GOATMUG GOES DOCUMENTARY CRAZY - (ANTI-GLOBALIZATION CINEMA!)

THE TAKE
Please view the following 2004 documentary on Argentina called, The Take.  The player is set to show 9 segments which is a pain if you actually have time to watch all 1 1/2 of it, but if you need to break it up it helps.  Once the first segment is finished it will give you a choice of segments below and they are labeled 1/9 or 2/9 etc, simply click the next one and it will get started.

The Take gives us a view the issues of what countries like Greece and Portugal will face with IMF and World Bank "help".  As I wondered in a recent post, GREECE NEEDS A HERO, when will Greece follow the Argentine model of deposing Presidents by booting their Prime Ministers?  When will they find a leader that chooses their people over the banks?  These situations are dangerous because you'll end up taking whoever says the right things without truly understanding who they are and ensuring their desires are genuine.

Again, I'm not suggesting that the Greek people are not at fault in this crisis of their own making, but I can tell you that there is no neo-math or old math or any calculation possible that will create a scenario where Greece will be able to cut its debts and repay its obligations.  They are at the point where creditors must take lumps right along with the citizens that are facing austerity measures.  The ECB, IMF, and World Bank have given a diagnosis and prescription that does not include any skin in the game for the financiers of this ponzi-scheme.  Haircuts are in order and they must take losses in any well designed and lasting workout. 

Obviously these bankers do not want the appropriate resolution because those remedies would immediately be sought by Italy, Spain, Ireland, Portugal, and so on.  Also, the "writedown" solution would probably end up destroying the Euro-system.  This is why the architects would rather induce never-ending unworkable pain for countries like Greece rather than finding a real path out of this mess.

I've watched 1/2 of this program and thought it was worthwhile.  Obviously I don't agree with everything presented here, but we don't live in a world where corporations can act without care or concern for employees.  Corporations should have flexibility and mobility, but they also have obligations that may be financial and are absolutely moral.  Please leave your comments I'd love to read them.  I will make a brief post after I've finished watching all of the segments.

GOATMUG

WHAT DO BOXERS AND QUANTITATIVE EASING HAVE IN COMMON?

QE II IS DEAD!?
June 30th has come at last and that means an end of additional capital injections by the Fed.  What the discontinuation of quantitative easing measures means is that the Federal Reserve will no longer add additional capital to the liquidity of the global monetary system, although we have been put on notice that the current level of capital will stay there. This means that as treasuries and other assets mature and are repaid, the Federal Reserve will take those proceeds and reinvest them in other bonds, it is important to point out that there won't be new money coming on line under this program. 

IS THE PROPELLANT GONE? 

Bears argue that the economy and markets are simply being fueled by these overt actions by the Federal Reserve to "goose" the system, and without new rocket propellant to move the market higher and higher, we'll see a collapse without the stimulus for higher stock and asset prices.  We don't know if that is truly the case, but we do know that the Federal Reserve is stuck in a box of its own making.  They have created a "liquidity bubble" that has elevated the price of financial assets and hard assets like commodities near two year highs.  The Fed has also forced treasury rates to historic lows.  Time will tell if these levels can hold.

Beyond asset pricing, QEII serves another purpose.  QE II serves as a way for the US government to manage its interest cost.  By selectively purchasing bonds in the open market the Fed manipulates the overall pricing of bonds to keep interest rates low.  Without QE II in place, what will happen to interest rates?  Look at how TLT (20 Yr Treasury) has performed over the last couple of days in anticipation of lower bond prices. 

TLT (100 Day)

WHAT DO BOXERS AND QUANTITATIVE EASING HAVE IN COMMON?
I grew up in the great days of boxing in the mid 70's and early 80's.  Some of my most memorable childhood memories involved watching boxing with my Step-Father.  I recall going to see many local boxing matches which included Olympian superstars.  Remember Sugar Ray Leonard, Marvin Haggler, and Larry Holmes?  These were greats that I grew up watching.  After years of being a boxing fan, one thing is clear, boxers never really retire.  If the paycheck is large enough or economic conditions of the fighter bad enough, they always have one more fight left.  In a similar way, QE has been so successful in achieving its goals that the Fed must see it as one of their greatest instruments to combat deflation.  While QE I and QE II sport amazing records and their heydays are past, they may be called up to fight another match in the near future.

If Treasury bond prices move significantly lower (yields higher) or stock markets fall appreciably we will absolutely see a return of QE.  While the Fed has many remaining tricks up their sleeve, QE is one that has immediate results.  QE is truly one of their favorites.  As a market participant that feels strongly that the invisible hand of government should get out of the stock markets I am not sad to see QE go.  Unfortunately I can say with great confidence that QE will be back for at least one more bout; great fighters never go gracefully.

Photo by Cliff1066 - http://www.flickr.com/photos/nostri-imago/with/2872463375/

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/

AMERICANS TAKE NOTE - TOP 10 AUSTERITY MEASURES WE'LL FACE IN THE FUTURE

The Greek Parliament sold out its people once again today and there is one more vote that will come down tomorrow to determine the specific measures that will be employed to destroy the life style of Greeks and pillage their public coffers.  I've written a lot about the concept of these austerity measures, but let's review a list of these changes to see how it might impact the everyday lives of Greek citizens.  I've used this slide show from CNBC as a source -

TOP 10 AUSTERITY MEASURES IN GREEK BAILOUT PLAN
1)  Property taxes and their VAT (Value Added Tax) will increase.  Their current VAT is 19% on each item purchased, it will increase to 23%.

2)  Luxury items will be taxed more and profitable businesses will also receive an additional tax.

3)  Taxes on fuel, cigarettes, and alcohol will increase by 33%

4)  Civil servants and other government workers will take 15% pay cuts

5)  Defense spending will be cut by 200 million euros and more in following years

6)  Education cuts will force mergers and closings of almost 2000 schools.

7)  Social security programs will face significant cuts and the retirement age will be raised from 61 to age 65.

8)  Greek government businesses will be privatized.

9)  Government jobs will be terminated via attrition.  Only 1 job out of every 10 retiring positions will be filled.

10)  Health care spending will be cut by 310 million euros this year and more in subsequent years.

CUTS ARE GOOD RIGHT?
Well, yes and no. Financial management of programs and social services are necessary, and the Greeks obviously didn't do a good job over the last 30 years of maintaining any sense of responsibility. The issue here is that these measures will be debilitating AND they will not make any dent in the piles of debt that have been amassed. The Greeks are past cutting to be able to repay all of these obligations; the figures are just insurmountable.

Take a close look at these provisions and it is clear that any normal person is going to get crushed as a result. Perhaps you are employed by the government or employed by a firm that provides a service or product to government. If you do keep your job, you will obviously take a substantial pay cut. Next, your fuel costs are going to rise and your property taxes are also going to increase. You health care costs too will be noticeably higher, and everything you buy will cost 4% more due to the move up in the VAT.


EXODUS OF EARNERS AND SMART MONEY
Any able bodied person that has any financial means will obviously be incented to employ any tax avoidance scheme possible. I would assume that high income earners would attempt to move to another country or at least off-shore their earnings and assets to shield them from these provisions. Clearly these efforts will undermine the financial projections of GDP and Greece will miss revenue targets, only to repeat the crisis again and again.

Is there any doubt why people are rioting? Is there any doubt there is a disconnect between the people of Greece and their politicians? No one questions that the Greek citizens did have a part in getting into this mess. However, it is quite possible that corrupt Greek leaders were bribed into taking bad loans that were not in the interest of their people. These politicians used the proceeds to hire unions and fund projects that were a form of political payback rather than society-enhancing endeavors.

The move this morning does nothing but extend the process for Greeks to default on unpayable liabilities. Major life style changes and hardships will be endured by common folk while connected politicians and the wealthy remain relatively comfortable. For more information about this topic, please read - GREEKS NEED A HERO - IS THERE ONE? The posting includes the documentary "Debtocracy" which is a must watch.

USA TAKE NOTICE -
This is the future of the USA if we don't take measures to arrest our spending deficits and our out of control entitlement programs. We continue to look at Greece as some third world country that can't get its act together, but the reality is that the country is simply playing out our future today.

In the midst of seeing all of the results from catastrophic debt it is clear that the USA is rushing headlong into policies and promises that emulate the European model. Unfortunately it is obvious that we'll be implementing many of the same austerity measures to pay back our lenders too.

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/

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/