our nation’s history.

Dimon boasts that his $2.4 trillion bank rolled over $260 billion in loans and credit during 2008 and 2009. A more interesting figure would be the volume of credit lines JPMorgan reduced or pulled, and loans it did not renew during those two years. Indeed, as the chart SEE LINK shows, for the industry as a whole, outstanding loans and available credit lines fell precipitously during the crisis and did not really begin to recover—albeit tepidly—until early 2013. Unused credit lines dropped by a whopping $2.6 trillion from the second quarter of 2007 to the second quarter of 2010. The damage to the real economy was profound. However, thanks to the bailouts, the banks were just fine. Dimon has a better point in his critique of the liquidity rules (which, like a lot of reforms, are still only half-done). I would agree that the basic premise of these rules -- that big banks would be taking steep haircuts on so-called liquid assets to raise cash during a crisis -- is highly questionable. But the answer is to change and strengthen the rules, not weaken them. For instance, banks could be required to retain a greater proportion of their funding from stable, long-term debt, and have to maintain a liquidity buffer at the Fed that could be drawn down during a crisis.

It should be acknowledged that Dimon managed his bank well during the crisis. The banks are lucky to have him as their spokesperson. But that is part of the problem. He tends to view the need for regulation through the lens of a well-run institution, though even mighty JPMorgan is subject to missteps, as we saw with the London Whale debacle.

Given big banks’ implicit and explicit government benefits, they have strong incentives to take outsized risks on the government’s dime. They need a firm regulatory hand. If we want to make sure big banks can “stand against the tide” and be a source of strength for the economy, we first need to make sure that the banks are stable themselves. What Dimon is really asking of the government is to loosen the regulatory shackles and trust them to do the right thing. How could any regulator who lived through the 2008 financial crisis want to go down that road again? Wall Street has persistently tried to escape accountability for its role in the 2008 crisis by blaming it all on government efforts to expand homeownership. This current finger pointing at regulation as the cause of system instability smacks of the same reluctance to accept responsibility for their own behavior.

If government was to blame for the last crisis, it was because regulators listened to Wall Street nonsense about enlightened self-regulation, that there was no need for mortgage standards, that they could be trusted to set their own capital rules, and that the derivatives markets needed no government oversight. If government is to blame for the next crisis, it will not be because they were too tough on the industry, but because they were, once again, too timid in the face of fierce industry lobbying which has left financial reform at best, half-done.


Sheila Bair was chair of the Federal Deposit Insurance Corporation from 2006-2011, a period in which the U.S. faced the worst financial crisis since the Great Depression. She is author of several books, including her latest, "Bullies of Wall Street."

http://blogs.wsj.com/economics/2015/07/20/signs-of-overheating-in-the-single-family-rental-market/


The single-family rental market has grown dramatically after around seven million families lost their homes during the foreclosure crisis and its aftermath. But there are signs that rents in some markets may be unsustainable, a new report finds. Single-family rentals now account for 13% of the overall housing stock, up from 9% in 2005, according to a report by Moody’s Analytics. Demand for renting homes grew dramatically after millions lost their homes to foreclosure, short-sale or other distressed events. Many didn’t want to live in apartment buildings, so investors scooped up foreclosed homes in bulk and rented them back to families.

But there are signs the market is starting to overheat. Rents in San Jose, California – one of the hottest real-estate markets in the country – appear to be 19% overvalued when compared to home prices, according to Moody’s. The average rental price for a single-family home in San Jose is now $3,121. Relative to home prices, the average rent should be $2,632, Moody’s said. Similarly, rents in Denver are 18% overvalued, with families paying $1,746 on average, when normal rents would be closer to $1,485.

Typically, rents for single-family homes should be in line with monthly mortgage payments for a similar house. Rents are also too high relative to home prices in Houston, where Moody’s estimates they are 8% overvalued. That could be particularly concerning given fears that the fall in oil prices will dampen the housing market there.

Mark Zandi, chief economist for Moody’s, said overheated rents aren’t likely to spell catastrophe. As long as families can afford them they will continue to pay, and if the job market or demand in these areas slows then landlords will be forced to pull back. Demand for single-family rentals, he said, will start to taper off in coming years as families’ financial situations continue to improve and the homeownership rate increases. Right now, the homeownership rate is hovering around 64%, down from 70% a decade ago.

“I do think there’s a fair amount of pent-up demand for homeownership. Some of these folks who took single-family rentals are going to start to want to be homeowners,” Mr. Zandi said.

FOOL ME ONCE...SHAME ON YOU.

http://www.cnbc.com/2015/07/20/interest-only-mortgages-theyre-baaack.html



They were the villains of the housing crash. Federal regulators called them toxic. Now interest-only mortgages are making a comeback, but these are not the loans of yesteryear or yester-housing booms.

"I think it's opening the door back to responsible lending, giving people choices," said Mat Ishbia, president and CEO of Michigan-based United Wholesale Mortgage, the second-largest lender through brokers in the nation.

The company announced Monday it is now offering interest-only loans through brokers, with significant safeguards. Borrowers must put 20 percent down, ensuring that they have the "skin in the game" that so many did not during the heady days of the housing boom. They must have at least a 720 FICO credit score, which is well above average, and they must qualify on what the payments will be once they're adjusted higher, not at the starter rate.

"These people can afford these mortgages. They're savvy homeowners," said Ishbia. "We're giving them the choice. It is no more risk to us. We actually think it's less risk."

United Wholesale Mortgage does not hold the loans but sells them to investors. Fannie Mae and Freddie Mac, the government-backed mortgage giants, do not buy these types of loans...

FOOL ME TWICE....

The housing market crashed not that long after. Out here in Portland the market is active, but not like the craziness of 2006, yet!

in the overheated areas of California, especially. You know when the flipper shows hit HGTV again that prices are inflating fast enough to justify the rehab work and generate a profit on trashed houses from the last bust. That inflation means conventional financing is out and people get terrified if they wait, they'll lose out completely. And so it goes until the whole thing goes bust again, people losing everything while remaining on the hook for debt they can't possibly repay.

And of course, it's all being marketed in the form of CDOs since the bad loans can't be sold to reputable outlets like Fannie and Freddie. And so it goes.

WELL, MAYBE, IF ALL THE FINANCIAL PARASITES ARE KILLED OFF, THE HOST ECONOMY CAN RECOVER...

http://www.bloombergview.com/articles/2015-07-20/will-the-world-ever-have-fast-economic-growth-again-

Let’s step back and take a look at global economic development. In the last two or three decades, we’ve seen a remarkable phenomenon. Since the Industrial Revolution, a few countries in Europe, North America and East Asia raced ahead of the global pack and maintained their lead for much of the 19th and 20th centuries. That confounded the predictions of basic models of economic growth, which say that national living standards should converge over time. Only since the 1980s, has the rest of the world been catching up, and catching up fast. Global growth has been strong -- usually more than 3 percent, often even higher. And developing countries have grown much faster than developed ones, helping to make global income distribution much more equal. It looks like the old economic models are working after all.

But can it last? The main engine of global growth since 2000 has been the rapid industrialization of China. By channeling the vast savings of its population into capital investment, and by rapidly absorbing technology from advanced countries, China was able to carry out the most stupendous modernization in history, moving hundreds of millions of farmers from rural areas to cities. That in turn powered the growth of resource-exporting countries such as Brazil, Russia and many developing nations that sold their oil, metals and other resources to the new workshop of the world.

China's Pain Points

The problem is that China’s recent slowdown from 10 percent annual growth to about 7 percent is only the beginning. The recent drops in housing and stock prices are harbingers of a further economic moderation. That is inevitable, since no country can grow at a breakneck pace forever. And with the slowing of China, Brazil and Russia have been slowing as well -- the heyday of the BRICs (Brazil, Russia, India and China) is over.

But the really worrying question is: What if other nations can't pick up the slack when China slows? What if China is the last country to follow the tried-and-true path of industrialization? There is really only one time-tested way for a country to get rich. It moves farmers to factories and imports foreign manufacturing technology. When you move surplus farmers to cities, their productivity soars -- this is the so-called dual-sector model of economic development pioneered by economist W. Arthur Lewis. So far, no country has reached high levels of income by moving farmers to service jobs en masse. Which leads us to conclude that there is something unique about manufacturing...

YEAH, IT'S CALLED "WEALTH PRODUCTION". REAL GOODS THAT INCREASE THE STANDARD OF LIVING. ADDING VALUE TO RAW MATERIAL...

Published on Jul 21, 2015

Economist Dr. Richard Wolff, Democracy At Work joins Thom. China - the world's second biggest economy - recently saw its stock market plummet 30 percent in a month. Does this mean that next big economic crisis is right around the corner?