1. FINANCIAL CRISIS END-GAME - UK's RBS nearly collapse

[pywong]

A Black Swan Lands In Southern Austria: The Ripple Effects Of "Mini-Greece Going Off In The Heartland Of Europe"
Tyler Durden's pictureSubmitted by Tyler Durden on 03/08/2015 21:58 -0400

8.5% Bad Bank Barclays Black Swan Creditors Detroit France Germany Insurance Companies Investment Grade Ireland Lehman NASDAQ Rating Agency ratings recovery




By far the most notable news of the past week, which has still gone largely unnoticed by the greater investing community whose focus instead was on whether algos would ramp the Nasdaq to 5000, and keep the S&P above 2100, even before Mario Draghi finally began buying bonds that nobody wants to sell, was the "Spectacular Development" In Austria, whereby the "bad bank" of failed Hypo Alpe Adria - the Heta Asset Resolution AG - itself went from good to bad, with its creditors forced into an involuntary "bail-in" following the "discovery" of a $8.5 billion capital hole in its balance sheet primarily related to ongoing deterioration in central and eastern European economies.

This shocking announcement promptly sent the price of Heta bonds crashing as creditors, no longer enjoying the explicit guarantee of the state, scrambled to get out of "northern Europe's" first Lehman moment.



But while the acute pain came and went for Heta bondholders who have seen a nearly 50% loss in just a few short months, the bigger and far more diffuse pain is only just starting, or as Bloomberg put it, "Austria’s decision to wind down Heta Asset Resolution AG sent ripples through the financial system, causing credit rating downgrades in Austria and bank losses in Germany."

The first casualty: the beautifully picturesque southern Austrian province of Carinthia.











Why and how was one of the 9 Austrian provinces just sacrificed? Telegraph explains:

[The Heta] bonds are notionally guaranteed by the Austrian state of Carinthia, which now theoretically becomes liable for the bail-in. It’s an echo of the mess Ireland got itself into at the height of the banking crisis, when it foolishly attempted to stem the panic by underwriting all Irish banking liabilities; the move very nearly ended up bankrupting the entire country. Hypo will bankrupt Carinthia.

Essentially, what the Austrian government is doing is cutting loose an entire region, rather in the way the federal authorities in the US allowed Detroit to go bust a number of years ago.

It’s a mini-Greece going off in the heartlands of Europe.

Specifically, to quantify the Carinthian exposure vis-a-vis its guarantee which will now be put in play: Carinthia provides deficiency guarantee on Heta's senior debt: the total is equivalent to €10.2 billion, or nearly five times the state's 2014 operating revenue. Carinthia's budgeted revenue in 2015 is just €2.36 billion, and as such the southern province of 556,000 would be unable to honor the guarantees if they came due now or in a year’s time, Governor Peter Kaiser told Austrian radio ORF on Tuesday.

In other words, we now have a waterfall bailout chain whereby the state guaranteeing the debt of the insolvent entity that guaranteed yet another insolvent entity, will itself need to be bailed out by the sovereign, Austria! Or perhaps not: Finance Minister Hans Joerg Schelling has said repeatedly that the Austrian government isn’t liable to cover Carinthia’s guarantees.

This is also why late on Friday, Moody's downgrades the State of Carinthia's rating to Baa3 from A2 (outlook to negative from stable). This is what the rating agency said:

The rating action follows the decision of the Austrian Financial Market Authority (FMA) on 1 March 2015 to initiate resolution measures on Heta Asset Resolution AG (wind-down entity of former Hypo-Alpe-Adria), in accordance with the Federal Banking Restructuring and Resolution Act (BaSAG). BaSAG is the national implementation law of the European Bank Recovery and Resolution Directive (BRRD), effective since 1 January 2015. The FMA also imposed a temporary payment moratorium on Heta's liabilities until 31 May 2016. This follows the disclosure of Heta's recent asset review by external auditors, which indicated an additional shortfall of assets of up to EUR7.6 billion, compared to the EUR4 billion expected before.

Carinthia provides a statutory deficiency guarantee on a very high portion of Heta's senior debt; the total guarantees are equivalent to nearly EUR10.2 billion, or nearly five times the state's 2014 operating revenue. In addition, Carinthia provides a statutory deficiency guarantee to Pfandbriefbank (Oesterreich) AG (A2, RUR) of which about EUR1.2 billion is related to Heta as of year-end 2014.

The downgrade reflects an increased susceptibility to event risks, including litigation from Heta's bondholders and further actions by the FMA, and greater than anticipated shortfalls of Heta's assets. All these factors could lead to a crystallization of a significant portion of Carinthia's guaranteed debt. This amount could exceed Carinthia's liquidity resources, likely lead to increased financial leverage and could require some form of extraordinary central government support.

We understand that there is a likelihood that the deficiency guarantee could not be enforced upon a full or partial cancellation of bailed-in debt under BaSAG, because of the guarantee's accessory nature. However, we see an increased uncertainty regarding further resolution actions. Additionally, uncertainty could result from the legal risk associated with different contractual provisions of Heta-bonds.
Whether or not the Telegraph is right remains to be seen, and the otherwise beautiful province of Carinthia is now insolvent remains to be seen, but the bigger problem is that the Heta fallout does not stop there.

As Bloomberg reports, "among Heta’s liabilities affected by the moratorium and a future bail-in are 1.24 billion euros Heta owes to Pfandbriefbank Oesterreich AG, which issues bonds on behalf of Austrian provincial banks."

Moody’s said it may cut Pfandbriefbank’s A2 rating as well as the ratings of two of its biggest member banks, Hypo Tirol Bank AG and Vorarlberger Landes- und Hypothekenbank AG, owned by the western Austrian provinces of Tyrol and Vorarlberg, respectively. A2 is the sixth-lowest investment grade rating at Moody’s.
Below are all the Pfandbriefbank members, all of which will now suffer and require further capital injections in some capacity:



Some additional color from Barclays:

The main purpose of the exclusion of secured liabilities from the application of the bail-in tool is to prevent contagion. Indeed, there are a number of contagion channels when treating the guaranteed liabilities of HETAR not as secured liabilities.

First, the securities benefiting from the deficiency guarantee of Carinthia are also regarded as eligible collateral for a wide range of public sector covered bonds across the EU, including Austria, Germany, Luxembourg and France. As of 30 September 2014, Austrian banks had a total of €2.7bn of exposure to Carinthia, which partially consisted of exposure to HETAR. Furthermore, Pfandbriefbank (Österreich) AG (PFBKOS), the universal legal successor of Pfandbriefstelle der österreichischen Landes-Hypothekenbanken, has €1.2bn of Carinthia guaranteed claims against HETAR. These claims were explicitly made subject to the moratorium. According to article 2 of the Austrian Pfandbriefstelle law, the member banks of PFBKOS are jointly and severally liable for the debt of PFBKOS. Thus, irrespective of the future of PFBKOS, there is an incentive for the member banks to jointly step in for missing payments from HETAR, as otherwise debt holders of PFBKOS bonds could claim payment from any of the member banks individually. Notably, the FMA decided to exclude public sector Pfandbriefe issued by HETAR from the moratorium, indicating a degree of concern about contagion risk. We believe that the inclusion of guaranteed HETAR securities in the application of the bail-in measures adds to contagion risk, as demonstrated by the PFBKOS example.

Second, a number of Austrian banks, including HYPO NOE Gruppe Bank AG and Vorarlberger Landes- und Hypothekenbank AG reported in their annual accounts for 2013 that they had direct exposure to HAA. At this point in time no write-downs were made as reference was made to the “value of the guarantee given by the state of Carinthia”, as well as the fact that there has been no “statutory procedure allowing a territorial authority to declare insolvency”. When announcing the moratorium, FMA explicitly expressed doubts about the value of the respective guarantees. Furthermore, this week Austrian Finance Minister Schilling, in an interview with Austrian state radio, ORF, was quoted as saying that “many have been saying that one should have known that a province like Carinthia can’t guarantee for debts of that size”. Thus, it appears very likely that Austrian banks will have to provision for claims they hold against HETAR and which were now made subject to the moratorium.

Third, according to article 115(2) of the EU’s Capital Requirements Regulation (CRR), claims benefiting from the deficiency guarantee of an Austrian sub-sovereign can be treated as an exposure to the central government. The respective list of the European Banking Authority contains all nine Austrian regional governments, as well as more than 2,300 local authorities. Based on this rule, EU banks are allowed to apply a 0% risk-weighting to these exposures. In combination with article 10 of the EU’s delegated act on the Liquidity Coverage Ratio, they are also allowed to treat these assets as “extremely high quality liquid assets” under the level 1 bucket of their liquidity buffer portfolios. Finally, solvency 2 rules foresee that debt issued by Austrian regions could be treated by EU based insurance companies and pension funds similarly to debt issued by the Austrian central government with a 0% capital charge.

Irony #1: the very same bonds that are about to lead to a waterfall in impairments are the ones that were, according to EU regulations, "riskless." One can only imagine how much latent risk Europe's bank have as a result of the supremely idiotic decision to keep a major subsection of European debt as 0% RWA. That may work as long as the ECB backstops everything, but the second Mario Draghi ends QE, does everything implode under its own weight?

And then there is the question, how much more maximum pain could there be in Austria. Barclays responds again"

As of year-end 2013, there were about €60bn of claims guaranteed by Austrian regions. We estimate about €50-55bn of such claims were still outstanding as of year-end 2014. In particular, we note that as of year-end 2012, the guarantee commitments of six out of nine Austrian regions exceeded the total annual income.

The full breakdown of who guarantees what in Austria:



And then, once the impairment wave of the latest European insolvency shocker is done with Austria - a wave which nobody expected at all, and it thus a legitimate Black Swan - it will flow over into Germany. From Bloomberg:

German banks yesterday also emerged as major Heta bondholders. Dexia’s Dexia Kommunalbank Deutschland AG said it owns 395 million euros of Heta bonds and will take an unspecified charge in the first quarter. Deutsche Pfandbriefbank AG also owns 395 million euros of Heta bonds and said it will write them down by 120 million euros, cutting its expected pretax profit by two-thirds.

NRW Bank confirmed it owned Heta bonds, declining to specify the size of its exposure. WDR TV station reported the bank owns 276 million euros of them.
Irony #2, and the biggest one of all: while German banks had spent the past 3 years preparing for the inevitable Grexit and offloading all their exposure to the now insolvent Greek state, it was a waterfall chain of events which started in Germany's own "back yard", courtesy of auditors who decided it was unnecessary to mark losses to market until it was far too late, and the immediate outcome is that one ninth of until recently Aaa/AAA-rated Austria is now also insolvent. And that is just the beginning.

One can only imagine how many such other "0% risk-weighted" Pandora boxes lie in wait across what are otherwise considered Europe's safest banks, provinces and nations.

[pywong]

Word is out that Deutsche Bank not only failed the US Stress Test but also had many warnings from internal risk management that were ignored.

Here's a few articles:

Deutsche Bank Fails US Stress Test
http://www.dw.de/deutsche-bank-fails-us-stress-test/a-18309245

Former Chief Warned Deustsche Bank on Stress Tests
http://www.reuters.com/article/2015/03/12/us-usa-deutschebank-emails-idUSKBN0M81VH20150312

At first glance...there is nothing we haven't heard here. So what? Just another bankster who mad a bad boo-boo and now will have to pay a fine.

But Deutsche Bank is no ordinary Bankster. Deutsche Bank is the HOLDER of MOTHERLOAD of Derivatives at upwards of $75 Trillion!!!

Elephant in the Room: Deutsche Banks $75 Trillion in Derivatives is 20x Greater than German GDP
http://www.zerohedge.com/news/2014-04-28/elephant-room-deutsche-banks-75-trillion-derivatives-20-times-greater-german-gdp

Of course, the Derivative Bubble won't pop unless SOMETHING happens in the real world so Deutsche Bank has no worries at all...right? It's not like they are invested in any areas that are struggling...are they? It's not like they don't know what's going to happen in Greece, Italy, Spain...etc. They must be long gone from those risky countries - Right?

Not according to Standard & Poors report in August 2014...

"Deutsche Bank carries larger exposures to the so-called eurozone periphery than many peers, largely due to its retail and commercial banking subsidiaries in Italy and Spain as well as positions taken by its investment bank. Based on the country of domicile of the primary counterparty, its aggregate net credit risk exposure to Greece, Ireland, Italy, Portugal, and Spain was €42.4 billion at June 30, 2014."

So now you can go to sleep easily and not worry about the Global Financial System melting down...at least until Monday.

Goodnight.

May the Road you choose be the Right Road.

Bix Weir
www.RoadtoRoota.com

*Buy the book as it tells you all about who, how, why and WHEN!

The Book: "Silver, Gold, Bitcoin...and God!"
http://www.roadtoroota.com/public/1530.cfm

[pywong]

The Triffin Dilemma

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by Greg Canavan.
Posted May 15, 2015.

There is a fundamental incompatibility between the attainment of global economic stability and having a single national currency perform the role of the world’s reserve currency. This is hardly a new revelation. But events of the past few months have brought this topic back into the spotlight.


Belgian born American economist Robert Triffin first highlighted this incompatibility in the 1960s. He observed that having the US dollar perform the role of the world’s reserve currency created fundamental conflicts of interest between domestic and international economic objectives.


On the one hand, the international economy needed dollars for liquidity purposes and to satisfy demand for reserve assets. But this forced, or at least made it easy, for the US to run consistently large current account deficits.
Triffin argued that such persistent deficits would eventually put pressure on the dollar and lead to the demise of the Bretton Woods system of international exchange.


The Triffin Dilemma, therefore, argued that the demands on an international currency meant that excess supply would undermine its value.


After WWII the Bretton Woods international monetary system came into being. This was a fixed rate currency regime with the dollar as the global reserve currency. But to ensure stability and financial discipline, the major currencies were fixed to the dollar and the dollar was fixed to gold at the rate of US$35 an ounce.


This is where the Triffin Dilemma kicked in.


The US soon understood that reserve currency status allowed them to run large deficits. The deficits were ‘paid’ for by issuing dollars. When the excess dollars began showing up in global central banks, they began converting their dollars into gold. This lowered the value of the US dollar in relation to gold.
At first the authorities tried to manage the Dilemma. In 1961 they established the ‘London Gold Pool’ in an attempt to keep the dollar price of gold to $35 an ounce. This system worked for a while but fell apart by 1968 when France withdrew from the Pool.


The various nations then attempted to preserve the Bretton Woods system by maintaining a two-tiered gold market; one operating at the official $35 an ounce price while another traded gold at the market price, which was well above $35. Of course such a policy was completely unsustainable and it too failed.


Bretton Woods was on its last legs. President Nixon ended the system once and for all when in August 1971 he suspended the convertibility of dollars into gold. From that point on, the dollar was without an anchor and the global monetary system went from a fixed to floating regime.


What followed was a decade of monetary instability and record high inflation.


Perhaps surprisingly, the dollar maintained its role as the world’s reserve currency throughout the decade. Due to its economic and military might, the reserve currency status of the dollar actually grew in acceptance throughout the next few decades.


But Triffin’s Dilemma never went away. It did remain out of sight though as parties on both sides of the equation enjoyed the mutual benefits of the dollar’s reserve status.
The US benefitted by paying for imports with essentially costless dollars. In turn, the US’ main trading partners enjoyed robust demand for their products, creating employment and income growth.


The huge deficits brought about by excess US consumption produced a massive amount of liquidity throughout the global economy. While Triffin’s Dilemma would have predicted a collapse of the dollar because of the glut of dollars in the system, such an outcome didn’t eventuate.


This was primarily because the beneficiaries of US consumption didn’t want it to end. So they reinvested their excess dollars back into US asset markets, notably US Government debt. Such actions supported the dollar, kept interest rates low, and perpetuated the imbalances.


Some commentators called this apparent happy state of affairs ‘Bretton Woods II.’ As the saying goes, markets make opinions and this was a flawed opinion born out of an ignorance of what brought the first Bretton Woods system undone.
The underlying conflicts identified by the Triffin Dilemma always remained. The ease with which the US could borrow and create debt was tolerated for decades. No doubt such tolerance was due to
gold no longer being a monetary anchor.


But in 2007 it reached a point where it could no longer be tolerated. Not because investors decided to be prudent, but because the market structure could no longer cope with more debt.


At this point, the end of the decades long US driven credit expansion turned abruptly into a contraction and asset markets collapsed. Amongst the carnage, the dollar was about the only asset to increase in value relative to everything else. This was because previously abundant global liquidity rapidly evaporated and returned to the source, pushing up the value of the dollar.


The point here is that in times of crisis, the US dollar trades as the world’s reserve currency, not based on its domestic fundamentals, which are just as bad as other countries. That’s what you saw in late 2008 early 2009.


So the Triffin Dilemma is beginning to rear its head again. The US domestic political preference is for a weaker dollar to stimulate exports and create employment. But the international situation, being market driven, is more powerful. The dollar is therefore strengthening relative to other currencies while the U.S. economy is still weak.


In the past the US response to this currency strength would have been to lower interest rates and turn on the liquidity taps. This would have increased credit growth domestically and liquidity internationally (think of all those US treasuries piling up in foreign central banks when US economic growth is strong). But the interest rate ammunition has been spent.


Like every other country, the US needs a weaker currency. However a global reserve currency operates under different rules to ordinary currencies. In times of global uncertainty, like now, the US dollar will be strong regardless of its fundamentals.


With the Euro-zone under pressure, the reserve asset of choice remains the US dollar. Perversely, this will allow the US authorities to pursue even more reckless policies in their attempts to provide global liquidity.


The inherent conflicts in the global monetary system that led to the great financial crisis have not been addressed. The dollar has served as the world’s reserve currency, without being linked to gold, since 1971.


While on the surface the experiment has been a success, the legacy is a huge buildup of debt. The need for global liquidity creates an incentive for the US to live beyond its means and run up debt levels. Perversely, the debts sit in the vaults of foreign central banks and masquerade as assets. (It is from this asset base that domestic banking systems generate their own credit growth).


But debt levels have reached a point where this system no longer works properly. The crisis of 2008 has quickly given way to the European sovereign debt crisis of 2010. They were just a sign of things to come.


The implications for you as an investor are many. Expect continued uncertainty and volatility as the world increasingly recognises the current financial system has reached its use by date. This is a gradual and subtle process. You won’t see this recognition splashed across the front pages anytime soon. But it is happening now.


In the short term you should expect continuing loose monetary policy out of the US and a lack of fiscal discipline. Of course, the big picture investment implication here is that the US dollar will eventually lose its role as the world’s sole reserve currency. This is a multi year event and certainly difficult to assess in terms of the effect on markets.


The IMF is already holding discussions about making changes to the financial architecture. Very few people understand the magnitude of what is going on, but it hasn’t been lost on the gold market.


Gold will be one of the major beneficiaries of change. Back in the 1960s Robert Triffin warned about the dollar glut and the fact that it would bring the Bretton Woods system undone. He was right.


The rising gold price was the first warning sign of the system’s weakness. So the best way to profit from this instability is to own physical bullion (not ETF’s or gold certificates). For a longer term bet on forthcoming changes to the financial system, you should be looking to buy gold on weakness.


Regards,


Greg Canavan
for The Daily Reckoning


Ed. Note: If the excessive money printing of various central banks around the world has taught us anything, it’s that there is no substitute for sound money. And as to that, gold is historically proven to be the best example of that. Readers of The Daily Reckoning email edition know that fact better than most. And they receive regular commentary on that and a variety of topics. If you’d like to join them, you can sign up for FREE right here.





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Gold Gains Prepared for Takeoff

by Greg Guenthner.
Posted Mar 14, 2014.With the gold price on the rise in 2014, more and more investors are starting to take notice of the yellow metal. But one sector of this market is starting to head higher that almost no one predicted. Greg Guenthner explains why, in order to get the biggest gains out of this sector, now is the time to act. Read on...



Greg Canavan is the editor of Sound Money, Sound Investments, a financial report devoted to unearthing great value investments amid today's "money illusion" of fiat currency. He is also a contributing editor to the Australian Daily Reckoning.

[pywong]

It's coming.



With Money Drying Up, Greece Is All but Bankrupt



A street in central Thebes, northwest of Athens. While the trash is being collected, budget cuts of 50 percent leave room for little else.
EIRINI VOURLOUMIS FOR THE NEW YORK TIMES





By LANDON THOMAS Jr.


MAY 25, 2015

ATHENS — Bulldozers lie abandoned on city streets. Exhausted surgeons operate through the night. And the wealthy bail out broke police departments.


A nearly bankrupt Greece is taking desperate measures to preserve cash. Absent a last-minute deal with its creditors, the nation will run out of money early next month.


Two weeks ago, Greece nearly defaulted on a debt payment of 750 million euros, or about $825 million, to the International Monetary Fund.


For the rest of this month, Greece should be able to cover daily cash deficits of around 100 million euros, government ministers say. Starting June 5, however, these shortfalls will rise sharply, to around 400 million euros as another I.M.F. obligation comes due. They will then double in size on June 8 and 9.


“There are no free rides in this country anymore,” said Kostas Bakoyannis, the governor of an administrative region.
EIRINI VOURLOUMIS FOR THE NEW YORK TIMES

“At that point it is all over,” said a senior Greek finance official who spoke on the condition of anonymity.
On Sunday, the interior minister, Nikos Voutsis, said that there would not be enough money to pay the I.M.F. if there was no deal by June 5.
In a society that has lived off the generosity of the government for decades, the cash crisis has already had a shattering impact. Universities, hospitals and municipalities are struggling to provide basic services, and the country’s underfunded security apparatus is losing its battle against an influx of illegal immigrants.
In effect, analysts say, Greece is already operating as a bankrupt state.

The government’s call to conserve funds has been far-reaching.


All embassies and consulates — as well as municipalities throughout the country — have been told to forward surplus funds to Athens.


Hospitals and schools face strict orders not to hire doctors and teachers.


And national security officials complain they are under intense pressure to keep air and sea missions to a minimum, at a time when migrants from Africa and the Middle East are rushing to Greece’s shores.


A class at the Athens University of Economics and Business. Budget cuts have hit education hard.
EIRINI VOURLOUMIS FOR THE NEW YORK TIMES

Even the swelling ranks of investment bankers, lawyers and consultants advising the Finance Ministry have been told that, for now at least, their work is to be considered pro bono.


Since its first bailout in 2010, Greece has been forced by its creditors to cut spending by €28 billion — quite a sum in a €179 billion economy. A proportional dose of austerity applied to the United States, for example, would come to $2.6 trillion.


During the last six months, a period during which Greece has had its credit line revoked over disagreements with Europe regarding economic overhauls, the state has been forced to wield an even sharper knife.


For a generation of Greek politicians who saw government spending (and borrowing) as a national birthright, the idea of deploying only the money at hand has been jarring.


Theodoros Giannaros, the head of Elpis Hospital in Athens, said he recently suffered a heart attack from the constant stress of his job. But it is his surgeons he worries about most, he said. They are working extremely long days, and for less pay than they were earning just a few years ago.
EIRINI VOURLOUMIS FOR THE NEW YORK TIMES

But for other Greeks who are eager to break from the country’s tradition of dispensing political favors to the well-connected, these years of imposed restraint have also provided a valuable lesson.


“There are no free rides in this country anymore,” said Kostas Bakoyannis, 37, the governor of the Central Greece administrative region. “The old parties — they never spoke truth to the people. Now we have to live on what we can make and produce.”


Mr. Bakoyannis was in the middle of a weeklong tour of the 25 municipalities that he oversees. He delivered this very message to the city elders of Thebes, a town of about 36,000 people, roughly 75 miles northwest of Athens.
Although Mr. Bakoyannis was elected as an independent and is scathing about Greek politicians past and present, he himself is a scion of the country’s right-leaning New Democracy Party: A grandfather, Constantinos Mitsotakis, was a prime minister, and his mother, Dora, has been a senior minister in various governments.
As it is in many small towns here, the unemployment rate is higher than the national average of 25 percent. And while the trash is being collected, budget cuts of 50 percent leave room for little else.


For about a year now, Thebes has been trying to complete a modest €2 million project to refurbish the town’s main street. But because the construction company has not been paid in more than a month, work has ground to a halt.


An abandoned bulldozer gathering dust in the rubble of the road suggests that the project will not be completed anytime soon.


What makes this work stoppage especially worrisome to Mr. Bakoyannis is that the street refurbishment is one of the many infrastructure projects in Greece that is backed by the European Union.


Some 89 percent of Greece’s €6.5 billion investment budget is majority financed by Europe, meaning the government is paid back shortly after each outlay.


Through the worst days of austerity, Mr. Bakoyannis explains, these investments — highways, bridges and ports, for example — had continued, as the government always knew it would be paid back in weeks.


Since April 30, he says, the liquidity crisis in Athens has forced the government to stop payment on these initiatives as well, the first time in his memory that that has happened.


“These projects are our lifeline,” said Mr. Bakoyannis, who has seen his infrastructure budget cut to €12 million from €65 million in the past four years. “It’s not about Keynesian politics anymore — it’s about finding enough money to repair a simple road.”


Security experts say that well-to-do families in suburban pockets surrounding Athens are now supplying critical funds to local police departments.
“It’s an increasing trend,” said Ioannis Michaletos, an analyst with the Institute for Security and Defense Analysis, a nonprofit group in Athens. “There is less money and a lot more work for the police to do.”


Perhaps no other areas in Greece have felt the full force of the country’s cash drain than its state-funded universities and hospitals.


At the University of Athens, the country’s largest educational institution and home to about 125,000 students, the annual operating budget has fallen to €10 million from about €40 million before the crisis.


As for the hospitals, even though they are taking in twice as many patients now, their budgets have been cut to the bone. In the first four months of this year, health officials say that the 140 or so public hospitals in Greece received just €43 million from the state — down from €650 million during the same period last year.


Sitting at his desk at the start of yet another 20-hour-plus workday, Theodoros Giannaros, the head of Elpis Hospital in Athens, chain-smoked cigarettes and signed off on a pile of spending requests that he said he knew would not be fulfilled.


Since he started work at the hospital in 2010, Mr. Giannaros has seen his salary shrink to €1,200 a month, from €7,400. His annual budget, once €20 million, is now €6 million, and the number of practicing doctors has been reduced to 200 from 250.


Like almost everyone in Greece, he is making do with less. The hospital recycles instruments; buys the cheapest surgical gloves on the market (they occasionally rip in the middle of operations, he says); and uses primarily generic drugs.


“We have learned that we can live with a lot of money and survive with nothing,” he said. “Maybe the crisis makes us better people — but these better people will die if the crisis continues.”


Mr. Giannaros, who is 58, says he recently suffered a heart attack from the constant stress. But he says it is his surgeons he worries about most.


In aging, depression-ridden Greece, treating the 150 or so patients that come to his hospital each day has put an extraordinary strain on his shrinking corps of doctors.


The fact that many have begun to strike because they are not getting paid for overtime makes matters worse.


Striding across the hospital grounds, Mr. Giannaros waved over his star surgeon, Dimitris Tsantzalos.


How many operations did you do last year, he asked.


“About 1,500,” said Dr. Tsantzalos, who, with his strapping build, seems younger than his 63 years.


Recently he says he put in a month of consecutive 20-hour days and, not surprisingly, confesses to exhaustion.


“I am burnt out,” he said. “It’s very dangerous for the patients.”


A week later, a tragedy struck Mr. Giannaros: His 26-year-old son, Patrick, committed suicide by jumping in front of an Athens subway train.


“There was just an emptiness in front of him,” Mr. Giannaros said between wrenching sobs in a brief telephone conversation. “The emptiness of the future they have taken away from us.”


His son had finished university studies and, unable to find work in a country where more than half the young are jobless, was helping Mr. Giannaros at the hospital.


“He saw no future, no way to help his family,” Mr. Giannaros said. “Now God has found him a job — as an angel.”
While Mr. Giannaros said he understood the importance of staying current with important creditors like the I.M.F., he said enough was enough.


“They can take their money,” he said, using an expletive. “I feel ashamed to be a European.”


Pavlos Zafiropoulos contributed reporting.

[pywong]

This has been dragging on longer than expected. When systems break down, it will be wise to secure the fundamental needs for survival:

1. Food - grow your own food,
2. Health - Origin Point Therapy,
3. Water - dig your own well,
4. Power - solar power,
5. Security - community security such as Rukun Tetangga.

Mike Savage


Ray Dalio is a billionaire hedge fund manager who has made his fortune by seeing opportunity in markets and acting upon his findings. In a recent quote he said, "If you don't own gold you know neither history or economics". WOW!
Stan Druckenmiller, who has made his name by investing in stocks and soundly outperforming the indexes for 30 years, two weeks ago at an investment conference, said: "Sell stocks and buy gold".

John Paulsen, Kyle Bass, and Paul Singer, all well-known hedge fund managers, currently have an increased interest in gold and are not shy in talking about it.
Of course, on the other side of the story you have Goldman Sachs who are shouting SELL! Because, they say the price is going to drop. I'll bet they hope it does. I reported late last year that, as Goldman was talking down gold they added 2 tons to their OWN vaults- not for clients but for themselves. Just last week it was reported that they have now added another TON of gold to their vaults- for themselves!

Now three tons. NEVER listen to what they say- watch what they do!
Aren't these the same people shorting subprime loans while peddling the same positions to their clients? Yes it is and the fines they paid prove it!

Why are all of these people now joining the chorus to buy gold? What are they seeing that most are missing? I have a few ideas.

The central banks around the world are creating scarcity. In English, that means that as they "print" money from nowhere that has no value it gives the appearance that all is ok but a closer look reveals that the liquidity being provided is now doing more harm than good.

The central banks and their partners at hedge funds and major banks are manipulating just about all markets. In doing so, they are crowding out private investment. The share of private ownership of assets is falling except for those at the very top.

Central banks are becoming the major shareholders of government debt and are now becoming major bondholders in corporations and in stocks of larger companies. Of course, as they do this they provide artificial stimulus to the markets they are buying but in the end it reduces private investment, saving and thrift, and eventually leads to their own demise in the form of lower growth, lower taxation and less economic activity at a time it is most needed to "grow our way out" of the debts that they themselves created. Sound familiar- we are seeing this right now.

Why can't they do this forever many ask. Because, as you can clearly see that whether their "printing presses" are unlimited or not - actual resources that people rely on to live and earn a living are finite and those cracks are very visible right now. Those countries further down this path are showing major social and societal problems. This also leads to different central banks having different agendas and needing different policies to help their political class keep power. In short, they stop working together and are engaged in a de-facto financial war.


A friend of mine, Jim Leeper, sent me a video of what is happening in Venezuela- a socialist paradise where all of the other people's money has run out. The video shows people looting a store that had rations. As Gerald Celente has said: "When people lose it all they lose it!" Another video I saw had a person who had planned to spend a week in Caracus and left after two days because it was too unsafe.

As resources dwindle the more desperate the public becomes and the more violence you are going to get.

We are seeing it all around us even here in the USA. The unrest and violence are being blamed on just about every excuse but the real one. That the Fed has taken us down a road that is a one-way street to a crisis. All that is left is to find out how it unfolds. Unfortunately, if history is a guide we might expect a major war of some kind as our "leaders" can never be blamed for what went wrong.


It is pretty obvious to me that nothing will change until a crisis of some sort forces the change.

If any changes were coming I believe they would have been made prior to running over $5.5 trillion budget deficits using GAAP (Generally accepted accounting principles) while our "leaders" crow about smaller deficits! Changes would have been made long ago before in many pension plans that are on the verge of insolvency even with stock, bond and real estate prices near all-time highs if their administrators had honesty and character- a trait lacking from top to bottom in our and most societies today.

Just think how all of the government transfer payments (newly issued debt) is contributing not only to new unproductive debt but also to a falsely inflated GDP number so that the officials can report growth when all that is actually growing is debt.

In a recent article it was written that 47% of all Americans couldn't come up with $400 for an emergency without a credit card. 45 million plus are on food stamps. Real unemployment without statistical games is 23% (John Williams -Shadow Gov't Statistics). Full time jobs are disappearing as the part-time Obamacare economy takes over.

It is NO surprise! I called this years ago. However, I had no idea how fast and furious this would happen. People are not spending "Savings at the pump" because their health insurance premiums and deductibles are going through the roof. Self-employeds have higher premiums and higher deductibles and co-pays. Get sick once and you have blown through all of your savings at the pump and then some!

My wife just got a statement that floored me. Her company paid $26,000.00 for our health insurance!

How many companies can afford this type of payment for long with increases from 17-35% already being reported by many media sources, including Contra Corner, in some places for 2017. This is not a guess- these rate increases have been filed already.

I could go on for many more pages about what these folks are seeing and taking action.

It is obvious to anyone paying attention that the numbers being reported don't paint the picture that is being played out here in the real world.

It appears to me that the central banks are well on their way to owning virtually all of the tangible real assets and leaving us with the debt they used to purchase those assets. Think about that statement for a moment. If that is not enough to make all of us want to take action and plan for whatever may be coming then nothing will likely ever move you.

The time is now to determine YOUR plan. Be Prepared!
Mike Savage, ChFC Financial Advisor
2642 Route 940 Pocono Summit, Pa 18346
(570) 730-4880
Raymond James Financial Services, Inc. Member FINRA/SIPC