Random Musings- Greece, America & apathy

~ A pie chart breakdown of where Greece's bailout money goes.  Only 19 cents on the dollar, or rather euro actually go back to the Grecian economy i.e. its populace.

No one respects deadlines anymore...

Frustrating... just frustrating..

The big news out of Greece over the weekend was that its leaders had just 24 hours to work out a deal with its EU, ECB & IMF creditors that would complete the selling of their nation and souls to their creditors.

Only 24 hours for Greece's leaders to agree to "the minimum wage be cut to less than 600 euros ($790) a month ($4.94/hr) and that at least one holiday allowance, the so-called 13th and 14th wages, be abolished, and pensions paid by supplementary funds should be cut by 35 percent" (AP)

Just 24 hours to agree to this harsh austerity or Default.

And what happens??   Talks extended into Monday...

Not sure what there really is to talk about.  The choices are really like an evil person saying "We will cut your left and right arm off as well as your right foot, or we will kill you outright"   How much deliberation does one need on a choice like that?  When does the pride instinct kick in?

We've learned and observed many lessons over the past 39 months.  Among them is that few to no world leader truly cares about its people, especially in a crisis, and when the choice is between reality and can-kicking, everyone including the common people want it kicked.  Happily so.

Also learned that few people in the US have really been affected so far by this recession.  Most of the people hurt and harmed were those in such bad shape from policies of the last 30 years that even in economic boom, they'd be going bankrupt, foreclosed upon and all that.  Very few others have.

You walk in most malls.. still see it bustling.. still see plenty of vapid, anti-social, technology addicted teenage morons with their headphone buds in ears and texting away without a care in the world.. Still see plenty of consumers consuming with credit cards swiping and registers cha-chinging all the live long day.. Still see people emotionally oblivious to everything outside their immediate family and more immediate needs.

The biggest lesson learned with few exceptions is that in this whole global economy narrative of crumbling banks, bailouts, recession and supposed "recovery", from politicians to investors to everyday people, there really is no one to cheer or root for.  And so few heroes.

Politicians are corrupt, bankers/financiers are evil, Investors are vermin and most everyday people won't fight back in any meaningful way.  Could be apathy or a fear that god-forbid, all their 'stuff' will be taken from them.  And the youth- they have the most cause to fight since every 18yr old college student without a silver spoon or teat to suckle upon, becomes a debt slave via student loans before legally allowed to take their first drink.  And that debt never, ever, Ever go away... Even in a bankruptcy.

In other parts of the world, youth fight back, or at least try to.

Angry Youths Attack House Of Greek President Papoulias; Hurl Rocks, Molotov Cocktails (AP) -- "About 30- 50 Greek youths arrived by motorbike and on foot just after 8 p.m, hurled a Molotov cocktail, rocks and paint at the house but stopped short of attacking the two guards at the President’s house"

In America, they sit outside in parks for days and weeks on end sipping coffee from thermoses while listening to their ipods and texting nothing important while mainstream America ignores them.

Either we've become That lazy and detached a nation, or those suffering the most still believe so much in the whole Left-Right political canard that no one wants to embarrass or hurt Obama's chances at re-election with a sincere dust-up.   I can't imagine such restraint if McCain/Palin were running the nation with exact same economic policies or even say a Bush third-term.

So, deadline extended in Greece one more day.  We still assume all will be worked out to the powerful banking interests' will...  or who knows, be extended another day.

Greece is the nation that invented democracy.   Would be nice if they be less like Athens and more like Sparta.

Peter Paying Paul (then repaying Peter)...

St Paul:  "Could I have that dollar you owe me?"
St Peter:  Of course..but can I borrow $2"

I wanted to take a moment to explain as clearly as possible why the world is in such trouble financially, and do so in a way that doesn't involve background knowledge in finance or many confusing statistics.

The world is economically in bad straits because we are all nations of borrowers. Every nation.  No one has any surplus and yet, we are borrowing from each other. We borrow from banks too but that's a dupe.  Most banks globally are zombie, meaning they're so much in the red that without money being poured into their coffers from nations, they couldn't survive.   Funny isn't it.. nations give banks free money so they won't collapse, then borrow it back at interest or lend to other nations that can't ever repay even the interest.

 And if not for all this and pretend currency created on paper and pretend monetary value placed upon it, the global financial community would have destroyed civilization 3 decades ago.

The reason I pinpoint it to the 1980s because most people do not realize this but in 1983, the Dow hit 1,000 for the first time.  Wall St had been in existence since Revolutionary War days (1770s) and yet never reached 1000 until 1983.  And what is it today?  Just about 13,000.  Each thousand represents $1 trillion dollars so in simple math, in a span of only 24 years, $12 trillion of pretend wealth was created.

Washington: "I much prefer my statue face something more honorable..."

Let's follow the sovereign economic food chain..  Greece needs money.  So does the rest of the PIIGS nations. And Eastern Europe.  So they borrow from the rest of the EU.   Who puts up most of the funding to cover those losses?   Germany.  And what was Germany doing today?


Merkel Looking for Help During Visit to China (Spiegel) -- "German Chancellor Angela Merkel needs help... Germany wants China to make a concrete pledge to invest in the euro bailout fund"

So basically all of Europe are beggars in one form or another.

Now Greece gets its bailouts from a "troika"- the EU, the ECB and the IMF which is pretty much US run and financed though it always has a puppet European leader so it gives the appearance of being international.  So 17.4% of all IMF loans and bailouts around the world come from US taxpayers.

And is the US a creditor nation?  Goodness No!  lol.. Not for many years..  We owe others more than $15 trillion dollars.  And yet the US has the audacity and arrogance to lend to others as if we're in the black.   And who do we owe money to?  Many creditors but namely, the Chinese.

And how do the Chinese lend to everyone?  They're really in an economic housing asset bubble, much like the US was prior to 2007. They had their citizenry build lots n' lots of homes, namely to keep the populace busy.  Problem is, most of the populace can't afford to rent or buy the homes that were built, so they're empty.. just like in Nevada, Florida and Arizona.

But China controls its media even better than the US so details of how weak their economy is, hasn't been truly known yet.  So as a ruse of prosperity, they lend money they don't really have to the rest of the other debtor nations and dramatically devaluing their currency so they can make up the losses via trade policy.

Everyone owes everyone.  This is why Investors are treated like royalty and national economic policies around the world cater to their needs; why Everyone tries to soothe the markets.  The Rats are the only source of  fresh money left in the big game of ponzi.

In a biblical sense, you could easy say the global economies survive by borrowing from "Peter" to pay "Paul" and no nation has the guts to dare call anyone out to repay their full tab. Banks and nations are all grateful simply if debtors can meet their monthly payments

And that's the sad state of the world no one talks about.

The Road toward 21st Cent Global Sharecropping

Once upon a time, there was a land far far away in the world of dreams and "remember when..", where people, even if they weren't always happy, were able for the most part to have good lives financially and take care of their families.  In this magical place, one breadwinner was only needed to raise the average family of four in a level of comfort and the spouse could Choose to work rather than need to out of absolute necessity.

In fact, this distant world was such an amazing place that the sole breadwinner did not need to attend college and compile any form of student debt in order to secure well-paying work.  There were jobs a-plenty, creating wonderous products that all the world sought after due to the reputation of high quality workmanship.  And these workers received salaries that allowed them to pay their bills, go on vacations, have savings for the future, and never in a million years think of doing things like using credit cards to supplement income or taking out Insta-pay loans to cover between paychecks...

To me, its definitely "Once Upon a Time" because the American economic golden age of the 1950s and 60s was before my time.  But one does not have had to actually have lived over the last 50-60 years to know there's been a profound shift in the quality of life of the average worker.

According to CNN/Money, "Nearly one third of Americans who were raised in the middle class dropped down the economic ladder as adults -- and that's before the Great Recession hit... Pew's Economic Mobility Project looked at children born in the early- to mid-1960s and assessed their economic status roughly 40 years later.

"Being middle class in the parents' generation meant a household income of roughly $33,000 to $64,000 in 1979. But their children had to earn between $54,000 and $111,000 to maintain their relative standing in society in the mid-2000s. (These figures are adjusted for inflation.)...

"Long-term unemployment has devastated the ranks of the middle class, with many people losing their homes and forced to turn to food banks and government aid after they run through their savings. It takes nearly 41 weeks, on average, for the jobless to find new work. Also, the steep decline in home values has hurt many in the middle class.

Recovering from a huge drop in income is not easy, a separate Pew study found. Half of people who lost more than 25% of their income in 1994 had not recovered four years later. And a third did not regain their economic footing after 10 years..."

________

Some quick observations:

1)  Notice how no one talks about or encourages individual entrepreneurship.  You're only supposed to survive by working for others; by being fully dependent on the whim and will of corporations to hire you when its best for them and at the lowest possible wage they can get away with.. No one in media gives any encouragement or even refers to the possibility that starting up one's own business is as good or better an avenue for survival than to work for others.

2)  Like we wrote before, the average length of time to find a job is 41 weeks- that's over nine months.  A child could be conceived and fully delivered into the world before the average person can find work again,  and that's not even taking into consideration whether that job matches the previous job's pay scale and educational requirements.

3) The destruction of the middle class would have occurred 25 to 30 years ago if not for the widespread introduction of credit cards as a means to supplement the lost income.  Credit cards had been around  before the 80's but they had annual fees usually around $75 to $125, and some like AMEX required 100% pay back on the bill when the monthly statement arrived.    They were cards of privilege for the privileged.

Once legislation was passed in early 80's which forced uniformity of all states to have to accept the interest rates of a credit card company based on what the home state of the credit card allowed (usually Delaware or South Dakota), then credit cards were free to explode into the market place and eventually without annual fees. Then came the rewards points and cash advance/transfer checks.. on and on..

4)  Its going to be harder and harder for people to maintain middle class and especially so for young people to enter it.  It is a global playing field now and the ultimate goal of corporatilists  is an level economic playing field between east and west, so everyone's paid bare minimums and the vast majority of people working and living for no other purpose than to repay 'company store' debts.

Company stores were used, starting in the post Civil War reconstruction period to keep sharecroppers, mostly black ex-slaves and poor whites, forever enslaved to the land by providing all the farming equipment, seed, etc for "free" (loaned but never taking cash for said items) but then to be repaid at very high interest rates which the worker was forced to accept terms and sign contracts even if illiterate, or go elsewhere.  And if a sharecropper didn't work, he was arrested and would spend many many years in prison doing work detail for free on chain gangs.

Not much of a choice is it?

UK : Egg/Citigroup Clamps Down On Riskier Credit Card Customers

Probably no coincidence that Citigroup is forced to make the move first and one of the largest US pawnbroker & payday lender is entering the market at the same time..... Once again their risk modeling wasn´t quite perferct...... How can you buy a UK credit card company close to a top in the UK housing market...... But i think it is very safe to say that others will have to follow ( not only in the UK ) Citi in this kind of tightening.....I suggest to read this Total UK personal debt statistic February 2008 from Credit Action to understand the magnitude of the mess especially in UK .

Sicher kein Zufall das ausgerechnet Citigroup den ersten Schritt machen muß und gleichzeitig das größte US Pfandleihaus & einer der größen "Kredithaie" in den UK Markt eintritt..... Es sieht so aus als wenn die mal wieder genau zum Top eine riskante Investition getätigt hätten.... In diesem Fall bin ich mir sicher das Citi mit diesem Schritt nicht lange alleine bleiben wird. Andere Anbieter ( auch länderübergreifend ) werden sich dieser Art der Kreditverknappung anschließen müssen.... Um einen Überblick über das Ausmaß gerade in UK zu bekommen empfehle ich einen Blick auf diese Übersicht Total UK personal debt statistic February 2008 von Credit Action zu werfen.

This quote sume it up / Dieses Zitat spricht Bände

"We can certainly understand the concerns, but even if people are up-to-date with repayments, they are people we decided we no longer wish to lend money to regardless of their status." Egg spokesman

Egg customer anger at credit move BBC
Angry customers of internet bank Egg have hit out at its decision to cancel their credit cards.

Egg says 161,000 cards belonging to people whose credit profiles have deteriorated since they signed up will stop working in 35 days' time.

But people who insist they have good records have been contacting the BBC to say they are on the list.

A spokesman for the bank said those affected were customers it no longer wanted to lend to "regardless of their current status".

Credit cards are being withdrawn from 7% of Egg's customers who it deems to pose an unacceptably "high risk".

This could include those who have missed repayments or exceeded their credit limit.

'Arbitrary action'
Cardholders will be able to continue making minimum monthly repayments on their balances but will not be able to spend any more after the deadline.

The move follows a "one-off" review after Egg was bought by US-based Citigroup for £575m last year.

The bank is not demanding immediate repayment of balances or making any changes to customers' terms and conditions or their interest rates. ....

Gillian Cox, of Farnham, Surrey, said she was "absolutely furious" to learn her credit card had been cancelled in what she described as an "unbelievable arbitrary action".

Mrs Cox said she and her husband are "retired, no mortgage, no debts" and "always paid the balance off in full each month".

She added that she had contacted credit reference agency Experian who said she was marked as having an excellent credit rating, "thus totally negating Egg's claim that this measure is about credit risk".

'Stop spending'
A spokesman for Egg said: "We are sorry some customers are upset after receiving notification we are ending their credit card arrangement, but they are people we do not feel it is appropriate to lend any money to."

He added: "The decision was taken after an extensive one-off review of our credit card book following acquisition by Citigroup."

Der Spiegel London - Die Internetbank Egg greift durch. Die britische Citigroup -Tochter will rund sieben Prozent ihrer zwei Millionen Kunden die Kreditkarte sperren. Offenbar haben es Egg und Mutterkonzern Citi mit der Angst zu tun bekommen - sie fürchten, die Risikokunden könnten sich übernehmen und ihre Darlehen nicht zurückzahlen können. Offiziell heißt es: Das Kreditrisiko der "riskanten" Kunden sei zu hoch.

Egg teilte zwar mit, der Schritt habe nichts mit der weltweiten Kreditkrise zu tun. Es handele sich bloß um eine "Neubewertung der Risiken", nachdem Egg im vergangenen Jahr von der Citigroup gekauft worden war. Die Maßnahme zeigt aber, dass Banken weltweit konservativer bei der Darlehensvergabe werden und hart gegen Risikokunden durchgreifen.

Die Egg-Mutter Citi hatte sich bei riskanten Kreditgeschäften so sehr verhoben, dass an den Finanzmärkten sogar zeitweise Insolvenzgerüchte zirkulierten. Citi hat im Zuge der Kreditkrise mehr als 18 Milliarden Dollar abschreiben müssen und damit einen Verlust im vierten Quartal von rund zehn Milliarden Dollar verbucht. Mit der Wahrheit über das Ausmaß der Krise rückte Citi nur scheibchenweise heraus. Egg will die Karten innerhalb von 35 Tagen sperren, die Kunden wurden bereits angeschrieben.

The Rise of Pawn Shops and Fringe Banking

This is probably one of the very few sectors in the US financial system with a very bright future.....Hat tip to Minyanville for digging this from the FT

Das Geschäft der Pfandleihhäuser dürfte eines der wenigen Sektoren im US Finanzsystem mit glänzenden Zukunftsperspektiven sein.... Dank geht an Minyanville für das ausgraben dieser Geschichte der FT.

US pawnbrokers benefit from hard times FT
Hard times in the US are benefiting pawnbrokers as beleaguered consumers pledge jewels, electronics and other goods in return for loans with interest rates running as high as 300 per cent a year.

Dave Adelman, president of the National Pawnbrokers Association, said the number of loans at US pawn shops had risen 15-20 per cent since October. He attributed the increase to rising fuel prices and deteriorating economic conditions – an assessment echoed by other industry executives.

“Brief and shallow downturns in the economy may benefit our business model,” said Daniel Feehan, chief executive of Cash America, the biggest US pawnbroker chain, with 942 locations. ( Cash America Presentation )

> Probably no coincident that they have entered the UK market in mid 2007....

> Sicher kein Zufall das die Mitte 2007 in den UK Markt eingetreten sind......

Pawnbrokers offer loans in return for personal items. Customers can buy back their property for the value of the loan plus a fee, which works out to an interest rate that can reach 300 per cent on an annualised basis, according to the NPA. If borrowers do not pay off the loan in a given time, the unredeemed item can be sold.

> Here comes the definition from "Cash Advance " & "Pawn" via Cash America

> Hier die Definition der Begriffe vie Cash America

Cash America said on Thursday its profits had risen 21 per cent to $26.3m in the fourth quarter, reflecting higher sales of pawned goods and more loans.

Alan Fishbein of the Consumer Federation of America said pawnbrokers and other “fringe” banking operations – such as those making loans against future pay cheques or car titles – had grown as banks had withdrawn from poorer areas. About $48bn in payday loans are made every year and the revenues in the whole fringe banking industry are an estimated $12bn-$15bn, according to Dennis Telzrow, a consumer finance analyst at Stephens, an investment bank.

An estimated 10m US households are thought to be outside the banking system, according to the Federal Deposit Insurance Corporation. The NPA estimates there are 12,000 to 14,000 pawnbroker shops in the US.

On Manhattan’s 47th Street, the New York block through which about 90 per cent of US diamonds are sourced, some merchants report a sharp uptick in the amount of jewellery being brought in for sale.

“Its real sad – they don’t want to sell,” said Ruben, a 52-year-old street hawker who buys jewellery from passers-by in the diamond district.

“They might have paid $150,000 for a necklace but they will get back $25,000 or $30,000 at most. But it’s either that or lose their house.”

60 Minutes Legitimizes Walking Away

I have borrowed the headline 60 Minutes Legitimizes Walking Away from Mish. He has also some more thoughts on this topic ( read also The Business of Walking Away ) . Also a hat tip to my friends from Housing Doom for digging the Youtube version. I hope this clip shows especially the European visitors how bleak the reality looks like and why we are still in the beginning of this painful process of the "correction". Lots of Germans ( including Landesbanker like West LB , Sachsen LB, IKB etc.) can´t understand that it is possible to just "walk away" from the house without facing consequences for the rest of their lifetime like here in Germany.

Dank geht an Mish für die "geborgte" Überschrift die eine ganz neue Dynamik in den "Anpassungsprozeß" der US Immobilienkrise bringen wird . Hier weitere Gedanken von Mish The Business of Walking Away . Zudem dank an Housing Doom für das aufstöbern der Youtube Version.

Nur zur Erläuterung muß erklärt werden das anders als in Deutschland die Haftungen in großen Teilen der USA und insbesondere in den Hochburgen wie Kalifornien bei einer Zwangsvollstreckung komplett anders als zum Beispiel in Deutschland gestaltet sind. Dort wird nur mit der Immobilie gehaftet. Das ist gleichbedeutend damit das selbst wenn die Immobile unter den Hammer kommt und die Bank wie momentan üblich gigantische Verluste macht der Schuldner nicht für diesen Verlust einzustehen hat.

Praktisch, oder?

Würde mal tippen, das auch dieses Neuland für die Manager der Landesbanken ist ( siehe Sachsen LB, West LB , IKB usw ) Sinnvollerweise haben die Verantwortlichen oftmals gleich die ganze Bank aufs Spiel gesetzt um auch ja genug US Hypothekenpapiere zu erwerben.....

So kommt es vor das zum Beispiel wenn ein Haus auf der gegenüberliegenden Straßenseite für 300.000 $ zum Verkauf steht und man für sein eigenes Objekt mit 400.000 $ in der Kreide steht ( Eigenkapital war ja zum Glück dank der wahnwitzigen Finanzierungen in den letzten Jahren aus der Mode gekommen ) es nur logisch ist das neue Objekt zu erwerben und das andere in die Zwangsvollstreckung gehen zu lassen. Der damit ruinierte Creditscore sollte bei dieser Ersparniss nicht weiter ins Gewicht fallen. Noch besser wird es wenn man es sogar geschafft hat während Zeiten steigender Immopreise die Refinanzierungskeule zu schwingen und siene Immobilien mit immer neuen Hypotheken zu belasten. Welch gigantische Ausmaße das ganze in der Verganheit angenommen hat zeigt eindrucksvoll dieser Chart.

Schweizer Ansichten von meinen geschätzen Bloggerkollegen gibt es auf Zeitenwende

Maxed Out

Have a nice weekend

Allen ein schönes Wochenende