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Tuesday, June 30, 2015

Don't Blame Austerity: Five "Dastardly" Ways Italy Burned Through Taxpayer Money




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Submitted by Tyler Durden on 06/30/2015 13:04 -0400

It took years (after our initial report in 2011) but finally the Greeks realized that the main reason the Troika had been fleecing them all along, is that of the €227 billion in bailout funds disbursed to Greece, the amount that actually reached the Greek population was... 11%. The rest went back to repaying Greek creditors in some form.



This is another way of explaining why while the PIIGS countries raged against "evil austerity", their debt load as a percentage of GDP was consistently rising year after year, and has hid new all time highs as of the most recent reading.




So what was really going in Europe over the past 5 years, if the debt load kept creeping higher, and yet little money was actually making its way to the broader population?

Former Senator Slams Washington As Corrupt "Sewer", Calls For Outraged Young Americans To Revolt



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Submitted by Tyler Durden on 06/30/2015 12:42 -0400



Submitted by Mike Krieger via Liberty Blityzkrieg blog,


On a more personal level, how can public service be promoted as an ideal to young people when this sewer corrupts our Republic? At this point in early twenty-first-century America, the greatest service our nation’s young people could provide is to lead an army of outraged young Americans armed with brooms on a crusade to sweep out the rascals and rid our capital of the money changers, rent seekers, revolving door dancers, and special interest deal makers and power brokers and send them back home to make an honest living, that is, if they still remember how to do so.

Our ancestors did not depart Europe and elsewhere to seek freedom and self-government alone. They came to these shores to escape social and political systems that were corrosive and corrupt. Two and a quarter centuries later, we are returning to those European practices. We are in danger of becoming a different kind of nation, one our founders would not recognize and would deplore.

In addition to the rise of the national security state, and the concentration of wealth and power in America, no development in modern times sets us apart more from the nation originally bequeathed to us than the rise of the special interest state. There is a Gresham’s law related to the republican ideal. Bad politics drives out good politics. Legalized corruption drives men and women of stature, honor, and dignity out of the halls of government. Self-respecting individuals cannot long tolerate a system of election and reelection so dependent on cultivating the favor of those known to expect access in return. Such a system is corrosive to the soul.



A former senator from Colorado, Gary Hart, has written an extremely powerful and accurate critique of the unfathomably corrupt and crony state of the U.S. government in 2015. It covers several very important angles, including how appalled and disgusted our founders would be at the current state of affairs. How a once great republic has devolved into a thieving oligarchy in which the pursuit of money at power at the expense of the public good has been elevated into something that’s not just tolerated, but actually celebrated and encouraged amongst an ethics deprived status quo.

Don’t take it from me though, here are several of my favorite excerpts:

By that standard, can anyone seriously doubt that our republic, our government, is corrupt? There have been Teapot Domes and financial scandals of one kind or another throughout our nation’s history. There has never been a time, however, when the government of the United States was so perversely and systematically dedicated to special interests, earmarks, side deals, log-rolling, vote-trading, and sweetheart deals of one kind or another.

What brought us to this? A sinister system combining staggering campaign costs, political contributions, political action committees, special interest payments for access, and, most of all, the rise of the lobbying class.

Worst of all, the army of lobbyists that started relatively small in the mid-twentieth century has now grown to big battalions of law firms and lobbying firms of the right, left, and an amalgam of both. And that gargantuan, if not reptilian, industry now takes on board former members of the House and the Senate and their personal and committee staffs. And they are all getting fabulously rich.

Frustrated, irate discussions of this legalized corruption are met in the Washington media with a shrug. So what? Didn’t we just have dinner with that lobbyist for the banking industry, or the teachers’ union, or the airline industry at that well-known journalist’s house only two nights ago? Fine lady, and she used to be the chairman of one of those powerful committees. I gather she is using her Rolodex rather skillfully on behalf of her new clients. Illegal? Not at all. Just smart . . . and so charming.

There is little wonder that Americans of the right and many in the middle are apoplectic at their government and absolutely, and rightly, convinced that the game of government is rigged in favor of the elite and the powerful. Occupiers see even more wealth rising to the top at the expense of the poor and the middle class. And Tea Partiers believe their tax dollars are going to well-organized welfare parasites and government bureaucrats.

Never forget this Venn diagram:

Screen Shot 2015-06-29 at 6.50.36 PM


The advent of legalized corruption launched by the Supreme Court empowers the superrich to fund their own presidential and congressional campaigns as pet projects, to foster pet policies, and to represent pet political enclaves. You have a billion, or even several hundred million, then purchase a candidate from the endless reserve bench of minor politicians and make him or her a star, a mouthpiece for any cause or purpose however questionable, and that candidate will mouth your script in endless political debates and through as many television spots as you are willing to pay for. All legal now.

To compound the political felony, much, if not most, campaign financing is now carried out in secret, so that everyday citizens have a decreasing ability to determine to whom their elected officials are beholden and to whom they must now give special access. As recently as the 2014 election, the facts documented this government of influence by secrecy: “More than half of the general election advertising aired by outside groups in the battle for control of Congress,” according to the New York Times, “has come from organizations that disclose little or nothing about their donors, a flood of secret money that is now at the center of a debate over the line between free speech and corruption.”

Of this handful, the largest by far is WPP (originally called Wire and Plastic Products; is there a metaphor here?), which has its headquarters in London and more than 150,000 employees in 2,500 offices spread around 107 countries. It, together with one or two conglomerating competitors, represents a fourth branch of government, vacuuming up former senators and House members and their spouses and families, key committee staff, former senior administration officials of both parties and several administrations, and ambassadors, diplomats, and retired senior military officers.

WPP has swallowed giant public relations, advertising, and lobbying outfits such as Hill & Knowlton and BursonMarsteller, along with dozens of smaller members of the highly lucrative special interest and influence-manipulation world. Close behind WPP is the Orwellian-named Omnicom Group and another converger vaguely called the Interpublic Group of Companies. According to Mr. Edsall, WPP had billings last year of $72.3 billion, larger than the budgets of quite a number of countries.

I’m not sure exactly where this number came from, as I’ve seen numbers around $15 billion thrown around, but not $72 billion.

With a budget so astronomical, think how much good WPP can do in the campaign finance arena, especially since the Citizens United decision. The possibilities are almost limitless. Why pay for a senator or congresswoman here or there when you can buy an entire committee? Think of the banks that can be bailed out, the range of elaborate weapons systems that can be sold to the government, the protection from congressional scrutiny that can be paid for, the economic policies that can be manipulated.

The lobbying business is no longer about votes up or down on particular measures that may emerge in Congress or policies made in the White House. It is about setting agendas, deciding what should and should not be brought up for hearings and legislation. We have gone way beyond mere vote buying now. The converging Influence World represents nothing less than an unofficial but enormously powerful fourth branch of government.

America’s founders knew one thing: The republics of history all died when narrow interests overwhelmed the common good and the interests of the commonwealth.

What would our founders make of this nightmare of corruption? We only know, in Thomas Jefferson’s case, for example, that his distrust of central government had to do with the well-founded and prescient suspicion that its largesse would go to powerful and influential interests, especially financiers, who knew how to manipulate both the government and the financial markets. In particular, Jefferson envisioned sophisticated bankers speculating in public-debt issues with some if not all the interest incurred going into their pockets.

The scope and scale of this genuine scandal (as distinguished from vastly more mundane behavior that passes for scandal in the media) is the single greatest threat to our form of government. It is absolutely incompatible with the principles and ideals upon which America was founded. At the very least, we Americans cannot hold ourselves up to the world as the beacon of democracy so long as we permit, as long as we acquiesce in, corruption so far beyond the standards of the true republic that our government cannot be proclaimed an ideal for other aspiring nations.

On a more personal level, how can public service be promoted as an ideal to young people when this sewer corrupts our Republic? At this point in early twenty-first-century America, the greatest service our nation’s young people could provide is to lead an army of outraged young Americans armed with brooms on a crusade to sweep out the rascals and rid our capital of the money changers, rent seekers, revolving door dancers, and special interest deal makers and power brokers and send them back home to make an honest living, that is, if they still remember how to do so.

When a former senator accurately notes that the best thing young Americans can do is instigate a successful rebellion against the incredibly corrupt and powerful monied interests running the county into the ground, you know things are very bleak.

A harsh judgment? Indeed. But it is impossible to claim to love one’s country and not be outraged at how corrupt it has become. For former senators and representatives to trade a title given them by the voters of their respective states and districts for cash is beyond shameful. It is outrageous.

“I tremble for my country when I contemplate that God is just.” Those words of Thomas Jefferson, enshrined on the walls of his memorial, referred to the institution of slavery. Today he might readily render the same judgment about corruption in and of the American Republic.

It is an error of serious proportion to dismiss corruption in twenty-first-century American democracy on the grounds that this has all been going on from the beginning, that boys will be boys, that politicians are always on the take. Past incidents of the violation of public ethics provide no argument fozr accepting the systemic and cancerous commercialization of modern American politics.

Our ancestors did not depart Europe and elsewhere to seek freedom and self-government alone. They came to these shores to escape social and political systems that were corrosive and corrupt. Two and a quarter centuries later, we are returning to those European practices. We are in danger of becoming a different kind of nation, one our founders would not recognize and would deplore.

Even as politicians and pundits alike pummel the fiscal deficit, we are developing an integrity deficit of mounting proportions. And one is not disconnected from the other. Because of the erosion of the integrity of our governing system, and the principles and ideals underlying it, the fiscal deficit increases. The government spending so many conservatives claim to abhor includes not only the social safety net of Roosevelt and Johnson, but also the war-making excursions of Ronald Reagan and George W. Bush. It is all government spending. And it includes favorite pork-barrel projects of every member of both houses of Congress of both political parties, and every one of those most loudly condemning “wasteful government spending.” Those projects are produced by the lobbying interests that raise money for those members of Congress in direct proportion to their effectiveness at bringing government-financed projects to their states and districts. By definition, if it is a project in my state or district, it is not wasteful.

We were not created to be like other nations. We were created as an alternative to monarchy, aristocracy, oligarchy, and corrupt political systems. The more we follow the easy path, the one paved for the benefit of the wealthy and powerful, the more we stray from our originally intended purpose and the more we lose our unique purpose for existence.

In addition to the rise of the national security state, and the concentration of wealth and power in America, no development in modern times sets us apart more from the nation originally bequeathed to us than the rise of the special interest state. There is a Gresham’s law related to the republican ideal. Bad politics drives out good politics. Legalized corruption drives men and women of stature, honor, and dignity out of the halls of government. Self-respecting individuals cannot long tolerate a system of election and reelection so dependent on cultivating the favor of those known to expect access in return. Such a system is corrosive to the soul.


As bad as things are, the fact a former senator is not only aware of the problem, but is willing to publicly write a scathing article condemning it, is ultimately a very good thing.

Chart Of The Day: Is China Sending A Warning?

Chart Of The Day: Is China Sending A Warning?

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In yesterday's discussion on the technical underpinnings of the market, I pondered the question of whether Greece was really the primary issue of concern for investors.
"Whether, or not, a Greek exit from the Eurozone or a potential debt default is "the thing" that sparks the next major correction in the markets is unknown. Historically, such a widely "known" event is generally already factored into the markets and has much less of an impact when that event eventually comes to fruition. As Art Cashin suggested this morning:

'I think China may be more important than Greece. Stick with the drill – stay wary, alert and very, very nimble.'"
I think that Art may be onto something. While Greece is indeed an issue, and did confirm that they would default on their debt payment to the IMF, this is something that has been long in the making. China, on the other hand, is very a different story.
Today's chart(s) of the day is a look at the history of "bubbles and busts" of the Chinese Shanghai index.
China-Index-063015
Emerging markets have a long history of speculative investment bubbles and bursts. Whether it has been South American debt or emerging market stocks, they speculative push to garner higher yields or returns has always ended up badly.

NATO Member Turkey Breaks Ranks: Slams EU Austerity, Offers Greek Aid





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Submitted by Tyler Durden on 06/30/2015 11:36 -0400


While perhaps not on the scale of China or Russia assistance, Turkey has thrown its hat into the Troika-Greece farce by offering financial assistance to its embattled neighbor. As ekthimerini reports, "We are ready to help Greece survive its economic crisis with cooperation in tourism, energy, trade," Turkish Prime Minister Ahmet Davutoglu said and Turkey's left-wing parties showed solidarity by adding, "we believe that apart from imposing austerity policies on peoples of Europe, there can be more reasonable agreements." While no aid has been asked fro Turkey says it is ready to evaluate options.

As ekathimerini reports,

Turkey on Tuesday said it was "ready to help" Greece out of its escalating financial crisis as its embattled neighbor edged closer to default.

"We are ready to help Greece survive its economic crisis with cooperation in tourism, energy, trade," Turkish Prime Minister Ahmet Davutoglu said in the capital, Ankara.

"We want Greece to be strong... Therefore Turkey will be positive toward any proposal for cooperation," he said in televised comments.

Davutoglu added that a Turkish delegation would travel to Greece for a high-level cooperation meeting as soon as possible to consider joint steps on the financial crisis.

...

Turkish Economy Minister Nihat Zeybekci said on Monday if an official proposal for financial aid is made by Greece, "we will evaluate it."

Turkey's left-wing and Pro-Kurdish Peoples' Democratic Party (HDP) also issued a message of solidarity with Greece, saying: "We are together with the Greek people and their government in their struggle for justice, equality and democracy and against austerity."

"We believe that apart from imposing austerity policies on peoples of Europe, there can be more reasonable agreements, which will be acceptable," said the co-chairs of HDP, considered the Turkish equivalent of Greece's ruling SYRIZA party.

It seems Greece has friends after all, and as we 'joked' previously:

Greece really just needs a DIP not bigger than $10 billion to last it 6 months. Should be easily 5-6x oversubscribed in 24 hours

Perhaps Turkey will provide the DIP?

Meanwhile, work goes on with other options... Greece hasn’t sought aid from Russia, support wouldn’t hurt, Energy Minister Panagiotis Lafazanis tells in intw with Russia’s state TV channel Rossiya 24.

Lack of money from EU isn’t end of world

Greece expects EU to be reasonable, sees too much pressure from Brussels now

Lafazanis reiterates that accord with Russia on gas link isn’t aimed at Europe


Greece might get “hundreds of millions of euros” from Russian gas transit after link starts in 2019

Gross Says Hold Cash, Prepare For "Nightmare Panic Selling"


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Submitted by Tyler Durden on 06/30/2015 10:21 -0400

Ever since bond market liquidity became the topic du jour across Wall Street (just a few short years after it was first raised in these pages), analysts, pundits, and reporters alike have begun to question what might happen should investors who have piled into mutual funds and ETFs (especially fixed income products) suddenly decide to sell into illiquid secondary markets. 

Some have suggested, for instance, that if corporate bond fund managers were suddenly inundated with a cascade of redemptions, the absence of dealer liquidity in the secondary market could create the conditions for a firesale.

The problem, as we’ve been keen to point out, is that when fund flows are one-way (i.e. everyone is selling), fund managers must either i) meet redemptions with cash, or ii) trade the underlying securities. Note that the latter option is so undesirable in illiquid markets (indeed, trading large blocks into illiquid markets poses a systemic risk), that some fund managers are now lining up emergency liquidity lines with banks so that they can at least meet an initial wave of selling with cash and avoid, for a time at least, sparring with illiquidity. 

Greece Asks For 2-Year Bailout From ESM, Merkel Promptly Shoots It Down


Greece Asks For 2-Year Bailout From ESM, Merkel Promptly Shoots It Down

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Submitted by Tyler Durden on 06/30/2015 10:10 -0400

 
Update 2: The Greferendum cancellation calls have begun
  • GREECE MUST CANCEL REFERENDUM TO ALLOW PROPOSAL AIRING: GABRIEL
  • GABRIEL: GREEK TALKS CAN RESUME QUICKLY IF REFERENDUM KILLED
Update: EU finance ministers will reportedly hold a teleconference shortly to decide on Greece's bid for an ESM loan. "Group of euro-area finance ministers have responsibility to choose whether to approve Greece’s bid for two-year bailout program from European Stability Mechanism," Bloomberg reports, citing an unnamed EU official.
Here's the statement from Tsipras' office:
"The government will fight for a viable deal until the end and within the euro. This will be the message of the No vote. We will say No to a bad deal on Sunday. From the first moment we made clear that the decision to conduct a referendum is not the end but a part of the negotiation for better terms. Greece remains at the negotiating table.”
But once again, German lawmakers aren't having it, as the headline hockey heats up:
  • CAN'T TAKE UP GREEK AID BID NOW, GERMAN CDU OFFICIAL SAYS
  • MUST WAIT FOR RESULT OF GREEK REFERENDUM, CDU OFFICIAL SAYS
and the result: EURUSD plunge (which is odd because everyone said that Europe x Greece would be much stronger, right?)

Earlier:
With a sovereign default now just hours away, both Greece and Europe may be starting to second guess the decision to open Pandora's Box with both sides cancelling press events citing "emergency meetings". The latest headlines have Greece requesting an ESM bailout and pressing for debt restructuring.
  • GREECE ASKS FOR 2-YR BAILOUT PROGRAM FROM ESM: PM'S OFFICE
  • GREECE ASKS FOR FINANCING, DEBT RESTRUCTURING: PM'S OFFICE
  • GREEK GOVT WILL SEEK VIABLE AGREEMENT WITHIN EURO: PM'S OFFICE
  • Dijsselbloem Cancels TV Interview Due to Urgent Obligations
  • Greek Govt Cancels Press Briefing Citing Emergency Meetings
More, from Bloomberg:
Greek govt submitted request to European Stability Mechanism today for a two-year agreement, which will fully cover country’s financing needs and includes debt restructuring at the same time, according to an e-mailed statement from the PM’s office.

Greek govt will strive for a sustainable agreement within euro area; that will be the message of a No vote to a bad deal in Sunday’s referendum Referendum isn’t the end of negotiations, but the beginning of talks under better terms for the Greek people; Greece remains at the negotiating table
To which we said:

To see the Tweets,pls click here:

With Market Closed, Trading Greek ETF Is Gamble, Guessing Game

With Market Closed, Trading Greek ETF Is Gamble, Guessing Game

Tyler Durden's picture



 
“The ETF can’t be more liquid than the underlying, and we know the underlying can be become quite illiquid” - Howard Marks
There’s been quite a bit of spirited discussion this year about whether ETFs provide liquidity. The proliferation of exchange traded bond vehicles and the concurrent decline in dealer inventories has led some to question whether investors are being lulled to sleep by so-called “phantom liquidity.”
Barclays took a close look at the issue recently and discovered that since 2009, the “net” portion of gross bond ETF trade volumes had declined from over 20% to just 12%, which the bank cites as evidence that ETFs are adding liquidity to the market.
But this could simply reflect the fact that volumes for ETFs that track assets like junk bonds have skyrocketed over the same period, with low yields fueling both the supply and demand side of the equation and thereby increasing the likelihood that flows will be diversifiable (versus unidirectional).
The problem, as we’ve been keen to point out over the last several months and as noted earlier today is that "when fund flows are one-way (i.e. everyone is selling), fund managers must either i) meet redemptions with cash, or ii) trade the underlying securities. Note that the latter option is so undesirable in illiquid markets (indeed, trading large blocks in illiquid markets poses a systemic risk), that some fund managers are now lining up emergency liquidity lines with banks so that they can at least meet an initial wave of selling with cash and avoid, for a time at least, sparring with illiquidity." 
Consider the above and then consider the Global X FTSE Greece 20 ETF which traded on Monday despite the fact that the market for the underlying securities isn’t just illiquid — it’s closed. Bloomberg has more:
Shutting down the Greek market has trained attention on exchange-traded funds tracking its stocks, adding an element of speculation to their prices as long as the Athens bourse is closed.

In the U.S., owners of the Global X FTSE Greece 20 ETF will have less information in deciding how much the security is worth. It tumbled 17 percent. In Europe, the Lyxor ETF FTSE Athex 20 plunged on one exchange and was halted on two others. Trading on the Athens Stock Exchange was suspended until July 6 as the country moves to avert the collapse of its banking system.


Traders will price the ETFs “on the information they have in front of them, and what they have is limited,” said Kevin Kelly, chief investment officer at Recon Capital Partners in New York. “Investors or advisers need to be prepared for how this is actually going to affect their portfolio.”

There Is One 'Small' Problem With The Crowd funded Greek Bailout Campaign

There Is One 'Small' Problem With The Crowdfunded Greek Bailout Campaign

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In the latest example that there are generous, perhaps even noble (assuming the whole thing isn't one vast scam like other "charities" such as those run by former and future US presidents) people, still left, Crowdfunding site Indiegogohas released a crowd sourced "Greek Bailout Fund" which in just 1 day has already managed to raise around €100,000 from over 6,300 contributors.

The reason for the campaign, in its own words: "All this dithering over Greece is getting boring. European ministers flexing their muscles and posturing over whether they can help the Greek people of not. Why don't we the people just sort it instead?
The European Union is home to 503 million people, if we all just chip in a few Euro then we can get Greece sorted and hopefully get them back on track soon. Easy.

So come on, order a Feta and Olive salad, maybe wash it down with an Ouzo or glass of Assyrtiko greek wine and let's sort this shit out.

Pledge €3 and get a postcard sent from Greece of Alex Tsipras, the Greek Prime Minister. We'll get them made and posted in Greece and give a boost to some local printers and post offices.

Pledge €6 and get a greek Feta and Olive salad

Pledge €10 and get a small bottle of Ouzo sent to you

Pledge €25 and get a bottle of Greek wine
Noble, generous... and quite idiotic, for one simple reason - the math is horribly wrong.
Here is what the campaign says is its target: "€1.6bn is what the Greeks need."
Actually, no.
€1.6 billion is what Greece needs to repay obligations that are already due to the IMF as of June 30 or else Greece will be kicked out of its current bailout program.
Here is the real list of what the Greeks "need" in order to get a full bailout: a complete repayment of their total outstanding debt to the Troika as well as to remaining private holdout creditors:
The total: €275 billion.
And what is even worse: not one cent of the €1.6 billion already due, nor one cent of the €275 billion in debt due until 2057 will make its way to the Greek people.
In fact, the only people who will see any money from this campaign would be bankers, the IMF, the ECB, and the unelected bureaucrats of the European Commission.
For those who really want to make a donation to Greece, don't repay their debt, but start a charity which unlike Hillary Clinton does not keep 90% of contributions as "operating costs", and distribute it direct to the Greek people.
We hear dropping money by drones is legal now.

assange



At midday on Friday 5 February, 2016 Julian Assange, John Jones QC, Melinda Taylor, Jennifer Robinson and Baltasar Garzon will be speaking at a press conference at the Frontline Club on the decision made by the UN Working Group on Arbitrary Detention on the Assange case.

xmas





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