September: Crunchtime For Europe And Germany

From ZeroHedge:

"September will undoubtedly be the crunch time," one senior euro zone policymaker said. "In nearly 20 years of dealing with EU issues, I've never known a state of affairs like we are in now," one euro zone diplomat said this week. "It really is a very, very difficult fix and it's far from certain that we'll be able to find the right way out of it."

As Europe's fight with the twin demons of logic and math continues, time is running out. And as eurocrats take their mandatory vacations for a job well done and spend the next two weeks lounging on some Mediterranean island or listening to opera, Europe will enter hibernation mode, courtesy of a slow down in sovereign bond issuance, all of which however will change very quickly once September rolls in which as Reuters describes, "is shaping up as a "make-or-break" month as policymakers run desperately short of options to save the common currency." It is then that we will find if all that money spent on newsletter promoting active prayer to push the hands of central planners in that direction or the other, was well spent, or just thrown in the same cash black hole which is the final restring place for hundreds of billions in "bailout money" which has achieved nothingbut perpetuating the same destructive behavior that it was meant to change.

Reuters explains why September will also be known as the popcorn month:

In that month a German court makes a ruling that could neuter the new euro zone rescue fund, the anti-bailout Dutch vote in elections just as Greece tries to renegotiate its financial lifeline, and decisions need to be made on whether taxpayers suffer huge losses on state loans to Athens.

On top of that, the euro zone has to figure out how to help its next wobbling dominoes, Spain and Italy - or what do if one or both were to topple.

Since the crisis erupted in January 2010, the euro zone has had to rescue relative minnows in Greece, Ireland and Portugal as they lost the ability to fund their budget deficits and debt obligations by borrowing commercially at affordable rates.

Now two much larger economies are in the firing line and policymakers must consider ever more radical solutions.

Following a year of real-time failed rumor, innuendo, speculation, prepackaged 'bankruptcy that is not a bankruptcy' negotiations, and much more, Europe has figured out what was patently obvious to everyone. This:

In Reuters' own words, the life raft is about to go pop:

The euro zone does not seem to have enough cash in the current setup to deal with a scenario of Spain and Italy needing a rescue, and a sense of doom is growing among some policymakers. Fighting the crisis, said the euro zone diplomat, is like trying to keep a life raft above water.

"For two years we've been pumping up the life raft, taking decisions that fill it with just enough air to keep it afloat even though it has a leak," the diplomat said. "But now the leak has got so big that we can't pump air into the raft quickly enough to keep it afloat."

Two bailouts in, and one bankruptcy, and Greece is fixed. Not

Compounding the problems, Greece is far behind with reforms to improve its finances and economy so it may need more time, more money and a debt reduction from euro zone governments.

If Greek debt cannot be made sustainable, the country may have to leave the euro zone, sending a shockwave across financial markets and the European economy.

Athens wants two more years than originally planned to cut its budget deficit to below 3 percent of GDP, so as not to impose yet more spending cuts on a country which is already in a depression.

This would mean Greece's 130 billion euro second bailout package may need to be increased by 20-50 billion euros, according to estimates by some euro zone officials and economists, and there is no appetite in the euro zone to give Greece yet more extra money.

More importantly Greece needs to bring its debt, which is equal to 160 percent of its annual economic output, under control. This means euro zone governments, which own roughly two thirds of it, may need to write part of it off.

Private creditors have already suffered a huge writedown in the value of their Greek debt holdings but so far euro zone taxpayers have not lost a cent on any of the bailouts.

So if Greece "agrees" to more austerity, how long until the rioting paralyzes the economy again, and a new government is elected, one in which Syriza has absolute majority, and the entire June fiasco with Greece potentially leaving the Eurozone out of its own volition is replayed? Not too long it seems. Especially since Schauble, who this weekend has perfected the art of throwing water in people's faces, just said there will be no more concessions.

But Greece is, once again, just the beginning.

Sept. 12 is a crucial date in the European diary. On that day the German Constitutional Court is scheduled to rule on whether a treaty establishing the euro zone's permanent bailout fund, the 500 billion euro European Stability Mechanism (ESM), is compatible with the German constitution.

A positive ruling is vital, because Germany is the biggest funder of the ESM, and the euro zone would be powerless to protect Spain or Italy without the ESM.

On the same day, parliamentary elections are held in the Netherlands where popular opposition to spending any more money on bailing out spendthrift euro zone governments is strong. The Dutch vote may complicate talks on a revised second bailout for Greece, which also has to be agreed in September.

Is a ECB impairment next in the cards? And if indeed Draghi takes a haircut on his Greek holdings, how long until he has to do the same with Portugal, Ireland, Spain and Italy? And how long until the EUR is currency only by decree, when even the blindest of the blind realize that the ECB's balance sheet has a massive capital shortfall, that can only be held together by more printing, something which Germany will hardly be delighted by:

Policymakers are working on "last chance" options to bring Greece's debts down and keep it in the euro zone, with the ECB and national central banks looking at also taking significant losses on the value of their bond holdings, officials said.

If governments swallowed the bitter pill by also accepting a cut in the value of their contributions to loans already made to Greece, this would break a taboo and could provoke demands for similar treatment from Ireland or Portugal.

Peter Vanden Houte, chief economist at ING bank, said euro governments might be forced to accept a halving of the value of their Greek debt - known in the business as haircut.

"If Greece is to be saved, we must see some debt forgiveness from euro zone governments in the coming years because otherwise Greece is never going to come out of the situation it is in now," he said. "We are talking about potentially a 50 percent haircut, which would still mean the Greek debt would be (proportionately) around the euro zone average."

The euro zone would want concessions from Athens. "Most probably in exchange, euro zone partners will be more strict on Greek compliance with structural reforms and may ask Greece to give up some sovereignty," said Vanden Houte.

In the grand scheme of things, we wonder what is more realistic: Greece handing over the keys to the kingdom to a Belgian, or the ECB getting senior bondholder concessions out of insolvent banks. Frankly, neither. At least not until iTraxx Crossover is over 1000 bps: aka - peak despair.

And then there is Spain and Italy, and the fact that the ESM is insufficient (not to mention still inactive), and the ECB will need to step in. Hope that it would do so, is what sent the market soaring last week. Yesterday, however, Germany made it all too clear that Draghi had made a deal without the devil, and that attempts to bluff Germany into a "certain" outcome just won't fly.

ECB President Mario Draghi signalled last Thursday the bank was ready to act, indicating it may revive its programme of buying bonds of troubled governments on the secondary market.

"Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough," Draghi said. "To the extent that the size of the sovereign premia (borrowing costs) hamper the functioning of the monetary policy transmission channels, they come within our mandate."

However, Germany has always been hostile to the idea and the Bundesbank said on Friday that it continued to view it "in a critical fashion".

German Finance Minister Wolfgang Schaeuble dismissed suggestions Spain will ask the bailout fund to try to lower its borrowing costs by purchasing its bonds.

Spain faces high borrowing costs because investors fear they will not get their money back. The Spanish economy is shrinking, many of its autonomous regions need bailouts from Madrid and banks need the recapitalisation of up to 100 billion euros.

Which, in turn, leaves out those who just bought Spanish bonds, because hope and prayer are a strategy (and remember: Lehman will never fail), out in the cold:

Madrid still has to raise about 50 billion euros on the market by the end of the year. This may be impossible if its funding costs stay well above 7 percent for 10-year bonds.

Draghi's remarks knocked yields down by more than 40 basis points to below 7 percent on Thursday, but they could quickly climb back if the market does not see firm ECB buying soon.

All this, and much more, is finally coming to a head, as the time for can kicking with hollow promises and words without action is coming to an end: just more than one month from now is when Europe will have to put up or shut up. And we will truly find out how much of a misnomer the "European Union" truly is.

Finally, for those who enjoy a granular walk through for what is in store for Europe, here it is courtesy of Deutsche Bank.

July

• 30 July: Italy auction. Bonds.

August:

• 1 August: Monti meets Finnish PM. Italian PM Monti is due to meet his Finnish counterpart in Helsinki.
• 2 August: Spain auction. Bonds
• 2 August: ECB Governing Council meeting. Our expectation is that 2 August is likely to be an occasion for non-standard (“quantity”) monetary policies. Standard (“price”) monetary policy, or the level of policy rates, we suspect will take a backseat this month. A monetary policy “price” response would in any case be more effective after a “quantity” response given the current impairments of the monetary transmission mechanism. We expect a further 25bp refi rate cut at the September meeting. We suspect the deposit rate will remain at zero for now. See “Eurostress” in this issue of Focus Europe.
• 7 August: Italian Q2 GDP flash estimate. A weak figure would reignite the ‘austerity versus growth’ debate (DB forecast –1.0% qoq).
• 13 August: Italy auction. Bills
• 14 August: Italy auction. Bonds
• 14 August: Euro area Q2 GDP flash estimate, from Eurostat.
• Mid-August: French Constitutional Court/Fiscal Compact. In Mid-August the French Constitutional Court is due to rule whether  the Fiscal Compact, which euro area countries are due to endorse by the start of 2013, needs to be ratified into the French Constitution. If so, a joint vote by the French Assembly would be required. Signals are that this would happen in September if required. See accompanying article on France in this issue of Focus Europe.
• 16 August: Spain auction. Bonds
• 20 August: Greek bond redemption. Greece is due to repay EUR3.1bn of GGBs. Following the PSI, these would be GGBs owned  by the ECB and EIB. While agreement on how to reconfigure the second loan programme is unlikely before September, it is unlikely the EU will hold-out from paying funds to Greece to repay the ECB/EIB. In a consolidated sense, the official sector’s exposure to Greece remains the same, but the creditor changes (to the EFSF). Alternatively, Greece could issue T-bills and the  Greek banks could absorb them with the assistance of ELA from the Greek central bank.
• 21 August: Spain auction. Bills
• 28 August: Spain auction. Bills
• 28 August: Italy auction. Bonds
• 29 August: Italy auction. Bills
• 30 August: Italy auction. Bonds
• End-August: DBRS rating on Spain/Ireland. By the end of August, the DBRS ratings agency is due to have concluded its review  of Spanish and Irish sovereign ratings.

September:

• September: Moody’s due to conclude review of Spanish sovereign rating. Logically Moody's should wait until there is clarity on  direct recap before making a decision on Spain’s rating. Since governments have not made progress fleshing out a direct recapitalisation facility — indeed, have created some ambiguity as to whether it will be non-recourse — there is a distinct risk that Moody's, in another move to be “ahead of the curve”, decides to downgrade Spain within the next 3 months. Moody’s currently rates Spain Baa3, the lowest investment grade rating.
• September: Detailed bottom-up Spanish bank stress tests due for publication.
• 6 September: Spain auction. Bonds
• 6 September: ECB Governing Council meeting. If we are right about the outcome of the 2 August ECB meeting (dominated by “quantity” measures), we suspect that revisions to staff forecasts for growth and inflation are likely to be a basis for a 25bp rate  cut.
• 11 September: Greece auction. Bills
• 12 September: German Constitutional Court ESM ruling. The German Constitutional Court is to rule on the complaints lodged  against the ESM and fiscal compact. The chances of the ESM being vetoed are low. However, the Court might again strengthen the German Parliament’s prerogatives as regards future European integration (see Focus Germany, 20 July). Germany is the last approval needed for the ESM to come into effect. Then the first instalment of the capital has to be paid by the ESM members  within 15 days of the ESM treaty entering into force. There are three other countries where Constitutional Court queries are outstanding — France, Austria and Ireland. France’s Constitutional Court will be deciding by mid-August. Neither Austria (which  may take another 3-6 months) nor Ireland are large enough to hold back the ESM — the ESM will come into force when countries representing 90% of the subscribed capital have approved it. Both Germany and France have an effective veto power in that case.
• 12 September: Dutch Election. In April, the VVD/CDA minority government failed when Geert Wilders' PVV party withdrew its  support amid negotiations for the 2013 austerity budget. A crisis was averted when three smaller parties came forward to give support to a budget, but an early election was unavoidable. Domestic austerity and European crisis issues will likely play  important roles in the election. Compared to the configuration of parliament at the October 2010 election, the latest opinion polls (Maurice de Hond) show PM Rutte's VVD liberal party vying with the Socialist Party for the dominant party position. Both would  gain 31 seats in the 150 seat parliament on the latest polls. This is an unchanged position for VVD, but a doubling of SP seats. SP are gaining at the expense of all other parties except VVD and neo-liberal D66. This may reflect a backlash against the  austerity for 2013 which has broad party political support. SP have also taken a stance against euro rescue initiatives, voting against the ESM alongside the PVV and extracting a pledge from Dutch FinMin De Jager that parliament will vote on any future  direct bank recapitalisation disbursements. Given the typical distribution of the vote among several parties, the questions are  what coalition emerges from this election, how long it takes to form a government and what policies will it support? Markets in particular will be watching the ramifications for domestic fiscal policy (the 2013 Budget is a week after the election) and euro  rescue initiatives.
• 12 September: Italy auction. Bills
• 13-14 September: G20 Finance Ministers and Central Bankers meeting. In Mexico.
• 13 September: Italy auction. Bonds
• 14 September: ECOFIN meeting. This is very likely the finance ministers meeting when adjustments to Greece's second loan programme will be considered. The remaining EUR23bn recapitalisation of the Greek banks is due to complete by the end of September, assuming a positive review of the loan programme. This is also when finance ministers should have their first discussion on the proposals for a common bank supervisory regime under the ECB. Any delays, with knock-on delays for a direct bank recapitalisation mechanism, will disappoint the market. Options for a reconsideration of Ireland’s legacy bank bailout policies may also be discussed (decision not due until October ECOFIN meeting).
• 15 September: Eurogroup meeting. Coinciding
• 18 September: Greece auction. Bills
• 18 September: Spain auction. Bills
• 20 September: Spain auction. Bonds
• 25 September: Spain auction. Bills
• 25 September: Italy auction. Bonds
• 26 September: Italy auction. Bills
• 27 September: Italy auction. Bonds
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Related:

Only Mario Draghi's ECB can avert global calamity before the year is out - By Ambrose Evans-Pritchard

Mario Draghi has promised the moon. The European Central Bank's council had better deliver on his pledge this week. If it does not, the crisis will surely escalate out of control in August or soon after.

False Flags Have Been Planned Against Syria for 50 Years

From Washington’s Blog, July 29, 2012:

Governments Routinely Conduct Fake Terror

Don’t believe all of the mainstream reports (roundup here) that the U.S. is supporting false flag attacks carried out by Al Qaeda against Syria?

The BBC reports that the British and American leaders seriously considered false flag attacks in Syria in 1957:

in 1957 Harold Macmillan and President Dwight Eisenhower approved a CIA-MI6 plan to stage fake border incidents as an excuse for an invasion by Syria’s pro-western neighbours, and then to “eliminate” the most influential triumvirate in Damascus….The report said that once the necessary degree of fear had been created, frontier incidents and border clashes would be staged to provide a pretext for Iraqi and Jordanian military intervention. Syria had to be “made to appear as the sponsor of plots, sabotage and violence directed against neighbouring governments,” the report says. “CIA and SIS should use their capabilities in both the psychological and action fields to augment tension.” That meant operations in Jordan, Iraq, and Lebanon, taking the form of “sabotage, national conspiracies and various strong-arm activities” to be blamed on Damascus. The plan called for funding of a “Free Syria Committee”, and the arming of “political factions with paramilitary or other actionist capabilities” within Syria. The CIA and MI6 would instigate internal uprisings, for instance by the Druze in the south, help to free political prisoners held in the Mezze prison, and stir up the Muslim Brotherhood in Damascus.

It’s not just Syria. Governments routinely admit to false flag terror – governments attacking people and then blaming others in order to create animosity towards those they wish to topple. For example:

• A major with the Nazi SS admitted at the Nuremberg trials that – under orders from the chief of the Gestapo – he and some other Nazi operatives faked attacks on their own people and resources which they blamed on the Poles, to justify the invasion of Poland. Nazi general Franz Halder also testified at the Nuremberg trials that Nazi leader Hermann Goering admitted to setting fire to the German parliament building, and then falsely blaming the communists for the arson

• The CIA admits that it hired Iranians in the 1950′s to pose as Communists and stage bombings in Iran in order to turn the country against its democratically-elected prime minister

• Israel admits that an Israeli terrorist cell operating in Egypt planted bombs in several buildings, including U.S. diplomatic facilities, then left behind “evidence” implicating the Arabs as the culprits (one of the bombs detonated prematurely, allowing the Egyptians to identify the bombers, and several of the Israelis later confessed) (and see this and this)

• The former Italian Prime Minister, an Italian judge, and the former head of Italian counterintelligence admit that NATO, with the help of the Pentagon and CIA, carried out terror bombings in Italy and other European countries in the 1950s and blamed the communists, in order to rally people’s support for their governments in Europe in their fight against communism. As one participant in this formerly-secret program stated: this)(Italy and other European countries subject to the terror campaign had joined NATO before the bombings occurred)

• As admitted by the U.S. government, recently declassified documents show that in the 1960′s, the American Joint Chiefs of Staff signed off on a plan to blow up AMERICAN airplanes (using an elaborate plan involving the switching of airplanes), and also tocommit terrorist acts on American soil, and then to blame it on the Cubans in order to justify an invasion of Cuba. See the following ABC news report; the official documents; and watch this interview with the former Washington Investigative Producer for ABC’s World News Tonight with Peter Jennings. Official State Department documents show that – only nine months before – the head of the Joint Chiefs of Staff and other high-level officials discussed blowing up a consulate in the Dominican Republic in order to justify an invasion of that country. (While the Joint Chiefs of Staff pushed as a serious proposal for Operation Northwoods to be carried out, cooler heads fortunately prevailed; President Kennedy or his Secretary of Defense Robert McNamara apparently vetoed the plan)

• The South African Truth and Reconciliation Council found that, in 1989, the Civil Cooperation Bureau (a covert branch of the South African Defense Force) approached an explosives expert and asked him “to participate in an operation aimed at discrediting the ANC [the African National Congress] by bombing the police vehicle of the investigating officer into the murder incident”, thus framing the ANC for the bombing

• An Algerian diplomat and several officers in the Algerian army admit that, in the 1990s, the Algerian army frequently massacred Algerian civilians and then blamed Islamic militants for the killings (and see this video; and Agence France-Presse, 9/27/2002, French Court Dismisses Algerian Defamation Suit Against Author)

• • Former chairman of the Joint Chiefs of Staff General Hugh Shelton says that a Clinton cabinet member proposed letting Saddam kill an American pilot as a pretext for war in Iraq (and see this)

• According to the Washington Post, Indonesian police admit that the Indonesian military killed American teachers in Papua in 2002 and blamed the murders on a Papuan separatist group in order to get that group listed as a terrorist organization.

• The well-respected former Indonesian president also the government probably had a role in the Bali bombings

• As reported by BBC, the New York Times, and Associated Press, Macedonian officials admit that the government murdered 7 innocent immigrants in cold blood and pretended that they were Al Qaeda soldiers attempting to assassinate Macedonian police, in order to join the “war on terror”.

• Former Department of Justice lawyer John Yoo suggested in 2005 that the US should go on the offensive against al-Qaeda, having “our intelligence agencies create a false terrorist organization. It could have its own websites, recruitment centers, training camps, and fundraising operations. It could launch fake terrorist operations and claim credit for real terrorist strikes, helping to sow confusion within al-Qaeda’s ranks, causing operatives to doubt others’ identities and to question the validity of communications.”

• United Press International Analysts speculate that agent provocateurs may be using the untraceable weapons even as U.S. authorities use insurgent attacks against civilians as evidence of the illegitimacy of the resistance.

• Quebec police admitted that, in 2007, thugs carrying rocks to a peaceful protest were actually undercover Quebec police officers

• At the G20 protests in London in 2009, a British member of parliament saw plain clothes police officers attempting to incite the crowd to violence

• A Colombian army colonel has admitted that his unit murdered 57 civilians, then dressed them in uniforms and claimed they were rebels killed in combat

• U.S. soldiers have admitted that if they kill innocent Iraqis and Afghanis, they then “drop” automatic weapons near their body so they can pretend they were militants

There are many other instances of false flag attacks used throughout history proven by the historical evidence. See this, this and this.

______-

Related:

Syria False Flag Brewing? Precursors to London Chemical Terror Attac

Syrian war of lies and hypocrisy

The US-NATO War on Syria: Western Naval Forces Confront Russia Off the Syrian Coastline

Al-Qaeda flags fly over rebel-held Syria

Flipping The Script: The Western Media’s Syria Propaganda Is Falling Apart

Obama- backed gangs doomed to fail in Syria: Webster Tarpley 

Syrian rebels burn comrades’ bodies in Aleppo to hide nationalities

Russia won’t comply with anti-Syrian sanctions, vessel inspections

Iran begins stockpiling 3 month food supply

U.S. presented Netanyahu with contingency plan for Iran strike

Jeff Berwick on Dollar Vigilantes, Inflation Protection and the Profitable Allure of Permanent Tourism

From The Daily Bell, Sunday, July 29, 2012 – with Anthony Wile

Jeff Berwick

The Daily Bell is pleased to present this exlusive interview with Jeff Berwick (left).

Introduction: Mr. Berwick is an anarchist, libertarian, and freedom fighter against mankind's two biggest enemies, the state and the central banks. Jeff is chief editor of The Dollar Vigilante, an anarcho-capitalist, Austrian economics based newsletter focused on surviving The End Of The Monetary System As We Know It (TEOTMSAWKI) and CEO ofTDV Media and Services, which provides internationalization information and solutions for yourself and your wealth. He is also host of Anarchast, an anarchist video podcast, and is a contributing editor at many of the world's largest financial and precious metals related websites. In 1994, Jeff Berwick founded Canada's largest financial website, Stockhouse.com.


Daily Bell: Great to interview you again, Jeff. When we talked with you this past October 2011, the world was a crazy place but it seems to be getting crazier. As an experienced observer of the financial scene, can you give us your take on the biggest problem the Western world is currently facing? Is it economics? Militarism? Growing authoritarianism? Or all three?

Jeff Berwick: Where to begin? When I first began discussing The Dollar Vigilante in 2008 I remember thinking to myself, "How will I find enough stuff to write about?" Now, in 2012, I can't possibly even comment on all the events happening daily. As one example of the escalation of what I see as the ongoing symptoms of The End Of The Monetary System As We Know It (TEOTMSAWKI), since we last spoke less than a year ago Barack Obomber has declared the Bill of Rights null and void. With his passing of the National Defense Authorization Act on New Year's Eve, he's also declared that he can kill any American, or anyone in the world, just by adding them to his kill list.

Daily Bell: Death by drone ...
Jeff Berwick: The US Government has announced plans to launch 30,000 drones to darken the skies over the US in addition to its foreign drones. You're not supposed to mention that, of course. In fact, the US Government tried to take control of the Internet recently via PIPA and SOPA. After being initially thwarted, Obomber declared by Executive Order last week that he is just going to take control of it. Simple, eh? The US government also has provided us withFATCA, which essentially makes it impossible for Americans to open stock accounts and bank accounts outside the US. And don't forget, Chuck Schumer wrote an act called the Expatriation Prevention Act last month ... if people can't see where this is all headed, I'm not sure I can help them.

Daily Bell: Give them a hint. Keep going.
Jeff Berwick: It's obvious that the US Government is preparing for a collapse of the dollar. Various entities behind the scenes are setting up currency and population controls to manage the transition and to keep the system alive as long as possible ... while giving more dictatorial powers to the federal government by which they can control the people for the upcoming riots and chaos.

Daily Bell: It's not just the US that is in trouble, of course. We think the global economy is heading into the tank. Is China headed for a hard landing?
Jeff Berwick: The global economy has actually been in the tank since 2001. After decades of government debt unhinged by a currency tied to gold and decades of government involvement and intervention in the economy through the communist-fashioned central banks and authoritarian Western governments, the economy died in 2001.
Had the governments and central banks allowed it to collapse, there would have been a few tough years as resources were reallocated to productive use. But the Keynesians are in control now. Paul Krugman called for a housing bubble to replace the tech bubble, and got it. This further destroyed trillions in wealth as businesses and entrepreneurs were fooled into thinking there was a great need for tens of millions of new housing units.

Daily Bell: Yes, we just wrote an article about speculation that there may be up to 40 million unnecessary single-family houses – new ones. That's an astonishing number.
Jeff Berwick: Yes... someone should tell the environmentalists that if they really care about the environment and wastage of resources they should hate central banks and the state... not want more of it. But I digress. When the housing bubble collapsed in 2007, the financial system died. Even statist mouthpiece, George Soros, recently acknowledged that the financial system died in 2008. Krugman and the central banks only know how to do one thing – call for more counterfeiting of money. This most recently had the effect of allowing the mainstream media to write that the economy was showing "green shoots" or was in "recovery." It's not ... not any more than Whitney Houston is showing signs of a comeback performance!
So, to finally answer your question, I see a lot of what is going on in China as only a symptom of the monetary inflationthat the world has been engulfed in from the central banks, including the Bank of China. Furthermore, China's GDP numbers, like all countries, are a fallacy and pointless to even consider. GDP is a useless, Keynesian number and when it is calculated and reported by a government you can consider it to be as based in reality as the tooth fairy... or, as they have here in Mexico, the tooth mouse.

Daily Bell: You travel regularly. What strikes you most about the world today?
Jeff Berwick: My travels have been mostly sequestered to the Americas for the last few years and I have spent a fair amount of time in the freest country in North America ... Mexico. The thing that I've really noticed is the militarization of the police in Canada and the US. Almost every time I go to the US, now, either my friends or I end up in handcuffs.

Daily Bell: Didn't that happen just recently? You wrote about it ...
Jeff Berwick: I was kidnapped by police in Phoenix last year and this year in Palm Desert. And on a recent trip to Las Vegas two of my friends were kidnapped and thrown into a cage for 24 hours for the crime of spilling their drinks. I have been commenting recently that I will never fly with my family to the US as long as the TSA exists – and it will exist as long as the US Government exists... These government programs, once put in place, are impossible to remove. And I also have been stating that I am giving serious thought to never returning to Canada or the US until such time as there is total government collapse.
It is just far too dangerous to go there, especially for a person such as myself who does not kowtow to police and supplicate to border guards. I believe that the US Government is trying to arrest as many people as possible because giving them a criminal record makes it nearly impossible for them to travel or to gain a second passport, so they are truly and wholly enslaved once they have a record ... and in the US today, everything is illegal, so it is pretty easy.
Tacitus said, nearly 2,000 years ago, "The more numerous the laws, the more corrupt the government," and that has never been more the case than in the US today. Thirty percent of Americans by the age of 23 have been arrested at least once. The US Government is not that much different than the National Socialist (Nazi) party in Germany except the US Government has scientifically perfected propaganda and statist tactics to the point that people don't even realize there already are prison camps in the US. The US has more people in prisons, mostly for non-crimes (no victim, no crime) than Stalin had in his Gulags! Yet there are plenty of people – US citizens – who still refer to the US as the "land of the free."
Daily Bell: Okay. Update us on the currency of the Land of the Free – the American dollar. Is this a currency you want to own? How about gold and silver? Is the run over or will we see higher prices?
Jeff Berwick: You should know what a dollar vigilante like myself will say about the dollar. The name dollar "vigilante" came about because the old bond vigilantes of the '70s who kept governments and central banks in check have all been made powerless now that central banks can print up as much money as they want to buy their own bonds.
Therefore, the only way to protest, and protect ourselves from government deficits and money printing is to sell the dollars themselves. Euros, yen and pesos too. If it's a fiat government piece of paper with pictures of dead criminals painted on it, we're sellers. We don't just do it out of principle but it's also been and will continue to be profitable, as anyone who has held gold or silver for the last decade knows. That said, I don't even follow the daily price of precious metals in terms of dollars. It is meaningless. We believe this monetary system will collapse and therefore gold and silver will eventually go over $1 trillion per ounce... but a billion dollars won't buy you a Big Mac! I am more apt to track the value of gold and silver in bitcoin, a currency that is impossible to inflate and that will still exist a few years from now than I am in dollars.

Daily Bell: Very good ... clearly stated. Is the euro a failed currency, too, or just, perhaps, a shrinking one?
Jeff Berwick: All fiat currencies in today's world of socialist democracies are constantly shrinking. Almost any sound economist (a.k.a. the Austrian school) could have predicted it could and would not work. If you are going to have a socialist democracy then it is imperative that you print money to cover the never-ending deficits and debts, at least for a period of time. The euro wasn't even elastic enough for this illegitimate task. The fact that the euro was so hamstrung from the start either shows incredible stupidity or a calculated plan to create a currency union that would quickly collapse necessitating a closer political union ... or a "one world Europe" government. This seems to be where things headed.

Daily Bell: How about Canada? What's your perception of the Canadian scene?
Jeff Berwick: Watching the evolution of the humans who live in the geographic region known as Canada over the last few decades is astonishing. I grew up in the Great White North so I have had front row seats for this transition. In the 1970s and 1980s Canadians felt they were a fairly poor backwater. People took comfort in drinking beer to make it through the long dark winter while they watched hockey and got by on the few dollars they had left after all the taxes.
In the '80s and '90s, the Canadian dollar was worth about half of the US dollar and there was constant mocking of the "loonie" and even outright conversations that it could just go to zero at any point. People clung to US dollars when they got them. But then, something changed. The latest commodity cycle, fueled by worldwide central bank money-printing, has now convinced 30 million Canadians that they are "a cut above."
The oil sands, which I grew up right next to and used to be called the "tar sands" and were thought of as a useless geological anomaly, are now a massive industry. And, thanks to Helicopter Ben Bernanke and his relentless devaluing of the US dollar, the Canadian dollar is now worth the same as a US dollar. Canadians are now richer on average than Americans. Like a drunk on a binge – who temporarily thinks highly of himself – this has changed the average Canadian's self-perception.

Daily Bell: Interesting analogy. We never quite thought of it that way.
Jeff Berwick: Trying to visit Canada these days is often harder than going into the US. Canadian border guards snarl and ask you if you are worthy enough to enter their great country. Try going to a hockey game and not yelling out the anthem at the top of your lungs with the rest of the slaves, and they'll immediately notice your aberration and you'll be lucky not to get beaten. And, you can't go for more than a few minutes without someone pointing out that Canadians are better than most countries because they have "free medical care."
Canadians, who used to be quite peaceable, now see it as their duty to invade foreign lands like Afghanistan and Libya, and are planning foreign military bases, to spread their own loving brand of socialism and democracy through guns and bombs. Canadians will tell you that their financial system is much better than the US and that is why they avoided the problems the US had in 2008. But, Canada has followed the exact same authoritarian road to bankruptcy and is just a few years behind. A massive housing bubble has been percolating in Canada, specifically in Vancouver and Toronto and it will collapse just the way the housing bubble in the US did. The Government run Canadian Mortgage and Housing Corporation is leveraged just the way Fannie Mae and Freddie Mac were in 2006.
In short, Canada is now almost exactly like the US – just a few years behind in terms of its housing bubble – but otherwise the economic environment is almost exactly the same. I call it Ca-merica now. But don't tell that to a Canadian. They are very polite but if you ever infer that Canada is not the best country on Earth you'll find yourself spitting out teeth unless you're quick with your fists.

Daily Bell: Getting back to the US, any comments on Ron Paul and the end of his campaign?
Jeff Berwick: I am a big fan of Ron Paul as a great communicator of libertarian ideals. What was most amazing to me about his campaign was the outright propaganda and smear campaign by the entire media in the US against the sole man who had any principles. It just goes to show how corrupt the entire society in the US is now. Leo Tolstoy, who was an anarchist, said, "The State is a conspiracy designed not only to exploit, but above all to corrupt its citizens" and we can really see that in action in the US today.

Daily Bell: Nice quote.
Jeff Berwick: Unfortunately a true one. The state forces you to use its methods and methodologies ... things like copyright or patents. If you don't do it, someone else will and then you will lose out. That is why the state is so dangerous ... once it exists, it becomes a kind of self-reinforcing disaster. The state is a grand tragedy of the commons. The good news is that this over-arching, obnoxious version will vanish too – no matter how broad its seeming influence.

Daily Bell: Logically, it has to.
Jeff Berwick: The numbers are already baked in the cake. That's why the Daily Bell and the Dollar Vigilante and the thousands of others spreading the message of freedom have to spread it as far and wide as we can right now using the educative power of the Internet. That's also why I am not unhappy at all to see Ron Paul not win the GOP election – although there still is a slight chance he could – and that is because this ship is sinking. It'd be like nominating Ron Paul to be the Captain of the Titanic after the iceberg has been hit. He would have just been remembered as that quirky guy who liked free markets, who "caused' the collapse of the US.

Daily Bell: Speaking of getting the word out about freedom, what's your take generally on the health of the Internet these days? We believe it's proven remarkably resilient. People are very resistant to encroaching government control. A false perception?
Jeff Berwick: The Internet is an amazingly significant invention. It's educated tens – even hundreds – of millions of people not just in the West but also around the world. They may not be able to provide you with a specific solution, but they have the idea now that something is wrong – that it is not their fault and that there may be a better way. Jesus, in many ways, was an anarchist and fought the state 2,000 years ago. The Internet is kind of my Jesus. I have been on computers since I was a teenager in 1981, and even then it was easy to see that connectivity would change the world. When that finally happened in 1993, I kept looking around wondering when government types would realize what the hell was about to hit them.

Daily Bell: Actually, it took them quite a while.
Jeff Berwick: Thankfully, as with all things the bureaucracy does, it was very slow to figure it out. We've had about 20 years to educate people about freedom, about global elites and the banksters, even about false flags. Just look at what is currently going on with the Batman Shooter. Within moments of this event millions from around the world were combing through the evidence and exposing it as likely being something somewhat less than was being reported by the government controlled mainstream media. They just can't get away with false flag events like they could in the past. Most notable was last year when, a day after the Fast and Furious scandal was exposed, the US Government came up with some ridiculous story about Iranians funding Mexican narco-traficantes to murder the Saudi Arabian ambassador in the US. Within seconds of this story it was mocked as being obvious propaganda and exposed completely. This isn't the 1980s anymore. Even with war, which takes the ultimate in propaganda to commence, it's harder to start a war these days without people understanding the falsity of it. When people in the US and Iran can talk freely during a game on Xbox Live or in a chat room, they realize pretty quickly that things are not as they've been told and they realize they have more in common with each other than they thought... and realize that the true enemy is their own governments.

Daily Bell: Can they now put the genie back in the proverbial box?
Jeff Berwick: I don't think so. Too much depends on the Internet now. Almost all commerce... all transactions... all communications... Kids live on the Internet. Want to cause a real revolution? Turn off Facebook and Xbox Live and watch how quickly they get their fat little butts out of their chairs and head into the streets!

Daily Bell: Probably true! We think the old men from certain dynastic families – the ones that are used to running things – only realized what was going on in about 2005. By then it was too late.
Jeff Berwick: I've met a few of those power elite types. They are almost always older and have no clue about computers. I had to teach a Bilderberg attendee – and granted, the Bilderbergs are mostly the house servants – how to use a computer mouse years ago. That is why they have missed the boat. Now, however, with people like Peter Thiel attending Bilderberg I am assuming that they have seen the error of their ways. I've been told Peter just went to "attack from the inside." I hope so. If he is selling out and joining the Dark Side he will be our new enemy. He better have a good excuse for going. A damned good excuse.

Daily Bell: It's always good to talk to you because you're generally hopeful, as we are, that what we call the Internet Reformation is changing the way the world works in a positive way. Give us a sense of its impact on your life and growing businesses.
Jeff Berwick: I would just like to reinforce that the Internet is proof that anarchy works. For nearly twenty years there were no rules, regulations, taxes, oversight committees nor overt government involvement (except in places like China and Thailand) and Internet conversation and commerce worked amazingly well. The amount of innovation was and is astounding. All of the questions asked of anarchism, like how will disputes be regulated, were all shown on the internet. Thousands of disputes every day are mediated on places like Ebay and Paypal. Websites like "judge.me" are allowing people to resolve disputes outside of the statist court system.

Daily Bell: Wow, that's a profound insight. Even committed libertarian types and anarchists spend hours on a regular basis discussing how much of society can be organized without the dead hand of government. Yet here they've got the example of an online anarchistic society operating under their noses! What a great way to think of it!
Jeff Berwick: Ironic, huh? No one ever died from using the Internet that I know of and millions of businesses have flourished. Of course there is "child porn" – but in my nearly 20 years on the Internet, I have not seen any child porn. Where is it? The government keeps trying to scare us into believing we need their protection from it and "cyber terrorism." I've yet to have a laptop blow up in my hands. The real terrorists are the governments themselves.

Daily Bell: The Dollar Vigilante's tagline is, "Survive and Prosper During and After the Dollar Collapse." What do people need to do now to secure themselves in the face of coming difficulties?
Jeff Berwick: The one thing that I would like to get across to people is that the world that we have lived in for the last forty years has not been real. It's been built completely on debt and because of that much of what we have seen and done hasn't been "real." It's been a mirage.

Daily Bell: We write about that! Society is distorted by so much fiat paper that we don't even know what a real society would look like. We tend to think it would be more agrarian and slower moving, maybe like parts of Switzerland. These days, they're razing half of Detroit. We're supposed to think that's normal, that people would create complex neighborhoods and whole cities that the next generation would tear down?
Jeff Berwick: All that is about to change. The entire western monetary, financial and political system will implode this decade. It all began when Richard Nixon removed the gold backing, "temporarily", as he stated, from the dollar on August 15, 1971 and since then the entire world has been on a completely fiat, unbacked monetary system. That, combined with a massively growing socialist/fascist democratic nation state system has meant massive amounts of debt – and great social instability laughingly known as progress.

Daily Bell: We've called it dreamtime, though we've traced it all the way back to 1913. That's when we think the damage really began and the false elite promotions began to become more prevalent. It's probably no coincidence that we had two massive wars following the implementation of central banking in the US.
Jeff Berwick: 1913 was definitely the start of it all... but it really went into warp speed after 1971. What you call dreamtime ebbs and flows. But over time the instability caused by pure fiat worsens. The system almost collapsed in 1980, the last time we had a crisis similar to this, and the only reason it didn't is because the initial economic distortions weren't as severe. The central bank still had one option: to allow interest rates to rise to their natural market level. That level ended up being 18 percent, as I recall.

Daily Bell: The distortions are much worse this time. You'd probably end up with credit tightening in the area of 30 or 40 percent. That's why we think the system is dead, like you do. When price inflation finally takes place and money velocity starts to lift, central bankers will finally realize what they're facing and panic. Bernanke will suddenly realize the guff he's been peddling about monetary sterilization is going to have been implemented. It's just hot air but he's going to have to go through the motions of acting like it's a "useful tool," as they call it.
Jeff Berwick: I agree, they're not going to be able to wring money and distortions out of the system by interest rates alone. Look, the amount of US debt has grown massively. Now, at $16 trillion, not including the $60+ trillion in liabilities, it would only take an interest rate of 11% and every penny of federal government tax revenue would go to just paying the interest on the debt!

Daily Bell: So true ... good point.
Jeff Berwick: If they stop printing money, the government will be insolvent right now. You see, there is no way out this time, without a massive change of living standards in the Western world. It is going to make the 1930s look like Disneyland. That's why we're advising subscribers to have a significant portion of their assets in precious metals. But, more importantly, have those assets geopolitically diversified, because as the Western governments have their backs to the wall they will confiscate whatever they can.
It's not like it hasn't happened before. The US Government confiscated gold in 1933. Therefore, we have written a report called "Getting Your Gold Out Of Dodge," which is a living document that we are continually updating which has information on places worldwide where you can buy and store your metals... as well as info on how to transport your metals.

Daily Bell: You seem to be growing aggressively. What are some ventures of yours?
Jeff Berwick: You are correct. We've been growing massively. We now have dozens of staff in a number of different countries and expect to be one of the largest media and services companies in the financial sector in the next two to three years. What happened was that over time we had so many people write to us about internationalizing not only their assets but also themselves through second passports and expatriation. They kept asking us how they could do it.
We found, for example, there was no major company that offered second passports worldwide in an easy, accessible form. So as good entrepreneurs and capitalists, we went out and did it. We had and have people on the ground in dozens of different countries, doing direct deals with the local governments to offer citizenships in a quick and not-too-expensive manner. We currently are working with the Dominican Republic, Paraguay, Dominica, St. Kitts and Nevis and Cambodia and will be announcing more soon. (You can see more at TDVPassports.com).
We also help people set-up international business corporations in countries without taxation and open offshore bank accounts. As I stated above, almost every bank on Earth has stopped accepting Americans as clients – which is why every American with assets needs a second passport. There are still a few who do accept Americans and we help get those set up (you can see more at TDVOffshore.com).
Remember all the people who fled their countries and arrived at Ellis Island in the US a hundred years ago? Well, now it's all going in reverse! And many in Europe are fleeing countries like France where they have a 75 percent tax rate on higher incomes and have seriously discussed moving that up to 100 percent!
Many who live in the Middle East, in places like Syria, Iran, Palestine and others are also looking to be able to transact globally. The Chinese are creating more millionaires than anyone at this moment and many of them, too, are looking to get their assets outside of the control of the Communist Party. Russians ... the list goes on. It's a giant game of geopolitical musical chairs right now and TDV has positioned itself as a provider of information, analysis and services to help people rearrange their affairs across the globe.
It's all stuff I did myself starting in 2004 when I left Canada for good and now live as what they call a PT... a Permanent Tourist ... or a Prior Taxpayer. You can still arrange your affairs so as no one government has complete control over you or your money and I recommend those who can do so ... and fast. The Western governments are trying to close every door as fast as it opens. This is one of those situations where you'd rather be a year or two early than a second too late.

Daily Bell: Remind us again how can people get more information from you.
Jeff Berwick: You can sign up to our free blog right on the front page of our website at DollarVigilante.com. We also have a paid newsletter there if you want more info than what we provide in the free blog. If you are interested in getting a residency or foreign passport, check out TDVPassports.com and for offshore corporations and bank accounts, go to TDVOffshore.com. Anything else to help people liberate and protect themselves and their assets during TEOTMSAWKI can be found at TDVMedia.com.

Daily Bell: Thanks for sitting down with us. Good luck.
Jeff Berwick: My pleasure. Good luck to you also and stay free!

Beyond Fictitious Capital: Michael Hudson discussion with Max Keiser

The Debt Death Spiral

From Economicnoise, july 24, 2012:

In the category of things to keep you up at night, consider the sovereign debt requirements in the next several years.

According to Chris Puplava:

Nearly 50% of the total outstanding debt of the world’s top 10 debtor nations needs to be rolled over by the end of 2015.

This amount is staggering! For the top ten debtor nations it totals $15 Trillion! That is approximately the entire size of US annual GDP and over 20% of annual world GDP.

The following table shows the maturity schedule by major country:

The table only reflects only debt maturing. This amount would be difficult enough to finance, but these nations all run deficits which must be funded as well. With obvious deterioration in credit quality of these sovereigns, who will purchase this debt at today’s interest rates of near zero, at least in the US?

Mr. Puplava provides his expectation:

… global central banks will be monetizing debt in massive quantities between now and 2015 because large portions of debt will be maturing in just the next two and a half years. For example, both the US and Japan will see one fifth of their entire debt outstanding mature just between now and the end of the year, with Canada seeing 26% of their total outstanding debt mature! The other members of the top 10 are only in a slightly better position with all but the UK to see double-digit debt rollovers of their total outstanding debt between now and 2015.

Continuing deficits add to these figures. The US will need to fund new debt resulting from projected deficits almost equal to its rollovers in the next three years. The total amount of debt issuance to meet both requirements totals over $8 Trillion dollars. Other countries in the above table run annual deficits which must also be added on to their rollover requirements. Proportionately, some are bigger than what is required in the US.

Where this funding will come from is the $64 Trillion question. Very likely it will be created out of thin air by Central Banks, exactly as they have done for much of the last four years. Obviously there is a limit to how much money they can create before fiat currencies collapse.

We are in the latter stages of the debt death spiral where debt and interest payments can only be made by adding more debt. This process has a sure ending. Like the flush of a toilet, the spiral goes faster and faster until it finally ends.

Mr. Puplava concludes:

There is just too much debt maturing over the next couple of years for capital markets to absorb and it is highly likely we will see global quantitative easing occur as central banks step in to be buyers of last resort to help suppress interest rates and keep debt servicing costs low.

If so, and I don’t see any other sources of funding possible, the question is when and how does this Ponzi scheme collapse?  These debts cannot be funded without massive debasement of the currency — all currencies.

Nothing has been done to stop this march to ruin by the political classes. Nothing will be done! When this ends will be determined not by politicians but by markets. Markets will eventually discipline politicians and all who trusted them.

“Got Gold?”

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Related:

$10 Trillion M2 Is Now In The Rearview Mirror