I know that this may sound a little odd, but I read a great article about the Greek loans from the ECB and the angst it’s causing – penned by the new Greek Prime Minister. Of course if one is honest, these are loans from Germany (the only strong country in the EU) to Greece, thus the direct nature of the following letter that was read here:

Most of you, dear Handesblatt readers, will have formed a preconception of what this article is about before you actually read it. I am imploring you not to succumb to such preconceptions. Prejudice was never a good guide, especially during periods when an economic crisis reinforces stereotypes and breeds biggotry, nationalism, even violence.

In 2010, the Greek state ceased to be able to service its debt. Unfortunately, European officials decided to pretend that this problem could be overcome by means of the largest loan in history on condition of fiscal austerity that would, with mathematical precision, shrink the national income from which both new and old loans must be paid. An insolvency problem was thus dealt with as if it were a case of illiquidity.

In other words, Europe adopted the tactics of the least reputable bankers who refuse to acknowledge bad loans, preferring to grant new ones to the insolvent entity so as to pretend that the original loan is performing while extending the bankruptcy into the future. Nothing more than common sense was required to see that the application of the ‘extend and pretend’ tactic would lead my country to a tragic state. That instead of Greece’s stabilization, Europe was creating the circumstances for a self-reinforcing crisis that undermines the foundations of Europe itself.

My party, and I personally, disagreed fiercely with the May 2010 loan agreement not because you, the citizens of Germany, did not give us enough money but because you gave us much, much more than you should have and our government accepted far, far more than it had a right to. Money that would, in any case, neither help the people of Greece (as it was being thrown into the black hole of an unsustainable debt) nor prevent the ballooning of Greek government debt, at great expense to the Greek and German taxpayer.

Indeed, even before a full year had gone by, from 2011 onwards, our predictions were confirmed. The combination of gigantic new loans and stringent government spending cuts that depressed incomes not only failed to rein the debt in but, also, punished the weakest of citizens turning people who had hitherto been living a measured, modest life into paupers and beggars, denying them above all else their dignity. The collapse of incomes pushed thousands of firms into bankruptcy boosting the oligopolistic power of surviving large firms. Thus, prices have been falling but more slowly than wages and salaries, pushing down overall demand for goods and services and crushing nominal incomes while debts continue their inexorable rise. In this setting, the deficit of hope accelerated uncontrollably and, before we knew it, the ‘serpent’s egg’ hatched – the result being neo-Nazis patrolling our neighbourhoods, spreading their message of hatred.

Despite the evident failure of the ‘extend and pretend’ logic, it is still being implemented to this day. The second Greek ‘bailout’, enacted in the Spring of 2012, added another huge loan on the weakened shoulders of the Greek taxpayers, “haircut” our social security funds, and financed a ruthless new cleptocracy.

Respected commentators have been referring of recent to Greece’s stabilization, even of signs of growth. Alas, ‘Greek-covery’ is but a mirage which we must put to rest as soon as possible. The recent modest rise of real GDP, to the tune of 0.7%, signals not the end of recession (as has been proclaimed) but, rather, its continuation. Think about it: The same official sources report, for the same quarter, an inflation rate of -1.80%, i.e. deflation. Which means that the 0.7% rise in real GDP was due to a negative growth rate of nominal GDP! In other words, all that happened is that prices declined faster than nominal national income. Not exactly a cause for proclaiming the end of six years of recession!

Allow me to submit to you that this sorry attempt to recruit a new version of ‘Greek statistics’, in order to declare the ongoing Greek crisis over, is an insult to all Europeans who, at long last, deserve the truth about Greece and about Europe. So, let me be frank: Greece’s debt is currently unsustainable and U, especially while Greece is being subjected to continuous fiscal waterboarding. The insistence in these dead-end policies, and in the denial of simple arithmetic, costs the German taxpayer dearly while, at once, condemning to a proud European nation to permanent indignity. What is even worse: In this manner, before long the Germans turn against the Greeks, the Greeks against the Germans and, unsurprisingly, the European Ideal suffers catastrophic losses.

Germany, and in particular the hard-working German workers, have nothing to fear from a SYRIZA victory. The opposite holds. Our task is not to confront our partners. It is not to secure larger loans or, equivalently, the right to higher deficits. Our target is, rather, the country’s stabilization, balanced budgets and, of course, the end of the grand squeeze of the weaker Greek taxpayers in the context of a loan agreement that is simply unenforceable. We are committed to end ‘extend and pretend’ logic not against German citizens but with a view to the mutual advantages for all Europeans.

Dear readers, I understand that, behind your ‘demand’ that our government fulfills all of its ‘contractual obligations’ hides the fear that, if you let us Greeks some breathing space, we shall return to our bad, old ways. I acknowledge this anxiety. However, let me say that it was not SYRIZA that incubated the cleptocracy which today pretends to strive for ‘reforms’, as long as these ‘reforms’ do not affect their ill-gotten privileges. We are ready and willing to introduce major reforms for which we are now seeking a mandate to implement from the Greek electorate, naturally in collaboration with our European partners.

Our task is to bring about a European New Deal within which our people can breathe, create and live in dignity.

A great opportunity for Europe is about to be born in Greece. An opportunity Europe can ill afford to miss.

The letter above will not be well received by many, especially those in the ECB; however, it is an amazing breath of fresh air to hear a politician speak frankly rather than hiding his real intentions in innuendo and fake promises.

I don’t know about you, dear reader, but I have certainly had enough with the never-ending sophistry of 99.999999% of politicians. There is no easy way out of Greece’s horrible financial situation and Mr. Tsipras is clearly fighting an uphill battle; there will be more pain, but I wish him the best of luck.

Trade well and follow the trend, not the perma-bull OR perma-bear “experts.”

Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banking mafia.


Wednesday was not just another day in the market, but both an FOMC day and an incredibly bearish day. Usually FOMC days and a market rally are as reliable as the sun rising in the East every morning; however, that certainly did not happen Wednesday. The Dow, for example, as monkey hammered nearly 300 points from its high to its low. What’s more, given the unbelievably good earnings from Apple, this is an especially interesting twist in the recent higher volatility. Me thinks the market is in big trouble!

Shortly after the lunch hour had ended, the FOMC deveiled its findings after a 2-day meeting. Not much had changed as we all parsed the statements, looking for clearer meanings of “transitory,” “considerable,” and most of all: “patient.” Frankly, it’s pathetic.





So the Fed is on hold with its monetary policy. Interest rates will yield savers near-zero for quite a while longer. As we also know, the ECB is increasing its printing policy as it embarks on QE in mid-March. What’s odd this time around, however, are the increasing amount of high-level politicians and prior central planners that finally disagree with this plan.

Bloomberg reported one such fellow – the former Bank of England Governor, Mervyn King.

“Many countries today can see that they have taken monetary policy as far as they can go.”

“Exchange rate policy may now become an instrument of monetary policy.”

“Since exchange rate changes are a zero sum game, there is a risk of currency war.”

King says disequilibrium in world economy is causing chronic weakness in demand

The must be addressed, says King, noting that monetary and fiscal stimulus may not be able to bring a recovery unless the disequilibrium is addressed.

(Regarding real interest rates remaining very low for a very long time.)

“They may be right, they may be wrong,”

“If they are right, I think we have a significant disequilibrium in the world economy. I do not believe and expect a market economy to thrive on real interest rates that are close to zero.”



“If they’re wrong, then at some point markets will discover that they have been pushing asset prices to an excessively high level and there will be a major downward shock to asset prices and with debt levels fixed in nominal terms, that could cause some serious problems at some point in the future.”

Naah, this guy is crazy – right? Up for Evvvahhh!

Trade well and follow the trend, not the perma-bull OR perma-bear “experts.”

Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banking mafia.


Leo Rosten in The Joys of Yiddish defines chutzpah as “gall, brazen nerve, effrontery, incredible ‘guts’, presumption plus arrogance such as no other word and no other language can do justice to”. A wise may related the concept to me many years ago a little more colorfully. “Chutzpah”, he said, “is a when child murders his parents and then throws himself at the mercy of the court because he is an orphan.” Yikes! Ok, I get it now! Enter Yanis Varoufakis, the new Greek Finance Minister. Greece’s economic woes are nothing new with plummeting living standards, ever-increasing unemployment, and the inability to keep up with their bills. But now it’s not about getting more money to buy them more time. He says, in an interview yesterday with CNBC’s Michelle Caruso-Cabrera, “how can I look the German and Finnish taxpayer in the eye and tell them you know I can’t really pay you the money I have already borrowed from you…”. Instead, it is this: “this is what happens when you humiliate a nation and don’t give it any hope.” See, it’s not Greece’s fault they have gotten to this point, it’s Europe’s fault and now Greece is offended and humiliated! So, instead of holding Greece accountable for its actions, let’s just forget the whole thing never happened and start fresh? That’s the way Mr. Varoufakis would like it I believe.


Listening to the financial news stations yesterday, you would think that an asteroid was going to hit the US Eastern seaboard and not a snowstorm. It never ceases to amaze me how much people freak out about these relatively common weather events. We have radar, we see it coming, and we see how fast it is moving. Do a little preparation, buy some groceries, stay off the roads and enjoy your snow day! In any event, this got me thinking about what the actual economic effect (if any) an event like this has. As Ryan Sweet, writer for “The Street” notes:

“Economic output in the region between Boston, greater New York City, Philadelphia totals about $2 trillion per year, just around 12% of national GDP. At 250 working days per year, daily output in the region is worth about $8 billion. Two days of lost output thus equals $16 billion, which isn’t unrealistic.”

I think this is a bit simplistic because it’s not like zero economic activity occurs when a storm like this rolls through, but it is at least a figure to give us some scope. In addition, you can argue that storms like this could even stimulate economic activity in the short run in the form of increased labor and capital expenditure for clean-up, maybe some extra road work in the Spring, perhaps a few roofs replaced due to snow and ice damage, etc. This brings me back to Economics 101 and the parable of the broken window. For a full discussion on this parable please refer to this link: But long story short, “the parable of the broken window was introduced by Frédéric Bastiat in his 1850 essay to illustrate why destruction, and the money spent to recover from destruction, is not actually a net benefit to society.”

So, just like most topics hyped by the talking heads acting like Chicken Little, it’s much ado about nothing. In a month (or sooner), we will forget this ever happened and the world will be no better and no worse for wear.


Greece is back in the news again. If you recall, a few years ago whenever there was political controversy in Greece the markets reacted with a severe “sell it at the market” rash. The market was fearful that a new group of politicians would force the country to leave the Euro, thus causing cascading and catastrophic losses for banks across the world, but especially in Germany. When enough politicians were bribed, however, the talk of leaving the Euro vanished.

This time may be different. The leader of the newly elected Syriza party wants a major reduction in Greece’s bailout packages for one reason: It can not pay, and what cannot be paid will not be. The debt amount is simply too large for such a small country.

On the results, Bloomberg penned the following: Alexis Tsipras’s Syriza took 36.5 percent in Sunday’s election, compared with 27.7 percent for Samaras’s New Democracy, according to official estimates. While the projected victory was by a wider margin than polls predicted, it remains unclear whether Syriza will be able to govern alone.

The win hands Tsipras a mandate to confront Greece’s austerity program imposed in return for pledges of 240 billion euros in aid since May 2010. The challenge for him now is to strike a balance between keeping his election pledges including a write-down of Greek debt and avoiding what Samaras repeatedly warned was the risk of an accidental exit from the euro.

Additionally, the wires shouted the following statements from the winning party…








These are quite serious statements; however, one wonders if Mr. Tsipras can guide his new party, Syriza, to their collective conclusions. Will he actually be able to fend off the EU naysayers and surely large bribe attempts? Or will Mr. Tsipras be found having committed suicide…by shooting himself repeatedly in the back?

Trade well and follow the trend, not the perma-bull OR perma-bear “experts.”

Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banking mafia.


The European Central Bank has gone all in: The Euro area will get nearly unlimited QE. The money-printing baton has been passed from the US and Japanese, to Mario Draghi. In order to debase its currency, drive inflation higher and thereby destroy purchasing power, Draghi fired a financial bazooka today.

Full details from the ECB:

ECB announces expanded asset purchase programme

•ECB expands purchases to include bonds issued by euro area central governments, agencies and European institutions

•Combined monthly asset purchases to amount to €60 billion

•Purchases intended to be carried out until at least September 2016

•Programme designed to fulfill price stability mandate

The Governing Council of the European Central Bank (ECB) today announced an expanded asset purchase programme. Aimed at fulfilling the ECB’s price stability mandate, this programme will see the ECB add the purchase of sovereign bonds to its existing private sector asset purchase programmes in order to address the risks of a too prolonged period of low inflation.

The Governing Council took this decision in a situation in which most indicators of actual and expected inflation in the euro area had drifted towards their historical lows. As potential second-round effects on wage and price-setting threatened to adversely affect medium-term price developments, this situation required a forceful monetary policy response.

Asset purchases provide monetary stimulus to the economy in a context where key ECB interest rates are at their lower bound. They further ease monetary and financial conditions, making access to finance cheaper for firms and households. This tends to support investment and consumption, and ultimately contributes to a return of inflation rates towards 2%.

The programme will encompass the asset-backed securities purchase programme (ABSPP) and the covered bond purchase programme (CBPP3), which were both launched late last year. Combined monthly purchases will amount to €60 billion. They are intended to be carried out until at least September 2016 and in any case until the Governing Council sees a sustained adjustment in the path of inflation that is consistent with its aim of achieving inflation rates below, but close to, 2% over the medium term.

The ECB will buy bonds issued by euro area central governments, agencies and European institutions in the secondary market against central bank money, which the institutions that sold the securities can use to buy other assets and extend credit to the real economy. In both cases, this contributes to an easing of financial conditions.

The programme signals the Governing Council’s resolve to meet its objective of price stability in an unprecedented economic and financial environment. The instruments deployed are appropriate in the current circumstances and in full compliance with the EU Treaties.

As regards the additional asset purchases, the Governing Council retains control over all the design features of the programme and the ECB will coordinate the purchases, thereby safeguarding the singleness of the Eurosystem’s monetary policy. The Eurosystem will make use of decentralised implementation to mobilise its resources.

With regard to the sharing of hypothetical losses, the Governing Council decided that purchases of securities of European institutions (which will be 12% of the additional asset purchases, and which will be purchased by NCBs) will be subject to loss sharing. The rest of the NCBs’ additional asset purchases will not be subject to loss sharing. The ECB will hold 8% of the additional asset purchases. This implies that 20% of the additional asset purchases will be subject to a regime of risk sharing.

Two points made are quite laughable: “price stability” and “QE is legal under the Maastricht Treaty.” Price stability is the exact opposite of what is happening. The money printing puts enormous pressure on the Euro currency, which slams it, and that isn’t stable. Additionally, money printing is directly against the treaty — but why would that stop a determined banker? They’re above the law.

And there was this from SocGen shortly after the QE announcement: “we argue ECB QE could be five times less efficient than in the US. In December, press reports suggested that the ECB had run studies suggesting that a €1000bn QE programme would only boost price levels by 0.2-0.8 after two years, five to nine times less efficient than the studies for the US or the UK. The impact on GDP is not provided, but it would be reasonable to assume the same impact as on inflation on a cumulated basis. The potential amount of QE needed is €2-3 trillion! Hence for inflation to reach close to a 2.0% threshold medium term, the potential amount of asset purchases needed is €2-3tn, not a mere €1tn.”

This will not be ending any time soon.

Trade well and follow the trend, not the perma-bull OR perma-bear “experts.”

Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banking mafia.


By the time you read this the head of the European Central Planning (ECP) bank – the new European Politburo – will have made its decision on interest rates and more. The man at its helm, of course, is Super-Mario Draghi. Like Super-Mario fame from the Nintendo video games, he’ll save everyone! (uhh, but are there do-overs when Central Planners lose?)

There was greater volatility than usual on Wednesday because the central bank (ECP) proved to be as leaky as a strainer. The plan of the ECP bank was revealed to the market exactly 5-minutes after the open and from there the Dow, NQ, and ES went straight up on hopes of more free funny-money.

As we wait, we read the following from Deustche Bank’s Jim Reid:

“As we start a monumental day ahead with the ECB almost certain to announce QE – even if they are not yet fully ready to implement it – I can’t help wondering what the date will be that we will be able to report that the ECB is out of the money printing game. Once they start it might be incredibly difficult to stop without a political accident on the negative side or a sustainable exogenous positive growth shock. If there is no political accident, will they still be buying bonds into the 2020s? Will they have bought other assets by then or will we have printed money to give directly to citizens before the next decade starts? When QE first started post crisis we felt money printing would be around for years and years. Several years later and we still can’t see an end in sight even if the Fed is currently pausing and the SNB has shown that there is an alternative direction for some. So today likely starts a new chapter, even a new section of a book that is nowhere near finished.”

It will be an interesting day to be sure!

Trade well and follow the trend, not the perma-bull OR perma-bear “experts.”

Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banking mafia.


There seems to be quite a bit afoot in the world. Let’s just say my “Spidey-sense” is tingling. You have the ECB preparing the world for it’s own version of QE starting in the very near future. You have the SNB’s gambit to get in front of that by unpegging the Swiss Franc from the Euro. And now you have this from Zero Hedge:

“Having tried and failed once to stem the speculative frenzy in Chinese stocks, regulators took more direct action tonight and suspended three of the biggest securities firms from adding margin-finance and securities lending accounts for three months following rule violations. As Bloomberg reports, Citic Securities, Haitong Securities, and Guotai Junan Securities shares plunged dragging the entire Shanghai Composite down almost 7% and negative year-to-date.”

Talk about a “bubbly” world economy. I can look at this in one of two ways, either the world is in a really bad place and it’s time to get in front of the panic, or that the Central Banks have identified the fact that there are some parts of the economy that are overextended but that the footing is so solid, it’s high time we let (some of) the chips fall where they may because the overall strength is there. I am not sure which way it goes but I do think it’s time to “cull the herd” and let the strong move forward.

It’s going to be one of those weeks.

Trade well, and do not be swayed by the “perma-bear” or “perma-bull” and let the facts lead the way.


The Swiss National Bank (SNB) shocked the FX world today when it decided to lift its 1.20 peg to the Euro. When it did, the currency soared about 32% in 30 minutes. That’s an amazing move folks, because we’re not talking about an individual stock move…but an entire nation (…32% in 30min).

Bloomberg said the following…

The Swiss National Bank unexpectedly scrapped its three-year policy of capping the Swiss franc against the euro in a U-turn that may change the perception of a century-old institution known for reliability.

In a surprise statement that sent shock waves through equities and currency markets, the central bank ended its cap of 1.20 franc per euro and reduced theinterest rate on sight deposits, deepening a cut announced less than a month ago.

The shift marks an attempt by the SNB to reinforce its defenses of the economy before government bond purchases by the European Central Bank that could crumple the franc cap. The currency surged after the announcement, Swiss stocks including UBS AG tumbled and the chief executive of watchmaker Swatch Group AG said the policy shift would hurt exports. SNB President Thomas Jordan defended the move, saying surprise was necessary.

“It’s amazing that such a stoic central bank could end up abandoning such a long held policy with such short shrift,” said George Buckley, an economist at Deutsche Bank AG in London. “I thought we were out of the situation where central banks surprise so significantly as this.”

Isn’t it interesting that the DB economist is shocked that there could be a (gasp) “surprise” move by a central bank? Maybe he’s the odd man out in the central planning cabal.

I will admit that the flip-flop policy of the SNB is indeed surprising; however, with the reality of the local and global economies being so weak…like Junker said “Sometimes you just have to lie.”

Trade well and follow the trend, not the perma-bull OR perma-bear “experts.”

Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banking mafia.

Despite strong bearish volume, a very weak open, another triple digit down day and more, the market was actually far less volatile than the last several days. The Dow was down more than -300 points but closed -186.59.

Part of the weak open and general bearishness today was due to an important report: Retail Sales. Bloomberg’s general definition of this report explains why it is important. Retail sales measure the total receipts at stores that sell merchandise and related services to final consumers. Sales are by retail and food services stores. Data are collected from the Monthly Retail Trade Survey conducted by the U.S. Bureau of the Census. Essentially, retail sales cover the durables and nondurables portions of consumer spending. Consumer spending typically accounts for about two-thirds of GDP and is therefore a key element in economic growth.

With that definition, you can see why the market was weak when the news hit the tape. The consensus was for a reading of -0.1%, but came in at a terrible -0.9%, which is the worst negative reading since January 2014! Moreover, November data were revised lower from +0.7% to +0.4%.

Since December retail sales clearly includes the peak of holiday shopping, one wonders: How in the world could retail sales be so bad? And another question is clearly why lower gasoline prices didn’t help retail sales data? Is the US economy radically slowing? More data is needed.

Trade well and follow the trend, not the perma-bull OR perma-bear “experts.”

Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banking mafia.