Foreign Confidential ™
Foreign News and Analysis Since April 2005 -- formerly China Confidential -- What's Really Happening in the World
Tuesday, May 15, 2012
Greece Going Through the Motions?
As of this writing, talks aimed at forming a coalition government in Greece are set to continue Tuesday. But informed sources say the talks are a sham--the parties are just "going through the motions." Read more.
Al Qaeda Role in Anti-Assad Uprising Increasingly Clear
Saudi Supported Salafist Seems to be Taking Over Syrian Revolt
The best hope for foiling his plan for turning Israel's northern neighbor into an Al Qaeda/Salafist stronghold could be a breakup of the Arab country along ethnic and religious lines.
Read more.
Endnote: The intrigue is overwhelming, even by Middle Eastern standards. According to the above-referenced article, Belhaj is a Salafist who claims to be ex-Al Qaeda, and the Saudis support him as a counter to Hezbollah. There's a military term for this: FUBAR--fouled up beyond all recognition.
Oil Futures Fall Towards $111
Good news, bad news.
The price of oil--the commodity on which the world runs--is falling. That's good news. The bad news is that the price is falling for frightening reasons--fear of an economic crisis in Europe and a slowdown in China.
Read more.
Read more.
Monday, May 14, 2012
Desperate Greek Politicians Ponder Technocracy
Greece's pro-austerity politicians are desperately seeking power--so desperately, that they are now openly embracing technocracy, an obscure, antidemocratic ideology that believes in a society controlled by an elite group of technicians. The technocracy movement dates to the early 1930s and the depths of America's Great Depression. Click here for the story, a sad--and scary--commentary on the times.
George Orwell wrote that "a technocratic society is a prerequisite for fascism."
Copyright © 2012 Foreign Confidential™
The Case of the Missing Paragraph
Greece faces a 436 million euro debt repayment Tuesday. Is the real deadline in seven or 30 days? Nobody knows, actually, because of a missing key paragraph in a legal document. Read more.
German Chancellor Increasingly Isolated
Germany's Angela Merkel is sticking with growth-strangling fiscal stringency, also known as austerity, even as the popular revolt against the policy spreads in Germany and throughout Europe. Read more.
Holland to Greece: It's the EU Way or the Highway
Dutch Finance Minister Rules Out Austerity Compromise
The lame duck finance minister of the Netherlands, whose own government recently collapsed over EU austerity requirements, has ruled out any compromise with Greece on its austerity-tied bailout agreement.
Commenting today on Greek commitments, Jan Kees De Jager told Athens News:
"Greece has no option but to reform (continue to cut spending) and to repay (its debts) and if it doesn't do that, it will be a very serious problem, not just for Greece, but for everyone. There is no room to soften the (second bailout) agreement, or to say 'we're going to reform a bit less or we could repay a bit less'.
"If there are suggestions for an alternative (for Greece), then the (ECB/IMF) Troika must look into them. But the Greek agenda is but one: to reform.
"And if the Greek people choose another agenda then we are going to have a big problem and we don't have the room to say 'well, don't worry'."
Related: Lame Duck Dutch PM Demands Greece Stay the Course
If the Euro Cracks: Comment
Considering a Common Currency's Collapse
Be that as it may, if the euro cracks it could lead to the breakup of the European Union, which could be catastrophic for the global financial system. Nobody seems to have a clear view of the relationship between a potential breakup of the euro and the massive derivatives exposure of the big banks and hedge funds. So-called too-big-to-fail financial institutions are secretive and resistant to regulation; regulators are overwhelmed; and the prestige press, which is supposed to clarify complex issues, has done an awful job of reporting economic news. Business journalism is mainly an oxymoron, and the big TV networks are prisoners of pictures, practically incapable of telling stories that lack attention-getting video images.
Small consolation: if economic conditions dramatically worsen, the networks will get the pictures they need … of mass poverty and unemployment and terrifying social unrest.
Related: Reuters Reports Contingency Plans Being Drawn Up for Forcing Greece's EU Exit
Copyright © Foreign Confidential™
More Pain in Spain
So far, Spain’s handling of these difficult choices has failed to restore confidence. Instead of winning support from international investors and attracting fresh investment, the austerity program has produced bitter fruit: recession, spiking unemployment and little faith that either growth or control of public debt are within reach. With investors still skeptical about Spain’s financial health, the government has to pay about 6 percent interest to borrow money. That rate is too expensive to be sustainable because it will boost the government’s obligations to a level that would be hard to pay off, setting up a deadly debt spiral and forcing Spain to raise interest rates yet higher if it is to convince anyone to lend it more money.
-The Washington Post. Read the full story.
Questions NBC's David Gregory Didn't Ask JPMorgan' s CEO
NBC TV Meet the Press moderator David Gregory's interview with JPMorgan Chase chief Jamie Dimon was little more than a video news release.
A few questions that should have been asked following the bank's disclosure of a $2 billion loss on derivative bets:
A few questions that should have been asked following the bank's disclosure of a $2 billion loss on derivative bets:
- What is JPMorgan Chase's total derivatives exposure? Is it really $70 trillion dollars--roughly the size of the world's economy?
- What is the total, combined derivatives exposure of all banks and hedge funds? Estimates of the notional value of all derivatives contracts in the world range from a mind boggling $600 trillion to an unfathomable $1.5 quadrillion, more than 20 times global GDP.
- Don't the giant derivatives portfolios held by financial institutions--which even include bets on weather--constitute a threat to the entire global financial system?
- How would a breakup of the euro affect foreign exchange derivatives? Could a euro breakup cause a financial meltdown?
Related: Warren Buffett on Derivatives as 'Time Bombs'
What Jamie Dimon Didn't Tell You on Meet the Press
How JPMorgan Actually Lost $17.5 Billion
What Jamie Dimon Didn't Tell You on Meet the Press
How JPMorgan Actually Lost $17.5 Billion
Sunday, May 13, 2012
Euro Zone Crisis Update
Social Democrats gain in Germany. Click here for the story.
Foreign Confidential™ sources say EU banks are preparing for a return of the Greek drachma as new elections loom.
In the meantime, continued uncertainty is likely to boost the relative values of the U.S. dollar and the Japanese yen.
Understanding Greece
'Once Upon a Time There Was a Middle Class'
With Greece entering its fifth year of recession, the message is loud and clear: Protracted austerity is killing the middle class and without it there cannot, by definition, be a political middle ground. It will gradually shrink to irrelevance, with its days of dominance consigned to a distant memory.
Former members of the middle class who have now been reduced to near poverty are finding the message of more radical parties far more appealing than they would have, had they felt a semblance of financial stability.
-Athens News. Read the entire editorial.
DAY OF PROTEST IN SPAIN
In related news, at least 100,000 people protested in the streets of cities across Spain Saturday, rising against the country's austerity measures in a run-up to the one-year anniversary of the start of a movement that spread across the region.
Tens of thousands of protesters gathered in Madrid's central Puerta del Sol plaza, the birthplace of the protests against economic injustice. Tens of thousands more demonstrated in Barcelona, with smaller protests in other cities.
The protesters say they will continue their demonstrations through May 15, the first anniversary of the initial protests. Authorities say they won't allow anyone to camp overnight at the protest sites.
Unemployment in Spain is neatly 25%. Half of Spaniards under the age of 25 are unemployed.
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