Greece Rejects 25th Hour Request to Change Course; Tsipras Asks Eurozone for Third Bailout; Rajoy Seeks to Save His Own Ass

Coordinated Meddling

Eurozone leaders are pouring it on thick again today with warning after warning. Yesterday, German chancellor Angela Merkel, French president Francois Hollande, and European Commission president Jean-Claude Juncker were all I in on the Coordinated Meddling hoping to convince Greece citizens to accept the current offer.

Rajoy Seeks to Save His Own Ass

Today Spain's prime minister, Mariano Rajoy, joined the hit parade. Like yesterday's trio, he issued another blunt warning to Greek voters that a No vote will force the country to leave the eurozone.

Rajoy also argued that it would be “good for Greece” if Mr Tsipras, who is backing a No vote, was defeated in the Greek plebiscite and forced out of office.

Recall that Tsipras is good friends with Podemos leader Pablo Iglesias. Like Tsipras, Iglesias wants to halt Eurozone austerity rules. Moreover, Iglesias has threatened to take Spain out of the Eurozone.

I suggest Rajoy is worried about his own ass in Spanish national elections later this year as Podemos has surged in the polls and is within striking distance of winning the election.

Greece Rejects 25th Hour to Change Course

In spite of the pleas, Greece Rejects Creditor Pleas to Change Course.

Greece’s government entered its final day in an EU bailout defiantly rejecting eleventh-hour pleas from its eurozone creditors to change course. It is now on a path that will lead to default on a €1.6bn loan repayment to the International Monetary Fund and being without a financial safety net for the first time in five years.

The IMF default, confirmed by Yanis Varoufakis, the finance minister, on Tuesday, will make Greece the first developed country in history to go into “arrears” with the fund. But it is not expected to have a direct impact on the country’s status in the eurozone. Credit rating agencies and EU bailout lenders have signalled they will not consider non-payment a “credit event” that triggers other defaults — a move that would bankrupt Athens immediately.

“The exit of Greece from the euro area, which used to be a theoretical question, can unfortunately no longer be ruled out,” Benoit Coeuré, the ECB board member responsible for Greek issues, said in an interview published on Tuesday in the French financial daily Les Echos.

Mariano Rajoy, Spain’s prime minister, on Tuesday joined fellow eurozone leaders in a blunt warning to Greek voters that a No vote will force the country to leave the eurozone.

He also argued that it would be “good for Greece” if Mr Tsipras, who is backing a No vote, was defeated in the plebiscite, paving the way for talks with “another government” in Athens.

“If Tsipras loses the referendum, this will be good for Greece. If he wins the referendum, Greece has no alternative other than to leave the euro,” Mr Rajoy told the Cope radio station.

Greece Asks Eurozone for Third Bailout

Curiously, Greece Just Asked Eurozone for New, Third, Bailout

Alexis Tsipras, the Greek prime minister, has asked eurozone authorities for a new, third bailout in a dramatic bid to try and secure a financial lifeline hours before the country’s current rescue deal expires.

The request, sent to the eurozone’s €500bn rescue fund on Tuesday, would cover Greece’s needs for the next two years, according to a statement from the prime minister’s office. It also makes a specific request for debt restructuring, the statement said.

Political Ploy

This request by Tsipras is nothing but a political ploy.

For those wavering, Tsipras provides hope that Greece will stay on the euro. He intends to convince older voters that Greece can still stay on the euro. The youth, with unemployment rates over 50% would prefer to start all over.

This move gives Greek voters of all ages a reason to vote "no" on the referendum. The meddling by Germany, France, and now Spain also will take a toll on the Troika cause.

Thus, a decisive "no" vote appears to be in the cards. As pertains to game-playing, Greek leaders have run circles around the eurozone nannycrats.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Obama Urges Congress to Pass Law Letting Puerto Rico Declare Bankruptcy; Great Idea, Let Illinois Do the Same

Puerto Rico is bankrupt. The key problem is that while municipalities can declare bankruptcy, states and territories cannot. 

President Obama recognizes the problem. He says No Federal Bailout for Puerto Rico. Instead he urges Congress to pass a bill allowing Puerto Rico to declare bankruptcy.

The White House threw cold water Monday on the notion of bailing out Puerto Rico from its financial crisis, instead urging Congress to consider changing the law so the island can declare bankruptcy.

On the heels of a dismal economic report, Puerto Rico's governor has warned that the commonwealth can't pay its $72 billion public debt, delivering a serious blow to Puerto Rico's recession-addled economy. But White House spokesman Josh Earnest said the federal government would provide financial expertise and access to existing resources — but not a bailout.

The Obama administration declined to offer Detroit a bailout, and the city declared bankruptcy under Chapter 9 of the Bankruptcy Code in 2013.

As a U.S. territory, Puerto Rico can't file for bankruptcy under that chapter, which is limited to municipalities such as Detroit. But Puerto Rican Gov. Alejandro Garcia Padilla has said he's considering asking Congress to change the law so that Puerto Rico's public agencies could declare bankruptcy under Chapter 9 — an idea that seemed to gain traction at the White House.

Earnest said the White House was encouraging Congress to explore possibilities to allow Puerto Rico to make use of Chapter 9, which would allow the commonwealth to restructure its debt amid a nearly decade-long economic slump. Garcia is seeking to defer debt payments while Puerto Rico negotiates with its creditors.

Idea Long Overdue

I welcome this action. But why limit the bill to Puerto Rico?

I say open this up to states like Illinois that will be doomed to the same fate eventually.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Mr. "Lie When It's Serious" Juncker, Lectures Greece On the Truth; Coordinated Meddling

Irony of the Day

In a bitter 40 minute lecture, European Commission president, Jean-Claude Juncker, lectures Greece on the "truth".

Other than being a pompous buffoon, Jean-Claude Juncker is most famous for his statement "When it becomes serious, you have to lie".

I believe it's safe to say that things are serious.

Coordinated Meddling

Please consider Eurozone Leaders Take Coordinated Gamble with Response to Athens

By publicly insisting that Greece’s referendum on Sunday is a choice about the country’s future in the eurozone, Europe’s leaders are taking a high-risk political gamble that their intervention will win over Greek voters rather than alienate them.

The strategy was carefully chosen. According to two eurozone officials, the EU’s three most high-profile leaders — Angela Merkel, the German chancellor; François Hollande, the French president; and Jean-Claude Juncker, the European Commission president — co-ordinated how they would respond to the Greek government’s call for a No vote during a series of phone calls at the weekend.

Greek voters have come to resent the EU’s interference in their domestic politics. Eurozone leaders were complicit in the ousting of George Papandreou as prime minister in 2011 and they actively campaigned against the far-left Syriza party in parliamentary elections back in 2012. But eurozone leaders believed they could not let the Greek government’s campaign for a No go unanswered, officials said.

“What do the Greek people know about all this? The reason why I am addressing . . . the Greek people is they have to know the truth,” Mr Juncker said in an occasionally bitter 40-minute address. “I think that the Greek government knows all these elements and it would be advisable to tell the truth to the Greek people instead of simplifying its own message to a ‘No’.”

It is a strategy that could still go awry. Mr Juncker’s bill of particulars included some evasions. His argument that creditors were not proposing pension cuts, for instance, is true only according to the narrowest possible definition of a pension cut. Greek officials also argue his claim there was never an “ultimatum” is a rewriting of recent history. Several eurozone officials at the time described the offer made to Athens on Thursday in such terms.

Believable Juncker

The only significant statement Juncker ever made that I accept as factual is his own admission that he is a liar.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Triumph of Democracy; Reader Reflections on Greece; Absurd Reactions

Reader Reflections on Greece

Reader "AC" pinged me this AM with her accurate assessment of events in Greece. "AC" writes ...

I find strange that no Euro leaders realized that even if Tsipras accepted the deal, his parliament would with almost certainty have rejected it.

European political leaders have lost the sense of democracy and of the power of Parliaments.

We may agree or not with Tsipras ideas and economic or social program, but one thing I think we can all agree on is that he has already made history.

Tsipras restored democracy with his decision to leave such a crucial decision to his people by referendum, showing everybody that in democracy, people must decide their own fate.

Triumph of Democracy

Reader "AC" is surely correct.

I have mentioned on many occasions that the policies of Tsipras are terrible. I cannot support them even as I support his decision to tell the Troika to go to hell.

Many will blame Tsipras. In actuality, it was Troika policies that all but assured the rise of the so-called "radical left" Syriza party.

Recall that Greece technocrat Prime Minister Lucas Papademos was handpicked by the Troika to replace George Papandreou simply because the latter proposed a voter referendum on the Greek bailouts.

Instead of imposed technocrats bowing down to kiss the ECB's ass, or early elections that the Troika hoped to see, Tsipras was willing to let the people decide.

One may or may not like the result, but this was a triumph of democracy over technocrats and nannycrat puppets.

Absurd Reactions

I was up early this AM and watched the futures. At one point the S&P was down over 40 points. Markets were (and still are) down everywhere, across the board, although the S&P has taken back about half the overnight low.

How could anyone have expected anything but what happened? Even those who failed to see this coming in advance should have realized late last week, this was finally inevitable.

The market is acting as if this was a big surprise. There is certainly no surprise in this corner.

The big shock will come when Spain marches down the same path.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Sudden Stop Thesis: What Are the Odds of Grexit Within Three Weeks?

Four years ago I thought odds of an eventual Grexit were nearly certain. Some people still don't believe so, while others are just beginning to understand the obvious.

Former Pimco Co-CEO El-Erian Sees 85% Grexit Odds With ‘Massive’ Contraction Coming.

Greece is heading for a “massive economic contraction” and is likely to be forced out of the euro zone, according to Mohamed El-Erian, the former chief executive at Pacific Investment Management Co.

“There’s an 85 percent probability that Greece will be forced to leave the euro zone” in the next few weeks, El-Erian said in an interview from New York. “What we are seeing here is what economists call the sudden stop, when the payment system stops. The logic of a sudden stop is a massive economic contraction, social unrest and it’s going to make continued membership of the euro zone very difficult for Greece.”

Sudden Stop Thesis

While I still think it likely Greece will exit the eurozone, I will take the "over" line on a "few weeks". It is amazing how long these things drag out.

There are at least two wildcards in play that could prolong things. At the top of the list is Russia. Second in line is the US.

Why? Because the US does not want Greece to form serious ties with Russia.

Also, Merkel does not want Grexit on her watch.

Russia the Key

Meanwhile, and as I have been saying for months, Russia is the Key. Will Russia come to aid Greece with enough money and oil to enable Greece to hang on longer than a few weeks?

I suspect the answer is yes. If so, the price may be sanctions.

EU rules require unanimous agreement on sanctions. I expect Greece to play that card very well. Greece can and likely will torpedo EU sanctions on Russia by the end of the year.

Unless there is an immediate collapse in Greece starting now, look for Russia to keep Greece afloat until sanctions are lifted.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Bank Holiday: Greek Banks and Stock Market Shut Until July 7; Capital Controls Imposed

After the ECB shut off ELA, prime minister Alexis Tsipras imposed capital controls while blaming the ECB just as I predicted.

Of course, that was an easy prediction. Yet, even at the last moment, many did not believe it would come to this.

Let's tune into the Guardian Live Blog for some details.

Bank Holiday

• Speaking on live TV, Alexis Tsipras is saying that the Greek central bank has been forced to recommend a bank holiday and the introduction of capital controls.
• He blames the ECB, and other institutions, for trying to obstruct the democratic referendum he has called for next Sunday. This is a “insult” that shames European democracy, he says.
• Tsipras also appeals for calm, and he insists that bank deposits are secure.

Capital Controls

• Officials said the bank closure would last for several days and would be accompanied by limits yet to be announced on bank transfers abroad and withdrawals from cash machines.
• The cashing of cheques would be halted and fixed term deposits would be locked down. The Athens stock exchange was also set to be closed.

Bank Queues

• All over Athens people have been queuing tonight, but the lines outside the National Bank branches were by some distance the longest, reports Jon Henley.
• And that’s because the National Bank supplies the banknotes, and lots of other Greek banks, by midnight on Sunday, had no more of those.

Vacation

In honor of the bank and stock market vacation, I offer this musical tribute.



Link if video does not play: Connie Francis Vacation.

How Can People Be So Stupid?

What are bank queues forming now that it's too late?

The only answer I can come up with is those who waited are stupid beyond belief. 

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

ECB Cries Uncle, Halts ELA Amid Run on Greek Banks; Capital Controls and Bank Holiday Next?

I have been wondering when the ECB would finally pull the plug and put a stop to the ELA.

Today, amid an accelerating run on Greek banks, the ECB capped the ELA.

The Guardian has a Live-Update on the crisis.

Here is the key point "No more extra emergency funding to Greece’s banks, despite steady outflow of deposits since crisis escalated."

Capital Controls, Bank Holiday Coming

Economics professor Karl Whelan says Capital Controls Coming

Professor Karl Whelan of University College Dublin just launched a blogpost which explains why he thinks some Greek banks won’t open tomorrow.

The ECB’s decision to cap emergency liquidity at its current level means capital controls are now coming, he argues.

That’s because commercial bank reserves have probably been significantly depleted by the rush to some cash machines this weekend.

So, they have little left in cash or reserves at the central bank, leaving them exposed when they open their doors on Monday morning.

Professor Whelan explains:

In that case, the only way the Greek banks could finance the (presumably very large) demands for withdrawals on Monday would have been to get access to additional funds from the Bank of Greece in the form of additional ELA. That will not be possible now, so most likely the banks will not open on Monday.

The statement that “ECB will work closely with Bank of Greece to maintain financial stability” is probably code for “ECB will help Greece to design a programme of capital controls”.

So it has come to this. No matter how well things go from here (and positive scenarios are hard to imagine) restrictions on Greek banks could be in place for a very long time.

It is easy at this point to panic and say it’s the end of the world and a new currency must be days away. It’s worth remembering, however, the Cyprus coped surprisingly well with its capital controls and ultimately they were lifted this year and the banking system survived. There is probably still a small window of opportunity left to keep Greece in the euro, even if the banks don’t open tomorrow.

Greece now gets to blame the ECB for bank failures. This move likely seals the deal on the July 5 referendum (See Tsipras Calls July 5 Referendum on Creditors’ Demands; Merkel Says No Alternative to Creditor's "Generous" Offer).

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com 

Tsipras Calls July 5 Referendum on Creditors’ Demands; Merkel Says No Alternative to Creditor's "Generous" Offer

In a surprise move that's sure to deflate the nannycrat's hope of early elections that could force prime minister Alexis Tsipras out of power, Greece’s Tsipras Calls July 5 Referendum on Creditors’ Demands.

Greek Prime Minister Alexis Tsipras called a referendum on whether he should accept the latest demands of the country’s creditors, the most dramatic move yet in a debt crisis that started five years ago.

Greek ministers, including the defense chief, joined the fray, urging the country of 11 million people to vote “no.” 

In a nationally televised address after midnight in Athens, Tsipras said the vote will take place on July 5 and excoriated a take it-or-leave it offer as a violation of European Union rules and “common decency.” A Greek official, speaking on condition of anonymity, said the government has no plans to impose capital controls and banks will stay open on Monday.

“After five months of tough negotiations, our partners unfortunately resorted to a proposal-ultimatum to the Greek people,” Tsipras said. “I call on the Greek people to rule on the blackmailing ultimatum asking us to accept a strict and humiliating austerity without end and without prospect.”

The surprise development throws into turmoil planned talks Saturday among euro-area finance ministers on their latest proposal, which would unlock 15.5 billion euros ($17.3 billion) and extend Greece’s program through November, in return for a commitment to pension cuts and higher taxes that Tsipras opposes.

No Alternative Says Merkel

Amusingly, Merkel Tells Tsipras No Alternative to Creditors’ Offer.

Chancellor Angela Merkel on Friday pleaded with Greek premier Alexis Tsipras to accept an “extraordinarily generous offer” from international creditors, making clear there was no alternative and that she would not intervene directly to broker a compromise.

But Mr Tsipras rejected the creditors’ offer, saying Greece would not be threatened with “blackmail and ultimatums”.

Clear Alternative

Clearly there is an alternative, that being to tell the Troika to go to hell. Tsipras was smart putting this to a vote. July 5 is interesting in that Greece will default before the vote.

What's the ECB to do now? Shut off the ELA, or keep it going 10 more days?

Instead of discussing "Plan B" on Saturday, the eurozone ministers are faced with "Plan C" .

Meanwhile, the run on the banks continues.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

BitGold Now Available in US! Why BitGold?

BitGold USA

Effective today, BitGold Announces Platform Launch in the United States.

BitGold, a platform for savings and payments in gold, is pleased to announce the launch of the BitGold platform for residents of the US and US territories. As of today, US residents can sign up on the BitGold platform and buy, sell, or redeem gold using BitGold’s Aurum payment and settlement technology. US residents will also have access to the BitGold mobile app and a prepaid card when these features launch over the coming weeks. Send and receive gold payment features are not initially available in the US.

About BitGold

BitGold’s mission is to make gold accessible and useful in secure savings. The BitGold platform provides innovative solutions to the challenge of transacting with fully allocated and securely vaulted gold. BitGold accounts are free and convenient to open by anyone, anywhere* in just minutes. BitGold provides users with a secure vault account to purchase gold using a variety of electronic payment methods. All physical gold acquired through the platform is owned by the customer, stored in vaults administered by The Brink’s Company, acting through Brink’s Global Vault Services International, Inc. (“Brink’s”), which insures gold through third party insurance providers.

First Ever Debit Card Backed by Gold in Real Time

I explain below what the buyout of GoldMoney by BitGold means, but first let's start with a look at details of the announcement of the first ever debit card backed by gold in real time.

• First Transactional Gold Account – Gold can be used in payments in addition to savings.
• First Gold Merchant Platform – Process Credit/Debit Cards and earn gold!
• First "Real" Gold Card
• BitGold is an online bank account that is backed by gold as opposed to currency
• Gold can be redeemed in as little as 10 gram increments (approximately $370 at today's price)
• Publicly Traded, Audited by PwC, Insured, Backed by Strong Investors

Unlike other cards that sell gold at a premium then issue a debit card, BitGold is a gold-based settlement system in real time. It is also the first gold-based card of any kind available in the US.

BitGold Signup

I encourage everyone to Sign Up for a BitGold Account. I have done so myself.

Promote gold!

Transactions in gold and settlement in gold, in real time are now possible.

One Plus One Equals Three

Due to my long-standing relationship with GoldMoney, many readers have asked what the purchase of GoldMoney by BitGold means.

After careful review over the past couple weeks with both James Turk, founder of GoldMoney, and Roy Sebag, the co-founder of BitGold, I am pleased to report the news is 100% positive.

Storage fees will drop, and the idea of a debit card backed by gold is a fantastic idea for numerous reasons.

Email From James Turk

Here is an email I received from James Turk regarding the GoldMoney/BitGold relationship.

Hi Mish

Once the transaction is complete, GoldMoney will become a subsidiary of BitGold, a publicly traded company on the Toronto Stock Venture Exchange, which adds yet an additional level of oversight to GoldMoney’s industry-leading governance. BitGold just completed a financing for C$18 million, which included some top name institutional investors.

After this financing, BitGold’s two main owners are the shareholders of GoldMoney and Roy Sebag, whose understanding of gold is as deep as anyone I have ever met. He becomes CEO of the group, and I have no hesitation seeing the baton passed to him.

With its IT expertise, C$35 million of cash in the bank and other resources, the combined BitGold/GoldMoney has resources far beyond what GoldMoney alone was able to put together. So I really see the combined company as a true 1+1=3 situation - the whole is greater than the sum of its parts.

GoldMoney will continue to operate in Jersey as a wholly-owned subsidiary of the Toronto parent. It will have the same governance procedures and controls that enabled GoldMoney to build its business. So nothing really changes in that regard.

Additionally, me and two of my fellow GoldMoney directors will join the board of the parent company in Canada.

All of us in GoldMoney and Roy and his team in BitGold have the same objective - to enable digital gold currency to circulate in global online commerce as an alternative choice to national currencies. My expectation is that our combined company will take GoldMoney up to the next level.

Regards
James

Follow-Up Discussion

In a second email, James Turk introduced me to Roy Sebag and Josh Crumb, the co-founders of BitGold.

Since then, Roy and I have spoken on many occasions. Following those discussions, I echo the views expressed by James Turk.

Seldom does one plus one equal three, but that idea makes sense here. I back promotion of gold as a currency, and BitGold has the resources and institutional backing to do it properly. Attempts by others have failed or languished.

Bullion Vault Rebuttal

Some readers have asked about the Bullion Vault article Bitcoin, BitGold, GoldMoney - and BullionVault.

In the article, BullionVault makes a number of allegations that took me a while to sort out. For a rebuttal, please see Roy Sebag's Instablog, Roy Sebag And Josh Crumb View On BullionVault.

Rebuttal Highlights

• BullionVault's net assets are comprised of intercompany loans (yes, there is money reported as loans moving back and forth between the company and the CEO at above market interest rates). This practice raises a fiduciary red-flag both for shareholders of the business, but also for customers because it introduces counterparty risk and undue reliance on one individual to the overall business. The balance sheet also includes a lot of outstanding short-duration lending facilities, adding more risk. In contrast, GoldMoney and BitGold are debt-free.
• BullionVault is an unregulated private company that operates in the UK, outside of the protections offered by the Financial Conduct Authority to customers of financial service companies. I am personally at a loss for words as to why the FCA or the Money Service Business regulators in the UK have not approached BullionVault requiring it to register as an E-Wallet or Money Service Business given the size and amount of customer holdings. When Josh and I founded BitGold, we spent nearly a year in an open dialogue with Canadian regulators, establishing a legal framework that would allow us to offer our service before proceeding with a plan of operation.
• BullionVault does not use an internationally recognized auditor and in contrast to GoldMoney, does not complete audits in accordance with ISAE standards. Its company accounts are prepared by a little known firm in Southwest England (Albert Goodman) publicly available as required under UK law, and not a voluntary disclosure purporting to offer governance. Put differently, BullionVault's financial statements add little to the governance of customer assets, and certainly cannot be compared to the quality and integrity of the audits made available by GoldMoney/BitGold.
• At BitGold, Josh and I take an annual salary of $1 and have personally invested over $3 million throughout the years in building the business. We don't need an annual salary, let alone "double dip" by also lending money back to the company [as does BullionVault].
• BullionVault has paid no significant dividends, while the company's CEO extracts via the company's loan arrangements favorable terms to the disadvantage of minority shareholders. Compare that to GoldMoney, which has paid out cash dividends democratically to all shareholders for several years highlighting owners income and free-cash-flow generation.
• The culture we are building at BitGold/GoldMoney is one that understands gold; we are passionate about the potential gold holds for people's savings.
• Our service at BitGold is significantly less expensive than BullionVault. They charge a minimum storage fee of $4 per month for gold and $8 for silver. That means if you own $1000 worth of each metal you are paying 4% and 9.6% per annum respectively just for storage! That same $1,000 worth of metal would carry no storage fees at BitGold and between 0.12%-0.39% fees through GoldMoney.
• The saddest part about the negative energy that BullionVault and others have instigated is that we should all be working together, not against each other. Gold still represents a tiny fraction of global financial assets. Together, BullionVault and BitGold/GoldMoney account for less than .00001% of the world's financial assets. The market is massive and BullionVault should be focused on expanding the category as we are doing each day. BullionVault's CEO should focus on building his business and serving his customers, not attacking a new generation of entrepreneurs trying to broaden access to gold.

Additional Points

I am aware of two additional points not directly mentioned in Sebag's rebuttal:

1. Last week, the combined companies raised an additional $21 million in cash bringing their combined cash position to nearly $40 million. This is impressive given the overall state of the gold market and indicates the principals support from institutional investors. 
2. BullionVault is unregulated and does not have an ISAE Audit by a Big Four Acounting Firm. GoldMoney is regulated by the JFSC and maintains an ISAE Audit by Delloitte. 

After reading the rebuttal and talking with Roy Sebag on numerous occasions, I firmly believe it is not GoldMoney/BitGold that has issues, but rather GoldMoney/BitGold competitors.

Free Conversion!

GoldMoney now offers free conversion from any other platform such as Perth, BullionVault, even GLD. GoldMoney will pay any associated friction costs (sell-buy costs, etc.) to complete the transaction.

To discuss this offer with GoldMoney, please email Transfers @ GoldMoney.Com (removing the spaces before and after the @ symbol).

On most browsers this link will automatically open up your email client application: Email Goldmoney Regarding Transfers to GoldMoney

Gold is Money

I still view gold as money. Widespread acceptance of a BitGold card will go a long ways towards alleviating any doubts and disagreements some have over this issue.

My intent is not to use BitGold for major purposes as I believe gold is to be accumulated over time, and a core position held at all times. Yet, I do intend to use the card occasionally as I want to encourage merchants to accept the idea that gold is money. Once merchants become convinced that the price of gold has bottomed, many will choose to hold a percentage of their profits in gold.

Moreover, merchants will like the idea because BitGold does not have processing fees. It does have fees for exchange to other currencies, but those fees are lower than normal processing fees.

This is a win-win situation for all involved.

Disclosure

In the sake of full disclosure, I have a relationship with GoldMoney that continues, and a new one with BitGold.

Yet, and as I have stated on many occasions, my reputation is very important to me. I do not enter relationships easily. If I genuinely thought there were major issues with GoldMoney or BitGold, my relationship with them would be over.

Instead, I have taken the time to research this matter thoroughly, and have concluded the GoldMoney/BitGold deal is a good one for the industry, for merchants, and individuals alike.

Want to promote gold as money? Then please Sign Up for your BitGold Account today!

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Greece Bank Deposits Drop to 11-Year Low; Creditors Offer 6 Month's Financing; Round One of Saga Nearly Over

Delay Game

If anyone has blinked, it now appears to be Germany and France, rather than Greece. The latest proposal does not include any new money, but it will free up enough cash until December. The game today is to continue the talks forever, or until Greece finally says OK.

It is already a couple days past midnight, and the creditors, despite the harsh talk from Germany, seem to be the ones who really want a deal.

Financing Dangle

Please consider Merkel, Hollande Dangle Financing Before Greece's Tsipras.

The leaders of Germany and France offered to release billions in frozen aid on Friday in a last-minute push to talk Greek Prime Minister Alexis Tsipras into contentious pension reforms in exchange for filling Athens' empty coffers until November.

The leftist premier's response, according to a Greek official, was that he could not understand why his country's creditors were seeking to impose such harsh conditions in return for money to avert imminent default and damage to the euro zone.

The creditors laid out terms in a document that went to Greece on Thursday and was seen by Reuters on Friday. It said Greece could have 15.5 billion euros in EU and IMF funding in four installments to see it through to the end of November, including 1.8 billion euros by Tuesday as soon as the Athens parliament approved the plan.

The total is slightly more than Greece needs to service its debts over the next six months but contains no new money.

"PLAN B"

If Greece refuses, the ministers will move on to discussing a "Plan B" on preparing to limit the damage from a Greek default to Greek banks and other euro zone countries and markets, the official said.

However, Merkel and Hollande have refused to talk publicly about a "Plan B", saying their efforts are focused on getting an agreement to keep Greece in the euro zone.

Greece Says No

The Financial Times reports Greece Refuses to Abandon Tax and Pension Plans

Greece is refusing to abandon its tax and pension plans despite the strong objections of its creditors to the proposals, in a sign of the gulf remaining between the two sides on the terms of a bailout deal.

According to its latest counterproposals to its creditors, Athens is sticking to its demand for a one-off 12 per cent tax on all corporate profits above €500,000 and a rise in employee pension contributions. Bailout monitors believe the plans would crimp economic growth and in their own final offer earlier insisted on alternative savings measures.

The stark differences in the two proposals come amid mounting evidence that several European leaders are preparing for the prospect that no deal will be reached at a make-or-break meeting of eurozone finance ministers on Saturday.

According to EU officials, Mark Rutte, the Dutch prime minister, told his fellow leaders at an EU summit on Thursday night that they may need to reconvene to discuss Greece — not to negotiate, he said, but to deal with the fallout from a Greek default.

Deposits Drop to Eleven-Year Low

Bloomberg reports Greek Bank Deposits Fall to Eleven-Year Low.

Official data from the Bank of Greece today showed deposits fell €3.8 billion to €129.9 billion at the end of last month, marking a 21 percent plunge since November. That was just before then-Prime Minister Antonis Samaras brought forward a vote for a new president that led to his government's downfall.

With Greece's continued presence in the euro hanging in the balance, and the threat of capital controls looming if Prime Minister Alexis Tsipras fails to reach a bailout deal with creditors, the outflow has continued in June.

Greek Bank Deposits



That's capital flight in a simple picture. It will continue as long as the ECB provides Emergency Liquidity Assistance (ELA).

I suspect ELA ends tomorrow or Monday.

Round One of Saga Nearly Over

Default is just round one. In spite of the Troika threatening to expel Greece from the eurozone and EU, the "damage control" operation starts as soon as default occurs.

Neither side wants Grexit, so expect prolonged wrangling as to how to make that happen.

Of course, Greece could just say to hell with it all right now, and be done with it. I actually suspect something in the middle.

The key to how this plays out following default is Russia. Greece holds a big trump card. It can end sanctions on Russia as soon as December.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com  

Consumers Come to Life in May

Consumer Spending, Income Surge in May

Consumers came to life in May, as expected by the Bloomberg Econoday Consensus Estimate.



Autos, Gasoline Lead the Way

Reports on personal income, consumer spending, PCE, and core PCE come out today. Economists got all of them correct, actually being a bit pessimistic on spending. Once again though, autos lead the way.

The consumer came to life in May, boosted by a 0.5 percent rise in personal income and helping to support a 0.9 percent surge in personal outlays that reflects heavy spending on autos and retail goods. And gains are not inflationary, at least yet, based on the very closely watched core PCE price index which edged only 0.1 tenth higher in May and is at a very benign 1.2 percent year-on-year rate which is actually down a tenth from an upward revised April.

Components on the income side are very solid with wages & salaries up 0.5 percent in the month. Both proprietors' income and rental income show especially strong gains. Spending components show special strength for durables, again tied especially to autos, and also strong gains for non-durables, here tied to higher pump prices. Spending on services once again shows an incremental gain.

Turning back to PCE prices, the overall price index looks a little hot in May at plus 0.3 percent but the year-on-year rate is unchanged at only 0.1 percent. That's right, that's the year-on-year rate at only the most incremental level of inflation. And the 1.2 percent year-on-year core appears to be moving in reverse, down 1 tenth in each of the last two reports and further away from the Fed's 2 percent target.

Consumers, in an expression of their confidence, dipped into their savings to spend, with the savings rate down 3 tenths to 5.1 percent. This is a good report for the bulls, showing a strong non-inflationary bounce for the second quarter. This report won't be keeping the doves up at night and does not move forward the Fed's coming rate hike.

For those who wish to view the actual report, here is a link to the BEA news release on Personal Income and Outlays for May 2015.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com 

Creditors Issue "Final" Ultimatum; ECB Keeps ELA Lifeline, Bundesbank Protests

Air of Finality?

I cannot possibly count the number of "final" offers nor count how many times the clock hit midnight only to have it move back to 11:58 PM.

Today, however, there finally appears to be an air of finality. We will see soon enough.

Ultimatum From Creditors

The Financial Times reports Creditors Issue Ultimatum to Greece

Greece’s creditors have presented Athens with a last-ditch offer for a deal to unlock €7.2bn in desperately needed rescue aid after marathon talks failed to narrow the differences between the two sides.

Bailout monitors presented their final offer — with terms much closer to those demanded from Athens earlier this month — after Greek prime minister Alexis Tsipras failed to meet an earlier deadline to come up with acceptable concessions of his own.

Arriving for the meeting, German finance minister Wolfgang Schäuble, was gloomy about the prospects for a deal. He said there had been “not much progress” and a “big difference” remained between Greece and its creditors. It was up to the Greeks to move, he warned.

“The Greeks didn’t move at all,” said one senior official of the talks on Wednesday and earlier Thursday between Mr Tsipras and the heads of the European Commission, International Monetary Fund and European Central Bank.

“The level of frustration is so high. I don’t see a deal,” the official added. “It’s looking pretty grim right now.”

ECB Keeps ELA Lifeline, Bundesbank Protests

Reuters reports ECB Holds Athens Lifeline Unchanged as Bundesbank Protests.

The European Central Bank held a crucial cash lifeline for Greece unchanged on Thursday, a person familiar with the discussion said, as the head of the Bundesbank objected to the way Greek banks are being funded.

ECB policy-setters held the limit on their emergency funding for the banks steady for the second day running, a source familiar with their talks said, having previously increased it steadily over many weeks.

Greece's central bank may not have asked for an increase, though the country's lenders have seen their reserves dwindle daily as savers spooked by the prospect of default continue to withdraw cash. It is not clear how much longer they can cope without further hikes in such funding back-up.

It comes as Bundesbank President Jens Weidmann gave his strongest criticism yet of the use of emergency credit to prop up Greece's banks. Weidmann said those banks should not continue to buy the short-term debt of their government.

"The Eurosystem must not provide bridge financing to Greece even in anticipation of later disbursements," said Weidmann, who also sits on the European Central Bank's Governing Council, which approves such funding - dubbed Emergency Liquidity Assistance (ELA) - to Greece.

"When banks without access to the markets buy debt of a sovereign which is likewise locked out of the market, taking recourse to ELA raises serious monetary financing concerns," he said at a conference in Frankfurt.

As president of the Bundesbank, Weidmann also sits on the ECB's Governing Council, which holds daily phone calls to discuss the extension of ELA. This group can restrict such funding if a two-thirds majority agrees.

What Does it Matter?

At this point it hardly matters whether the ECB keeps the ELA for another few days or not. Capital flight has been intensive for months on end. Withdrawals  have been about a billion euros a day so we are talking about another few billion euros or so, assuming of course, there really is a deadline to this ultimatum.

I suspect the ECB is still holding the lifeline so that the eurogroup finance ministers take the blame rather than the ECB.

The stalling tactics of Greece were impressive if this was the plan all along.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Driverless Car Attitudes: Who Wants Em? Societal Disruption Coming Over Robots?

In response to First Self-Driving Truck Hits the Road Already, Nevada License AU010 I received an email from reader Stephen who welcomes the day driverless cars take over.

Stephen writes ...

Hello Mish

I am looking forward to being to just sit in my car, and read or take a nap.  Then again I am 60. When I was a teenager I loved driving.

I liked the ability to get to where I wanted to go without having to get someone to take me. I also liked driving just for the fun of it.

In contrast, when I talk to my teenage nieces and nephews they are not as passionate about driving as I was when I was 15 and 16. They would rather be able to text or play a video game while the car is getting them there.

On the truck side I agree with you, but I see little written about the unloading and delivering part of the equation. Once the trunk arrives, it has to be unloaded.

Also, I recently I bought a washer and dryer.  The company delivered it to my house, unpacked it outside,  brought it inside, up to the 2nd floor, hooked it up.

What scares me about robotics in general is the trend leaves a significant portion of the population unemployed. If the economic underclass becomes too large, and I believe we are pretty close to that point right now, society may break down.

We need to find ways to evolve our education system and other social systems, to prepare everyone for jobs that require flexibility and thinking. Everything else will become automated.

Regards,

Stephen

Changing Attitudes

I too, liked to drive, and still do. But most if not all of my 60ish friends would just as soon not drive. Some won't drive at night because of night-vision problems. Others are nerve-wracked over traffic. Some others would rather read or relax.

The little association I have with millennials suggests they would rather text or watch a movie than drive. Heck, some I know will text someone in the next seat up in the bus rather than strike up a conversation, whereas I have sent less than 20 text messages in my entire life.

Anecdotes are not data, but it also appears to me that most aging boomers and millennials would in general be at least as happy not having to drive than to have to drive.

Last Mile

In regards to deliveries, I have written about the issue many times. It's the long-haul truck jobs that will vanish first. Local deliveries, especially those that involve heavy lifting will require a person. Eventually the driver will go away, even if the "lifter" stays.

Local delivery jobs will go to the young and the strong, not the skilled driver.

What Can Be Automated, Will Be

Steven is correct. What can be automated, will be automated. I have discussed this as well. It is one of the big problems the Fed faces. All of this technology is very deflationary. Yet the Fed wants to force prices up.

It's a very losing battle, as higher prices increase the desire of businesses to automate sooner rather than later. The cheap borrowing cost of money is an added incentive.

Not All Doom and Gloom

In spite of the above, it's not all doom and gloom on the jobs front. I am sure there will be another technology or energy breakthrough that will create jobs.

Throughout history, that has always been the case.

Horses gave way to cars, hand picking cotton to the cotton gin, candles to electricity, passenger trains to planes, etc. The internet created tens of millions of jobs.

My fear is not that all jobs will vanish, but rather there is a major war over energy, jobs, or protectionist meddling before we get to that point.

Fuel for Societal Disruption

Central banks and their inane war on CPI deflation, untenable student debt, massive pension issues as boomers head to retirement, and rising income inequality (for which the Fed is also to blame), and increasing use of robots (before the next job wave begins) provide fuel for societal disruption.

Warmongers in Congress itching for a military showdown with Russia and protectionists seeking a trade war with China could indeed provide the match.

On the warmongering front, also consider Warmongering Jackass Proposes Forced Servitude by Millennial to Fight Isis.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Germany Rejects Greek Offer; Syriza Mutiny Over Concessions

Déjà Vu All Over Again

With a hat tip to Yogi Berra, the setup in Greece today is a case of déjà vu all over again.

1. Prime Minister Alexis Tsipras' Syriza hardliners threaten mutiny because the party believes the prime minister made too many concessions.
2. Meanwhile, the IMF does not like the Greek proposal because it is too dependent on tax hikes instead of spending cuts.
3. Germany rejects the proposal outright.

Syriza Mutiny Over Concessions

The Financial Times reports Greece Under Pressure to Build Support.

Greece’s parliament will have only a few days to pass all the economic reforms pledged by Athens to unlock desperately needed bailout aid, putting intense pressure on Prime Minister Alexis Tsipras to build domestic political support for the concessions.

Berlin has insisted on full and immediate legislative approval of measures that may be agreed at a meeting of eurozone finance ministers on Wednesday evening, even though officials now concede a deal may come too late for Athens to meet a €1.5bn debt repayment to the International Monetary Fund due on June 30.

Greek authorities have begun preparations for a hasty and potentially rancorous parliamentary debate over the weekend amid growing signs that Mr Tsipras’s new reform plan — which would be presented to eurozone leaders on Thursday — faces fierce resistance in Greece.

A handful of more radical members of Mr Tsipras’ governing Syriza party have already vowed to mutiny over the proposals, and thousands of pensioners took to the streets of Athens on Tuesday evening to decry the plans.

Officials representing the creditors said in Brussels on Tuesday that a deal before Wednesday’s finance ministers meeting was still far from assured. The IMF has raised concerns that Greece’s proposal relies too heavily on new taxes on labour and capital, rather than on cuts in government spending. One official involved in the negotiations on Tuesday with Athens described the talks as an “uphill” struggle.

Emmanuel Macron, the French economy minister, said on Wednesday that he supported the IMF’s tough stance. “The IMF is exercising its right and is right to be demanding of Greece,” he told CNN.

Breakthrough Far Off as Deal Terms Rejected

Bloomberg reports Germany Says Greece Breakthrough Far Off as Deal Terms Rejected.

Germany downplayed the chances of an imminent deal with Greece as Prime Minister Alexis Tsipras’s government rejected the latest terms set by creditors to unlock bailout aid.

The downbeat tone from Berlin reinforced the brinkmanship at play as Tsipras met in Brussels Wednesday with the heads of the three creditor institutions: International Monetary Fund Managing Director Christine Lagarde, European Commission President Jean-Claude Juncker and European Central Bank President Mario Draghi.

“Our impression is that there’s still a long way to go,” German Finance Ministry spokesman Martin Jaeger told reporters at a regular government press briefing in Berlin. Creditor institutions have made “exceptionally generous” concessions to the Greek government, and “it’s now up to the Greek side to show some movement,” he said.

It's time for the adults in the room (are there any?) to simply admit the obvious: even if there is another deal, it cannot possibly hold.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Greetings from Beautiful Iceland

Greetings from beautiful Iceland!

Liz and I are taking 17 days to circle the ring road. We are also taking many side excursions. This is day 6 of 17. We are currently in Borgarfjordur Eystri in the East section of Iceland.

I have some phenomenal images to share, but currently they are in "raw" format. I will post some after we return.

Google Ads Follow You Wherever You Go

Google knows we golf. This ad popped up just now while writing this post. 



Here is another ad I captured.



The above ad extols the virtues of duty free shopping.

I Will Follow Him

In honor of Google knowing who you are, what you do, and where you are every moment of your "connected" life, I offer the following musical tribute.



Link if video does not play: I Will Follow Him, a number one hit form 1963 by Little Peggy March.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Durable Goods Orders Plunge in May, Huge Downward Revisions in April

In the durable goods May forecast, the Bloomberg Consensus Economist's Estimate was well off the mark.

The consensus estimate was -0.6% with the actual number a dismal -1.8%, but heavily skewed by a drop in aircraft orders.



The economists had the negative sign correct, but given the huge downward revision from -0.5% to -1.5% for April, they really missed the mark by a mile.

Big downward revisions to April data almost sink the latest durable goods report where, however, important details show some life. Total orders sank 1.8 percent in May but this is badly skewed by a 49 percent drop in aircraft orders where outsized month-to-month swings are the norm. The April revision is the big surprise here, now at minus 1.5 from an initial minus 0.5 percent in an unwelcome reminder of how volatile this series is.

Stripping out transportation, which is where aircraft is tracked, shows strength in the month at plus 0.5 percent which hits the Econoday consensus. But here again, the April revision swings in and takes an initial 0.5 percent gain to minus 0.3 percent.

The key area, however, that remains on the positive side is capital goods where new orders excluding aircraft rose 0.4 percent in May vs a 0.3 percent slip in April which was initially posted at plus 1.0 percent. Shipments for this reading, in what is a plus for second-quarter GDP, show back-to-back gains of 0.3 percent.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Two Minutes After Midnight, Still No Pumpkins; Schäuble Seeks Capital Controls; Sisyphus

Early this morning, we saw reports of a last minute deal offer by Greece. That was followed by a Financial Times headline that read "Hopes Fade of Breakthrough Greece Deal".

The exact same link now displays this headline: Greek Concessions Keep Hopes of Bailout Deal Alive.

Greece on Monday kept alive hopes of an eleventh-hour deal with creditors to avoid default after Athens presented its first substantial concessions in months of fruitless negotiations.

Donald Tusk, president of the European Council, said Athens had produced “its first real proposals in many weeks”.

Jeroen Dijsselbloem, who heads the eurogroup of eurozone finance ministers, called the new Greek proposal “a positive step”.

Markets soared amid rising hopes of a breakthrough. The main Athens stock index closed up 9 per cent and bank shares surged more than 20 per cent.

Jean-Claude Juncker, the European Commission president, said finance ministers would be called back on Wednesday in an effort to finalise an agreement, and two Greek ministers will remain in Brussels to negotiate with creditors.

Some eurozone members remain deeply sceptical of the chances for a deal. According to three officials, finance ministers had an intense discussion about whether capital controls should be imposed in Greece.

Germany’s Wolfgang Schäuble and Michael Noonan, his Irish counterpart, pushed for curbs on emergency liquidity for Greek banks unless capital controls were imposed, one of the officials said.

At the evening summit of eurozone leaders, offcials said Mr Tsipras acknowledged he had lost the trust of many leaders in the room and tried to rebuild confidence by outlining the breadth of concessions he had made.

Mr Tsipras also raised the issue of debt relief during the session, something he has insisted on as a necessity to get support for a refom programme at home. Officials said he was told by other leaders that the issue could not be part of the current deal, but there was willingness to discuss it as part of future negotiations.

Angela Merkel, German chancellor, said at a post-summit press conference that she was open to considering debt relief — but only after the current negotiations over economic reforms were completed first.

After Midnight

Here we go again. It is easily after midnight, for the nth time. Yet, no matter what happens, the clock instantly reverts to 11:58.

Watching action in Greece is like watching Sisyphus roll a ball up a hill.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

The Most Common Job in 29 States to Nearly Vanish in 10 Years; Know What That Job Is?

The NPR claims the most common job in 29 of 50 US states is truck driving. This seems a bit overboard, and depends on how jobs are categorized, but here is the chart.



The above chart from NPR "Planet Money" report that says ...

We used data from the Census Bureau, which has two catch-all categories: "managers not elsewhere classified" and "salespersons not elsewhere classified." Because those categories are broad and vague to the point of meaninglessness, we excluded them from our map.

Self-Driving Trucks Will Hit Us Like Ton of Bricks

Please consider Self-Driving Trucks Are Going to Hit Us Like a Human-Driven Truck.

It should be clear at a glance just how dependent the American economy is on truck drivers. According to the American Trucker Association, there are 3.5 million professional truck drivers in the US, and an additional 5.2 million people employed within the truck-driving industry who don’t drive the trucks. That’s 8.7 million trucking-related jobs.

One further important detail to consider is that truck drivers are well-paid. They provide a middle class income of about $40,000 per year. That’s a higher income than just about half (46%) of all tax filers, including those of married households. They are also greatly comprised by those without college educations. Truck driving is just about the last job in the country to provide a solid middle class salary without requiring a post-secondary degree. Truckers are essentially the last remnant of an increasingly impoverished population once gainfully employed in manufacturing before those middle income jobs were mostly all shipped overseas.

Short-Term Job Outlook of the American Trucker

The trucking industry expects to see 21% more truck driving jobs by 2020. They also expect to see an increasing shortfall in drivers, with over 100,000 jobs open and unable to find drivers to fill them. Higher demand than supply of truckers also points to higher pay, so for at least the next five years, the future is looking great for truck drivers. The only thing that could put a damper on this would be if the demand for truck drivers were to say… drive off a sharp cliff.

That cliff is the self-driving truck. So when will the process end? When will self-driving cars conquer our roads?

Adoption Timeline



According to Morgan Stanley, complete autonomous capability will be here by 2022, followed by massive market penetration by 2026 and the cars we know and love today then entirely extinct in another 20 years thereafter.

Other Estimates

• Navigant Research: “By 2035, sales of autonomous vehicles will reach 95.4 million annually, representing 75% of all light-duty vehicle sales.”
• IHS Automotive: “There should be nearly 54 million self-driving cars in use globally by 2035.”
• ABI Research: “Half of new vehicles shipping in North America to have driverless, robotic capabilities by 2032.”
• Nissan: “In 2020 we’re talking more autonomous drive capability. It’s going to be an evolutionary process and 2020 will be the first year to truly see some of these capabilities start to be introduced in the vehicle.”

I think the the timeline is off a bit in two ways.

1. Technology change and adoption are happening at a breath-taking pace. Penetration will happen faster than most of the estimates above suggest.
2. Truck hauling jobs will vanish faster than inner-city truck driving jobs. 

At $40,000 a year, the incentive to replace truck drivers with software is massive. And it will happen. Not only that, but insurance costs will drop. Most truck accidents are caused by user error: Driving too fast, driving while tired, driving intoxicated, etc.

Robots don't drink, don't get tired, won't drive unsafe to get to a destination faster, etc. My initial vision is that drivers may still be needed for inner-city driving (at least initially), but most long-haul operations will quickly vanish as soon as licensing is complete in most of the states.

What About Taxis, Uber?

Taxi and limo driving jobs will also vanish.

Travis Kalanick, the CEO and founder of Uber, said at a conference last year that he’d replace human Uber drivers with a fleet of self-driving cars in a second. “You’re not just paying for the car — you’re paying for the other dude in the car,” he said. “When there’s no other dude in the car, the cost of taking an Uber anywhere becomes cheaper than owning a vehicle.” That, he said, will “bring the cost below the cost of ownership for everybody, and then car ownership goes away.”

People keep emailing me about insurance. Many believe the cost of insurance will skyrocket. I believe accident rates will plunge, and insurance costs with it.

So what happens to a lot of insurance salesmen? Claims investigators?

As for car ownership, those who live in cities and seldom leave their city will have a huge incentive to dump their car. That too is a massive disruption.

Think of the manufacturing jobs that will vanish. Then again, cars will be nearly entirely robot-made, so those jobs will have already vanished.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Goodbye Kiss Today?

Parties on both sides still talk as if a deal over Greece is possible, but how realistic is that? And yesterday, the ECB voted to continue ELA, but did so with an amount less than Greece requested.

Last Minute Phone Talks

This morning, Reuters reported EU's Juncker, Greek PM Tspiras Hold Telephone Talks.

European Commission President Jean-Claude Juncker spoke to Greek Prime Minister Alexis Tsipras on Saturday and will speak again on Sunday to seek a solution to Athens' debt crisis, an EU official said on condition of anonymity.

Over the weekend, senior officials have remained in close contact ahead of a meeting of finance ministers and euro zone leaders scheduled for Monday, the official said.

Tomorrow, eurozone officials hold an emergency meeting to discuss Greece. However, France and Germany Insist Greece Needs to Table Offer Today.

France and Germany have told Greece it must have an agreement on economic reform measures with the trio of bailout monitors finalised and delivered before a crucial leaders’ summit between Athens and its creditors on Monday.

With the Greek cabinet meeting on Sunday to consider compromise proposals, François Hollande and Angela Merkel both telephoned Alexis Tsipras, the prime minister, to remind him that he needed a “staff level” agreement with the European Commission, IMF and ECB ahead of the summit.

If a deal is reached, the two leaders said the summit could start talking about the Greek debt and a third bailout. France is open to discussing debt relief and restructuring, Mr Hollande told Mr Tsipras, whose radical leftwing government won office in January setting Greece on a collision course with its creditors.

The Greek cabinet was summoned to a meeting at Mr Tsipras’ Maximos Mansion residence on Sunday morning for a last-ditch meeting to hash out the government’s strategy.

Ministers are expected to discuss how Mr Tsipras can bridge his two seemingly intractable electoral mandates: to end austerity and block further cuts in spending while also satisfying creditors’ demands for reform to keep Greece in the eurozone.

Yanis Varoufakis, Greece’s finance minister, writing in German daily Frankfurter Allgemeine Zeitung, has said German chancellor Angela Merkel faces “a stark choice” ahead of the crucial summit of European leaders in Brussels on Monday.

Ms Merkel could enter into “an honourable agreement with a government that opposes bailouts” and wants “a negotiated solution that ends the Greek crisis once and for all”. The second option was to “heed the sirens” from her government, which he said were “encouraging her to jettison the only Greek government that is principled and which can carry the Greek people along the path of genuine reform.”

Mr Varoufakis said the Greek government would come to Brussels on Monday willing to compromise. but it would only compromise as long as the Syriza-led government was not asked to take on new loans “under conditions that offer little hope that Greece can pay back its debts”.

“The choice, I am very much afraid, is hers,” he said.

In a sign of the growing anxiety in Greece, savers withdrew more than €1.6bn in deposits on Friday, according to two banking sources, the largest withdrawal in one day since Greece’s left-wing government took office in January. More than €6bn have left the system this week, and bankers fear the withdrawals could speed up when the banks reopen on Monday.

Syriza supporters will rally in front of Parliament on Sunday evening to urge the government not to give in to creditors’ demands.

By stating willingness to discuss debt relief and restructuring, while Greece offered little, it should be clear which side is willing to bend more. However, Merkel's hands may be politically tied. A majority of Germans now favor Greece leaving the eurozone.

Those still expecting Merkel to cave may be in for shock therapy tomorrow.

It is Yanis Varoufakis, Greece’s finance minister, who signaled goodbye intentions stating Greece would not take on more debt, with both France and Germany talking about a third bailout.

This dance has gone on far too long already. A goodbye kiss is long overdue.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Warmongering Jackass Proposes Forced Servitude by Millennial to Fight Isis

National Journal writer and senior political columnist Ron Fournier is calling for "shared sacrifice" to fight ISIS.

His odd definition of "shared sacrifice" is forced conscription for all 18- to 28-year-olds.

Please consider How to Defeat ISIS With Millennial Spirit and Service.

"I know a better way to fight ISIS. It starts with an idea that should appeal the better angels of both hawks and doves: National service for all 18- to 28-year-olds," says Fournier.

Fournier is not only a "warmongering jackass", but a moron as well if he believes his idea can appeal to doves.

He says he has a better idea. Actually, I do. Send Fournier and all the other jackasses who believe in forced servitude to fight Isis.

The way to perpetual war is forced servitude and attitudes of those like Fournier. We rightfully got rid of servitude, so let's not bring it back.

You can send a protest email to Fournier here: rfournier@nationaljournal.com.

On most browsers, this link opens up your email server automatically: Email Ron Fournier

The gall of this moronic jackass is stunning. My friend Pater Tenebrarum at the Acting Man blog pinged me with this comment just a bit ago: "Oh my god, what a creepy statist slave-driver this guy is."

When I asked Pater if I could post his comment, he replied "Please quote in capital letters!"

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Euroskeptics Poised to Form Government in Denmark, Seek Alliance and Rules Changes with Cameron

Anti-euro parties are on a roll. In a shocking election result in Denmark, Eurosceptic Danish People’s Party Surge in General Election.

The eurosceptic Danish People’s Party could become the largest party in a new right-wing government in a shock result that brings David Cameron a powerful new ally in his bid for EU renegotiations.

The anti-immigrant party took 21.1 percent of the votes, jumping past their Liberal allies to become Denmark’s second biggest party.

With 99 percent of votes counted, Denmark's national broadcasters DR and TV2 projected opposition leader Lars Loekke Rasmussen's bloc would get more than the 90 seats needed to secure a majority in the 179-seat legislature.

"It is completely unreal," said Kristian Thulesen Dahl, the Danish People’s Party (DPP) leader, as he congratulated his party, but he gave no hints even on whether his party wanted to join a ruling Right-wing coalition let alone lead it.

“It’s an astonishing result,” said Ian Manners, a British politics professor at the University of Copenhagen. 

Right-Wing Eurosceptics Look Set to Form a New Government

In the wake of the election, The Independent reports Right-Wing Eurosceptics Look Set to Form a New Government.

Euroskeptic Party Wins Danish Elections

Strator explains things a little better with its analysis: Euroskeptic Party Wins Danish Elections.

The results are in following Denmark's elections, and the Euroskeptic and anti-immigration Danish People's Party (DPP) has won with 21.1 percent of the vote. Denmark's voting system is based on groupings of parties, called voting blocs. To form a government, an individual party's bloc must win an overall majority. This system worked against the Social Democratic Party, the lead party of the incumbent center-left coalition. Although it received 26.3 percent of the vote, its left-wing "red bloc" did not perform as well as the right-wing "blue bloc," in which the DPP is the highest placed.

However the DPP chooses to interact with the government, the party's influence will be significant — and its increased role will impact wider European trends. Recently re-elected British Prime Minister David Cameron is renegotiating the United Kingdom's relationship with Europe and will hold a public "in-out" referendum before the end of 2017. The DPP is part of the same European Conservatives and Reformists Group as Cameron's Tories in the European Parliament and is equally concerned about the erosion of national sovereignty in Europe and perceived high levels of immigration. European Parliament member and DPP vice-chair Morten Messerschmidt said the party's intention is to "make Denmark into Cameron's biggest ally." Indeed, even before the election, the DPP had managed to convince Venstre, which is nominally pro-Europe, to offer its support for Cameron's renegotiation if the blue bloc won. Once the new government takes power, the United Kingdom looks set to gain a firm ally.

The Alternative for Germany party, another member of the European Conservatives and Reformists, is well-positioned to taking advantage of German frustrations with the Greek debt situation. Although the party is currently beset with internal strife, if it emerges united it could also ally with the DPP and the Tories. Poland's Euroskeptic Law and Justice Party, also a member of the right-wing European Parliament group, won the country's presidential election last month and stands to perform strongly in general elections in October 2015. Although some of Cameron's immigration policies might be distasteful to the Polish people, a potential Law and Justice-led government in Warsaw would find common ground on reclaiming sovereignty from the European Union. With all of these likely supporters, Cameron's Conservatives and the DPP have the potential to form an alliance of Northern European parties dedicated to the repatriation of power to European countries.

Euroskeptics on the March

The Stratfor report is via email. I don't have a link for it yet.

Euroskeptic (some spell it Eurosceptic) parties are on the march in Denmark, Greece, France, Spain, Finland, and Poland. We may see renewed life from AfD in Germany.

A potentially huge victory party may be in the works in Spain, where anti-euro party Podemos is flirting with a lead in national elections later this year.

See Shifting Sentiment in Spain: 2011 vs. 2015; Could an Anti-Euro Party Win the 2015 Spanish National Election? for further discussion.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com 

ECB Unscheduled Conference Today; Emergency Eurozone Meeting Monday; ECB Ponders Shutting of ELA as Cash Withdrawals Accelerate

The mad dash and perhaps last dash for euros in Greece is on. Some will undoubtedly be frozen out as soon as the ECB halts emergency liquidity assistance (ELA) to Greek Banks.

Emergence Meeting Monday, Unscheduled ECB Conference Call Today

There's an Emergency Meeting of Eurozone Leader on Monday to discuss Greece, but the ECB may very well act in advance. Once ELA is removed, Greece will soon be forced to issue capital controls.

Greek banks have continued to suffer withdrawals amid concerns that Athens and its creditors will fail to strike a deal to avoid a debt default.

The eurozone’s top central bankers are set to decide in the next few hours whether to approve an increase in emergency loans to Greece’s banking system after talks on Thursday between finance ministers failed to strike an agreement to prevent the country from defaulting on its debts and potentially crashing out of the currency bloc.

Depositors pulled out more than €1bn on Thursday from the country’s four systemic banks, bringing the total for the week to €3bn - three times the average weekly amount over the past two months.

Greece has already seen more than €30bn of deposit flight this year in an orderly process under which depositors notify their bank of withdrawals and take the cash out 24 hours later.

The latest withdrawals came as eurozone leaders were summoned to an emergency summit on Monday in a last-ditch effort to prevent Greece from defaulting on its debts and potentially crashing out of the EU’s common currency.

The European Central Bank’s governing council will hold an unscheduled conference call on Friday where they will decide whether to allow a rise of around €3bn in Emergency Liquidity Assistance available from the Bank of Greece, the country’s central bank.

A two-thirds majority of voting members of the council would be needed to block the rise. The council, made up of the ECB’s top six officials and the governors of member states’ central banks, could also approve a smaller rise.

The request for an increase came from the Greek central bank on Thursday evening -- just a day after the ECB backed a €1.1bn rise in ELA that took the figure of emergency loans available to €84.1bn. Greek banks are thought to have around €95bn-worth of collateral that they can use in exchange for the loans under the current terms of the loans.

According to people briefed on eurozone planning, Greece’s central bank could request that Mr Tsipras legislate for capital controls if no agreement is reached at the Monday night summit, called for 7pm.

Question of Collateral

The ECB requires collateral in exchange for loans, but pray tell, how good is that collateral?

Capital controls actually violate EU rules, but that will not stop eurozone leaders from telling Greece to impose them.

My suggestion to Greece, and one that I already think is being acted on, is to wait until the ECB halts the ELA. At that point, Greece can and will blame the ECB for the controls.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Mish with Gordon Long: Video Interview on the Troubles in Illinois and Greece

A week ago, Gordon Long at Macro Analytics interviewed me for the third time on Financial Repression. Long made the interview available today.

The subject this time is Illinois pensions and turmoil in Greece.

I believe a minimum of seven Illinois cities are in serious and immediate trouble, unable to meet current obligations. Numerous others cities are in serious trouble over pensions eventually.

We also discussed Greece.

I stated, as I have on my blog, that it appears Greece is stringing the Troika along, purposely giving Greek citizens time to pull deposits.

Today we learned Tax Revenue Collapses in Greece; Government Denies Capital Controls; Citizens Pull €2bn in Three Days.



Link if video does not play: Mish Comes Out Swinging on State of Illinois, Public Pensions and Greece.

Previous Interviews with Gordon Long

• April 20, 2015: America's Pension Problem: Gordon Long Interview of Mish
• October 2, 2014: Financial Repression (and How to Defend Yourself From It)

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Tax Revenue Collapses in Greece; Government Denies Capital Controls; Citizens Pull €2bn in Three Days

Knowing that a default is now inevitable, Greek citizens made a decision to stop paying taxes. The result was foreseeable: Greek Government Suffers Collapse in Revenue in May.

The Greek government suffered a collapse in revenue in May after companies and individuals delayed filing tax returns amid fears that emergency levies were imminent in order to secure a deal with bailout creditors.

The news of the sharp drop in receipts comes as eurozone finance ministers held a crunch meeting to discuss the country’s bailout.

Greek government revenues in May were €900m, or 24 per cent, short of the monthly target, according to preliminary budget figures. It had met projections for the previous three months.

But Greece still ran a primary budget surplus — before making payments on the public debt — amounting to €1.5bn for the first five months after slashing payments to suppliers and outlays for public investment.

“There appears to be a complete freeze on domestic payments apart from wages and pensions as the government rounds up cash to pay international creditors,” a senior Athens banker said. “This is starting to have a knock-on effect on revenue collection.”

A government spokesman on Wednesday denied reports Greece was considering imposing capital controls, perhaps as early as next week.

Cash withdrawals from local banks have picked up pace, with almost €2bn pulled out in the past three days, the same banker said.

“This week’s gloomy scenarios have affected depositors . . . We are back where we were in January [when about €10bn left Greek banks],” he said.

Capital Controls?

On one hand, we have an official denial. Please recall the expression: "Never believe anything until it's officially denied".

On the other hand, it makes sense for Greece to allow citizens to pull cash as long as the ECB does not remove ELA.

Sooner or later, either the ECB or the Greek government will impose capital controls. I suspect it will be the ECB that forces the issue.

Meanwhile, my oft-repeated message takes on increased urgency: "Get your money out of Greek banks while you still can!"

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

CPI Jumps 0.4% on Gasoline Prices, Still Flat From Year Ago; Debt Deflation Dynamics

The headlines on today's CPI jump of 0.4% are all over the map. If you want a slant one way or another you can find it.

For example:

• Reuters says U.S. consumer prices post largest gain in more than two years.
• Bloomberg says U.S. Consumer Prices Fall Short of Expectations at 0.4%

In reality, this is pretty much an expected jump due to rising gasoline prices.

The above Bloomberg headline is all the more interesting because the Bloomberg Consensus Estimate was nearly spot on at 0.5%.



I have been mocking economists' estimates for most of the year, but it seems to me they got this one correct. The entire consensus range was reasonable for a change.

From Bloomberg Econoday:

Just about all the readings in the May consumer price report point to very soft price pressures with the overall monthly gain, at plus 0.4 percent, and the ex-food ex-gasoline core gain, at only plus 0.1 percent, at or near the low-end of the Econoday forecasts.

The 0.4 percent overall gain may look a bit high compared with prior months including April's 0.1 percent rise, but it reflects an unsurprising jump in energy costs specifically gasoline which jumped 10.4 percent in the month. But energy prices are still very low, confirmed by the year-on-year rates which for all energy products are down 16.3 percent and for gasoline, down 25.0 percent (no misprint).

But the look at the year-on-year rates shows one element of pressure, a plus 1.7 percent rate for the core. This is down from 1.8 percent in April but is still skating a bit close to the 2.0 percent hawk barrier at the Fed. The overall year-on-year rate, however, is as benign as can be at zero percent.

Components of note include a second month of declines for apparel, down 0.5 percent in May after falling 0.3 percent in April which is not good news for the nation's retailers. Education & communication also fell, down 0.1 percent. Showing pressure is a 2.7 percent rise for transportation that reflects a jump in airfares. This follows, however, a 0.3 percent dip in transportation for April. Food costs and housing costs show no increase in May.

The lack of pressure through most of this report gives the Fed plenty of waiting time before raising rates, especially given what have been even more benign rates in the more closely watched PCE index.

Year-Over-Year CPI



Debt Deflation Dynamics

Year-over-year prices are benign, but the CPI ignores asset inflation in stocks, land, homes, bonds, etc. On that basis, inflation is hardly benign.

Moreover health-care is hardly benign, and probably under-reported. Finally, one can and should question food substitution and other anomalies that suppress the stated rate.

The real problem though is asset inflation. When various bubbles pop, rate hikes by the Fed are going to come much slower than economists expect.

Even after the housing bust, few economists understand the dynamics of debt-deflation, bubbles popping, and the overall burden of debt itself.

Round after round of counterproductive QE created asset bubbles, but most economists (including the Fed) will not see the problem until those bubbles pop.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Fed Lift-Off or Crawl-Off?

Nothing much changed as a result of today's FOMC meeting. If you are having trouble falling to sleep, I have the cure. Read today's FOMC Statement as it's sure to do the trick.

The Financial Times reports Fed Sets Course for 2015 Rate Rise.

The Federal Reserve set course for an increase in short-term interest rates as soon as September, as it expressed cautious optimism about the US economy following a sharp slowdown that struck in the first quarter.

However interest-rate projections from the Federal Open Market Committee signalled that the pace of tightening will be gradual, as officials seek to quell fears of a spike in borrowing costs.

A chart of interest-rate predictions from Fed officials pointed to two increases later this year, but the committee appeared to be heavily divided over whether that many rises would be merited, with an increased number of policy makers advocating only one move.

The Fed is treading a precarious line as it attempts to signal a rate rise while damping the risk of a market tantrum that could derail global growth. Top officials have repeatedly insisted policy will only be tightened modestly, and today’s forecasts from officials put the longer-run rate at just 3.75 per cent.

Stanley Fischer, Fed vice-chairman, said this month that “lift-off” was the wrong word for rate rises when they came, insisting that the central bank would instead be “crawling” as it pursued incremental increases.

Even so, some analysts argue that any move this year would be premature and choke off the recovery. Among them is the International Monetary Fund, which recently made a prominent call for the Fed to wait until 2016. Some officials within the Federal Open Market Committee have also been voicing caution.

Lael Brainard, a Fed governor, this month said the recent economic weakness may not be transitory and that more optimistic growth predictions were underestimating the negative investment implications from the oil price drop and the hit to growth from the higher dollar.

Gradual Pace

The Wall Street Journal reports Fed Signals Rate Hikes at a Gradual Pace

The Federal Reserve signaled it was moving toward interest-rate increases later this year now that signs of a slowdown in economic activity are waning, but the path of rate increases could be less steep than officials anticipated.

The last time the Fed made such projections, its consensus appeared to be building around two rate increases this year. Fed officials also nudged down their rate projections for 2016 and 2017 by a quarter percentage point. The shifts suggested officials have become less certain about the longer-run vigor of the U.S. economy and its capacity to withstand much higher rates. Expansion of output is on track again in 2015 to undershoot the Fed’s expectations.

In a press conference following the meeting, Chairwoman Janet Yellen said the importance of the initial rate increase “should not be overstated.” She emphasized that even after the first move higher, the Fed’s policy will still be broadly accommodative.

Ms. Yellen added the committee will decide when to first raise the federal funds rate “on a meeting-by-meeting basis” depending on its assessment of “incoming economic information and its implications for the economic outlook.”

Crawl-Off Analysis

The Fed can and will do whatever it wants, within reason.

If the economy is muddling along with weak growth, and the Fed still wants to hike anyway, it can make up any statements about the economic data that it needs to justify its decision.

If the economy relapses at any point between now and the September 16-17 meeting, hikes will likely be put off.

Today's meeting and follow-up Yellen yap conference did not clarify anything.

I suggest December seems more likely than September unless data is strong between now and the September meeting. I am still not convinced there is a hike this year at all, but it does seem more likely than a month ago.

Dollar Not Impressed

The US dollar was clearly unimpressed with today's announcement. The US dollar index opened at 95.27, rose to 95.59, but now sits 94.46, down .80 on the day. Had the Fed signaled strong action, the dollar would have soared.

Key to Decision

The key to the September rate hike decision will likely be the next set of reports on retail spending, housing, and wages.

Fed Statements at the July 28-29 meeting will set the tone for September.

Statements at the October 27-28 meeting will set the tone for December.

Here is the FOMC Schedule for 2015.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com