DEBTOCRACY - GREEKS NEED A HERO, IS THERE ONE?

As we wait for a critical vote on austerity measures from Greece I wanted to share a few revelations I've had.  Before getting there, let me state emphatically that it doesn't matter if this 5 year austerity plan is approved, there will be another restructuring and another one and ultimately Greece will default on its creditors.  In addition, this same charade will be played out on the stage of each peripheral EU country for sometime. 

REVELATIONS

LACK OF CONTROL OF THE CONTROLLERS
A)  I have written several times and thought often more that Greeks brought this on themselves through over the top pensions and union handouts.  (They did, but I am realizing that the Greeks did in fact bring this on themselves because they did not have control over their corrupt leaders who made decisions to bury their country in debt and use the spoils to enrich political allies and powerful interests.)  (Sound familiar?)

DEFAULT ON YOUR PEOPLE OR DEFAULT ON THE BANKS
B)  Greece must choose default and essentially already has.  In life there are truly very few zero-sum games (fortunately!), but in this instance we have one.  At the present time by implementing austerity measures, Greek politicians have chosen to saddle their citizens with debt that is unpayable by any stretch of the imagination.  They have elected restrictions and tax increases and cuts that remove all doubt that they have defaulted on their citizens.  It is striking and mind blowing that a leader doesn't stand up and say no more!

FED'S POLICIES CREATE A GREEK SPRING....ERRR SUMMER?
C)  Oddly, the Fed's policies may cause yet another amazing uprising.  Think of the Fed as an extension or the same entity as the ECB or the IMF and World Bank.  These entities really are servant representatives of the largest of banks in the world.  Overtime these banks have extended loan upon loan to the Greeks and even helped them lie and hide financial truths in order to qualify for membership in the EU (Goldman Sachs).  Now that Greece has its back to the wall with an undeniable problem with unpayable debt, we may see the citizenry of Greece finally say, "enough is enough".  Can you imagine an entire nation facing hardships where the poorest of the poor cannot afford basic necessities and then our Fed is directly ramping up inflation globally?  While Tunisians, Egyptians, Libyans, and Syrians were trying to cast off the yokes of oppression in their Arab Spring, Greeks are looking to cast off the chains of economic oppression and slavery.

DEBTOCRACY
Please watch this video.  I understand that it is over an hour long, but I think your perspective will be changed by watching it.  In fact, I will go out on a limb and suggest that this is probably one of the best hours you can spend this year.  I am a pretty hard line conservative capitalistic guy, and this film was clearly made with a liberal point of view, but the truth is undeniable.  The leaders at the top of the global economic banking institutions are playing for keeps and willing to win at all costs.  This film shows the destruction that is caused by men in suits using corrupt local leaders to enrich the super rich.





REVELATIONS AND QUESTIONS - THEY NEED A HERO
There are so many powerful items in this film.

Can it be true that where ever the IMF has lent money, the life expectancy of the population declines?

"You can have freedom but no sovereignty."  Wow, that really is it isn't it.  When you owe so much you become so indebted to your masters that you essentially have been conquered with a bank ledger.  You are told how to spend your money, who to buy things from, and what you will be allowed to do for your people.  This is about control, power, and wealth.  The Fed, IMF, World Bank, and ECB have used Greece's desires and corruption against them to make them economic vassals.  Any real leader would have no choice but to cast off the chains of bondage.  Greek PM George Papandreou is clearly not the leader to stand for his people, do Greeks have a hero?

Oddly enough, if the Greeks resist they could make the global financial system shake if they have the courage to do what it right.

A WARNING FOR THE USA
When watching this movie constantly ask yourself if the US is any different?  How do we citizens express and exert control over our politicians and their spending?  What are we getting for our borrowing?  What power do we have to stop the borrowing of money and the subsequent allocations of the proceeds to giant corporations?  How can we even arrest the progress down this slippery slope when companies and paid lawyers write the laws our Congress passes?  Could we ever see Americans so frustrated and broken that they rise up like those in Ecuador or Argentina?  Are Americans just too fat and asleep to notice that we too are being shackled to unpayable obligations for the benefits of others?  Unfortunately I am pessimistic and scared of the answers we'd receive if we were brave enough to ask them.

GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.blogspot.com/

QE II AND OUR JUST REWARDS

I've noted several times over the last few months that although the program named QEII has a terminal date of 6/30/2011 we aren't likely to see the end of heroic measures to manipulate and game the free market system.  The Federal Reserve continues to highlight that they will continue to make purchases of bonds over the next year or so as maturing bonds roll off.

http://www.bloomberg.com/news/2011-06-27/fed-seen-buying-25-billion-a-month-in-treasuries-after-qe2-comes-to-end.html

Here is a choice quote from the article.

“I don’t think the Fed wants to remove accommodation in any way, shape or form,” said Matt Toms, the head of U.S. public fixed-income investments at Atlanta-based ING Investment Management, which oversees more than $500 billion. “It’s quite natural for them to reinvest cash,” he said. “That effectively maintains the accommodative stance.”

The Fed will continue their operations for a number of reasons.  First, they can't draw down liquidity in the system because much of the gains in asset values in stock markets and commodity markets come directly from the additional stimulative work the Fed has done.  By forcing Mom and Pop and institutions away from money markets and fixed income investments and into risky assets they have provided the feeling that things are getting back to normal.  Remember, if stock prices go up, the wealth effect kicks in and you and I get to spending right? 

Second, the Fed and Treasury are working in tandem to buy treasuries and mortgage backed assets because if they were not the buyer of last resort the USA couldn't not meet its debt and interest payments and continue the amazing pace of deficit spending and government growth.  There is no way the government could actually find enough buyers at these rates without the Fed and Treasury's influence in the bond market. 

Third, the activities the Fed will continue under this program gives them cover for operations overseas.  I hadn't really thought about this until today, but the massive size of the Fed's balance sheet and their constant work in markets gives them an incredible ability to run "black programs" elsewhere in world financial markets.  Think back to the 1980's when we heard of $200 hammers or $600 toilet seats, did those items really cost that much?  Clearly the answer is no, but the marked up tools and fixtures were ways of diverting excess money to other projects that were not approved and were funded by these creative financing methods.  In the same way, the Fed is working under its self-appointed power in QE I & II, but the sheer size of their work probably has allowed them to mask repos and swaps with foreign banks and countries that would raise concerns domestically.

In summary, the Fed is wrapping up QEII only to not wrap it up at all.  The USA cannot afford to allow a market with full price discovery because we would not see buyers at these treasury levels.  Buyers of treasuries today will lose significant amounts of money if interest rates rise even 1% on the 10 year.  Given those pricing dynamics, I wonder who is stupid enough to buy all of those new 10 years bonds?  If your answer was the Fed you'd probably be correct.  Welcome to massive losses Mr. Taxpayer, this is your reward for failure to rein in the Federal Reserve. 

GOATMUG

Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at http://www.goatmug.blogspot.com/