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Must read: The Greek butterfly effect. Why math crushed Greece, and why math will crush the US and EU

Greece is the first victim of fake math. If rates were “normalized” tomorrow the entire financial system would collapse under the weight of the basic mathematics.

Alex Christoforou

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Post originally appeared on NorthmanTrader.

Many times nothing happens for a long time. Then all of a sudden everything happens at once. Like a dam break. It builds slowly and then it bursts. Example: Who would have ever thought the Confederate flag would be taken down across the South during the same week that a rainbow flag is symbolically hoisted across the entire country? Just because things seem unthinkable doesn’t mean they won’t happen.

Take the global debt construct as another example. For decades the world has immersed itself in ever higher debt. The general attitude has been one of indifference. Oh well, it just goes higher. Doesn’t really impact me or so the complacent rationalize.

When the financial crisis brought the world to the brink of financial collapse the solution was based on a single principle:

Make the math workable.

In the US the 4 principle “solutions” to make the math workable were to:

1. End mark to market which had the basic effect of allowing institutions to work with fictitious balance sheets and claim financial viability.

2. Engage in unprecedented fiscal deficits to grow the economy. To this day the US, and the world for that matter, runs deficits. Every single year. The result: Global GDP has been, and continues to be overstated as a certain percentage of growth remains debt financed and not purely organically driven.

3. QE, to flush the system with artificial liquidity, the classic printing press to create demand out of thin air.

4. ZIRP. Generally ZIRP has been sold to the public as an incentive program to stimulate lending and thereby generate wage growth & inflation. While it could be argued it had some success in certain areas such as housing, the larger evidence suggests that ZIRP is not about growth at all.

If ZIRP’s true goal were to stimulate growth the result of this:

nt 1_0…would not have produced this:

nt 2_0

No, ZIRP’s true purpose is actually much more sinister:

To make global debt serviceable. To make the math work without a default.

Here’s the reality: If we had “normalized” rates tomorrow the entire financial system would collapse under the weight of the math. In short: Default.

Which brings us to Greece the butterfly, the truth and indeed the future:

Greece for all its structural faults is the most prominent victim of fictitious numbers. From the original Goldman Sachs deal to get them into the EU based on fantasy numbers and to numerous bail-outs, the simple truth has always been the same: The math doesn’t work.

It never has and it never will until there is a default on at least some of the debt.

And in this context the Greek government’s move to call for a public referendum on July 5 may be a very clever strategic move as it forces the issue of math.

Here’s the strategic frame-up: Ultimately what Greece needs is debt relief. Big time debt relief to make the math work.

The global cabal of creditors, ECB, EU, and IMF do not want that. Why not? Because the very second they do this the classroom will look like this:

nt 3

Everybody would want a cut on their debt starting with Italy, Spain, Portugal etc. and the dominos would be rolling.

No, they do not want this as a default would require acknowledging that debt matters.

What are the alternatives? Greece’s referendum move risks putting a debt deal up for a vote to citizens. When has that ever happened? Have Americans every voted on their government’s debt spree? Have citizens ever had a say on their central bank’s policies and balance sheet expansions? The answer is no. This so ever important element of our global economic system is completely removed from voters.

And so Yanis Varoufakis is very much correct in highlighting this open secret:

No, voters are very much not permitted to participate in this decision making process. And hence the only reason a Greek referendum may actually proceed is this: To make an example of Greece. You want to default? Watch what we will do to Greece.

But that’s a big gamble for the EU, for the ECB, the IMF and everybody else including China and the US. Why? Because all of them have carefully orchestrated a construct that they do no want to see disturbed. It’s not an accident that we have seen 46+ rate cuts this year. It’s not an accident that China announced another rate cut just a day after Chinese stocks plummeted 7% this past Friday. It was no accident that the Fed’s Bullard talked about QE4 in October the moment US stocks got close to a 10% correction.

No, you see their primary mission in their timed actions and their words: To make the math work. And to continue to make the math work.

And hence Janet Yellen is not delaying rate hikes because she is “data dependent”. She is dealing in reality: Over $18 trillion in US debt (and ever growing) a large portion of which needs to be refinanced over the next 5 years. And higher rates will become an ever larger burden on the discretionary budget of the US. And the world, heavily indebted that it is, has the same problem:

nt 4_0

Math.

So this next week is not so much about Greece the butterfly, but it is about keeping the butterfly from becoming a hindrance to the math working globally. And the Greek government knows this. They are negotiating on the basis that a bad Greek deal from Europe’s point of view is better than a default. Angela Merkel wanted a concluded Greek deal before markets open on Monday. Now she has a mess.

And in the world of gamesmanship every percentage drop in the #DAX will enhance Greece’s negotiation stance. This past week saw a massive rally in the #DAX in the hopes that a deal would certainly be positively concluded.

Now this weekend all this bullish sentiment may find itself tested come Sunday night and Monday morning unless Europe blinks quickly. China is doing its part to support the construct with this latest rate cut, but the ECB can’t be happy about its QE program challenged by the constant Greece distraction:

nt 5_0

As we outlined in technical charts a default of Greece would risk a structural repeat of 2011:

nt 6_0

And it couldn’t come at a worse time:

nt 7_0

No, odds are they’re not going to let Greece default. They can’t afford to. The math has to work.

For more charts please refer to our Technical Charts segment.

References:

http://northmantrader.com/2015/06/27/the-greek-butterfly-effect/

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Germany Wants Nuclear Bombers

Germany does not manufacture atomic weapons but has come to consider itself as a nuclear power because it has vectors to use them.

The Duran

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Via VoltaireNet.org:


Germany’s armed forces are currently studying the possibility of acquiring nuclear bombers capable of using the new American B61-12 atomic bombs.

Meanwhile, the Pentagon itself plans to deploy these new atomic bombs in the German region of Eifel, in violation of the Nuclear Non-Proliferation Treaty.

The German air force already has multi-tasking Tornado warplanes, which are already capable of deploying American atomic bombs. But those aircraft are going to be replaced, possibly, by European-developed Eurofighters, or by United States manufactured F/A-18 Super Hornets.

Either way, the warplane that Germany selects will have to be equipped with the AMAC (Aircraft Monitoring and Control) system, which allows the use of the new American atomic bombs and enables the regulation of the power of the explosion as well as at what height the bombs explode after they are launched.

Germany does not manufacture atomic weapons but has come to consider itself as a nuclear power because it has vectors to use them, and believes that this gives it the right to sit on the UN Security Council sharing the permanent member position occupied by France.

Both countries would thus represent the European Union, under the auspices of NATO.

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1st since Notre Dame: Yellow Vests back despite ‘unifying’ disaster & they are angry

‘Yellow Vests’ march in Paris for 23rd straight week.

RT

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Via RT…


Yellow Vests protests brought clashes and tear gas back to the streets of Paris, despite politicians’ calls for “unity” in the wake of the Notre Dame fire. For protesters, the response to the fire only showed more inequality.

Saturday’s protests mark the 23rd straight weekend of anti-government demonstrations, but the first since Notre Dame de Paris went up in flames on Monday. Officials were quick to criticize the protesters for returning to the streets so soon after the disaster.

“The rioters will be back tomorrow,” Interior Minister Christophe Castaner told reporters on Friday. “The rioters have visibly not been moved by what happened at Notre-Dame.”

For many of the protesters, grief over the destruction of the 800-year-old landmark has made way for anger. With smoke still rising from Notre Dame, a group of French tycoons and businessmen pledged €1 billion to the cathedral’s reconstruction, money that the Yellow Vests say could be better spent elsewhere.

“If they can give dozens of millions to rebuild Notre Dame, they should stop telling us there is no money to respond to the social emergency,” trade union leader Philippe Martinez told France 24.

Saturday’s protests saw a return to scenes familiar since the Yellow Vests first mobilized in November to protest a fuel tax hike. Demonstrators in Paris’ Bastille district set barricades on fire and smashed vehicles, and police deployed tear gas to keep the crowds at bay.

Sporadic incidents of vandalism and looting were reported across the city, and some journalists even reported rioters throwing feces at police.

60,000 police officers were deployed across the country, and in Paris, a security perimeter was set up around Notre Dame. A planned march that would have passed the site was banned by police, and elsewhere, 137 protesters had been arrested by mid afternoon, police sources told Euronews.

Beginning as a show of anger against rising fuel costs in November, the Yellow Vests movement quickly evolved into a national demonstration of rage against falling living standards, income inequality, and the perceived elitism and pro-corporation policies of President Emmanuel Macron. Over 23 weeks of unrest, Macron has made several concessions to the protesters’ demands, but has thus far been unable to quell the rising dissent.

After Notre Dame caught fire on Monday, the president postponed a television address to the nation, during which he was expected to unveil a package of tax cuts and other economic reforms, another measure to calm the popular anger in France.

Macron’s address will be held on Thursday.

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O Canada! The True North Strong and Free – Not

Maybe it’s past time for Canadians to get serious again about their independence.

Jim Jatras

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Authored by James George Jatras via The Strategic Culture Foundation:


Canadian visitors to Washington sometimes wonder why their embassy stands at the foot of Capitol Hill.

The answer? To be close to where Canada’s laws are made.

A main showcase of Ottawa’s craven servility to Washington is Prime Minister Justin Trudeau’s complicity in the US-led regime change operation being conducted against Venezuela. Not content with ruining his own country with multiculturalism, polysexualism, and the like, Li’l Justin has acted in lockstep with Big Brother to the south inslapping sanctions on Venezuelan officials and serving as a US agent of influence, especially with other countries in the western hemisphere:

‘A Canadian Press report published at the end of January revealed that Canadian diplomats worked systematically over several months with their Latin American counterparts in Caracas to prepare the current regime-change operation, pressing [Venezuelan President Nicolás] Maduro’s right-wing opponents to set aside their differences and mount a joint challenge to the government. “The turning point,” said the Canadian Press [Global News], “came Jan. 4, when the Lima Group … rejected the legitimacy of Maduro’s May 2018 election victory and his looming January 10 inauguration, while recognizing the ‘legitimately elected’ National Assembly.” The report cited an unnamed Canadian official as saying the opposition “were really looking for international support of some kind, to be able to hold onto a reason as to why they should unite, and push somebody like Juan Guaidó.”

‘One day prior to Maduro’s inauguration, [Canadian Foreign Minister Chrystia] Freeland spoke to Guaidó, the newly-elected National Assembly speaker, by telephone to urge him to challenge the elected Venezuelan president.’

But that’s not all. Canada is out front and center in the “Five Eyes” intelligence agencies’ war on China’s Huawei – with direct prompting from US legislators and intelligence.  As explained by Col. Larry Wilkerson, former chief of staff to Gen. Colin Powell, it’s not that Huawei violated any law when circumventing US sanctions but it is the US that is acting illegally by unilaterally imposing sanctions that were never agreed to internationally. But that’s OK – when it comes to Washington’s claims of jurisdiction over every human being on the planet, Justin and Chrystia are happy to oblige!

Also, let’s not forget Chrystia’s role in keeping the pot boiling in Ukraine. It would of course be cynical (and probably racist) to attribute anything relating to Ukraine to her own interesting family background …

To be fair, the lickspittle attitude of Canadian officials towards their masters south of the 49th parallel is hardly unique in the world. Also to be fair, it’s natural and would be generally beneficial for Canada to have a positive relationship with a powerful, kindred neighbor rather than a negative one. Think of Austria’s ties to Germany, or the Trans-Tasman relationship of Australia and New Zealand, or the links that still exist between Russia and Ukraine despite efforts by the west to set them against each other (as, for example, Spain and Portugal were at loggerheads for several centuries, when the latter was a loyal ally of Spain’s foe, Great Britain, to such an extent that Portugal was sometimes shown on maps and globes in the same pink as British possessions; a similar situation existed between Argentina and British ally Chile).

A close and mutually advantageous relationship is one thing, but Canada’s de facto loss of independence is another. Not only does the US control Canada’s diplomacy, military, and intelligence but also her financial system (with, among other levers, the notorious FATCA law, which places Canadian institutions under the supervision of the IRS, with Canada’s revenue service acting, care of the Canadian taxpayer, as a cat’s paw for not only the IRS but the NSA and other snooping agencies). As explained by one Canadian nationalist (yes, they do exist!), the redoubtable David Orchard, trade is also a critical issue:

‘Canada …, after almost three decades of “free trade” with the U.S., has more than $1.2 trillion in federal and provincial debt, large deficits at every level, no national child or dental care, high university tuition, miserly old age pensions, years of massive budget cuts, and giveaway prices for its exports of oil, gas, timber and minerals.

‘For 150 years, great Canadian leaders have warned that without an economic border with the United States, we would soon no longer have a political border.

‘We once owned the world’s largest farm machinery maker, Massey Harris, headquartered in Toronto; built the world’s largest and most respected marketer of wheat and barley, the Canadian Wheat Board, based in Winnipeg; created a great transcontinental railway system, beginning in Montreal, which tied our country together; and saw Vancouver’s shipyards produce the beautiful Fast Cat ferry.

‘Instead of spending hundreds of billions on foreign-made machinery, electronics, automobiles, ships, fighter jets and passenger aircraft (even payroll systems for federal employees!), we can build our own, both for the domestic and export market.

‘We once designed and built the world’s most advanced jet interceptor, the Avro Arrow, so we know it can be done. [Emphasis added] With Canada’s resources and ingenuity, it could create a prosperous, domestically controlled economy that would give Canadians multiple benefits, security and pride of ownership. All that is required is some of the will that drove our ancestors to create an alternate power in North America. As George-Étienne Cartier, the great Québécois Father of Confederation, put it, “Now everything depends on our patriotism.”’ [Note: Orchard is the author of the must-read book The Fight for Canada: Four Centuries of Resistance to American Expansionism. To begin at the beginning, in the late 1680s, as part of English-French rivalry in North America, Massachusetts Puritans sought to root out the nest of popish deviltry known as Quebec. Following their disastrous 1690 defeat, they decided to fight Satan closer to home by hanging witches. The rest, as they say, is history…]

Scratch a Canadian patriot and you’ll hear about the Avro Canada CF-105 Arrow. As a watershed moment in Canada’s downward slide into subservience, the cancellation of what by all accounts was a magnificent aircraft – and a snapshot of what Canada’s international competitiveness (including in advanced aerospace) could have looked like had it been able to develop independently – might have been the point of being sucked into the American vortex. As noted by one response to my suggestion that Ottawa’s stance on Venezuela amounted to Canada’s annexation by the US: “Canadian here…unfortunately, the above is true (not literally of course, but in practice). It goes back even before the time of Diefenbaker, who canceled our Avro Arrow program on demand from the US – thus destroying our aerospace industry and causing brain drain to the US/Europe.”

To this day, the decision of then-Prime Minister John Diefenbaker to kill the Arrow project (and “put 14,528 Avro employees, as well as nearly 15,000 other employees in the Avro supply chain of outside suppliers, out of work”) on what came to be known as “Black Friday,” February 20, 1959, remains controversial and shrouded in mystery. A mix of budgetary, political, technological, and personality factors has been cited, none of them conclusive. Pressure from the US side, including unwillingness of Washington to purchase a Canadian aircraft when the US could pressure them to buy American planes and missiles, no doubt played a key role: “Instead of the CF-105, the RCAF invested in a variety of Century Series fighters from the United States. These included the F-104 Starfighter (46 percent of which were lost in Canadian service), and (more controversial, given the cancellation of the Arrow) the CF-101 Voodoo. The Voodoo served as an interceptor, but at a level of performance generally below that expected of the Arrow.”

While we may never know reliably why Diefenbaker cancelled the Arrow or how Canada or Canadian industry might have followed a different path, there’s no question of the superior capabilities of the Arrow. As it happens, one of the few pilots who had a chance to test the Arrow in an impromptu friendly dogfight is now-retired USAF fighter pilot Col. George Jatras, later US Air Attaché in Moscow (also, this analyst’s father). As he related in 2017:

‘I’ve received a number of messages in the last couple days about this bird, including some that say it may be revived. I don’t know how The Arrow would compare to today’s aircraft, but I had a first-hand lesson on how it faired against the F-102.

‘In 1959, I was stationed at Suffolk County AFB on Long Island with the 2nd Fighter Interceptor Squadron. We had an informal exchange program with a Canadian fighter squadron stationed near Montreal. From time to time, two or four aircraft from one of the squadrons would fly to the other’s base on a weekend cross country.

‘On one such exchange, I was #3 in a four ship formation led by [former Tuskegee airmanErnie Craigwell (I don’t recall who the other pilots were). As we entered Canadian airspace, cruising at about 40,000 ft., we spotted a contrail well above our altitude (probably at 50,000ft.) and closing very fast.  As the other aircraft appeared to be passing by, we could clearly see the delta shaped wing and knew it was the Avro Arrow that the Canadian pilots had told us about. Then, instead of just passing by, he rolled in on us! Ernie called for a break and we split into elements. When we talked about the encounter afterwards we all agreed that our first thought was, “This guy is in for a surprise; he doesn’t know that he’s taking on the F-102.”  Well, we were the ones in for a surprise. Even with two elements covering each other, not one of us could get on his tail. His power and maneuverability were awesome.  After he had played with us for a few minutes, like a cat with four mice, he zoomed back up to about 50K and went on his way. What an aircraft! What a shame that it never went into production.’

What is perhaps most curious about the Arrow’s demise is that “everything was ordered brutally destroyed; plans, tools, parts, and the completed planes themselves were to be cut up, destroyed, scrapped and everything made to disappear.”  Why? Well, security of course! Don’t engage in conspiracy theories …

The Canadian national anthem finishes with a pledge: “O Canada, we stand on guard for thee.” It should be noted that understandably resentful Loyalists fleeing the US following the American Revolution were a major contribution to the growth of Canada’s English-speaking population. American troops – back when we were the plucky underdog fighting the mighty British Empire – invaded Canada in 1775 and during the War of 1812 but were defeated. Relations got testy during the American Civil War as well, and even afterwards the US was wary of a proposed united “Kingdom of Canada,” hence the choice of the name “Dominion” in 1967. If today’s Canadians think we-all down here don’t know whom they’ve mostly had in mind to “stand on guard” against all this time, they’d better think again.

Maybe it’s past time for Canadians to get serious again about their independence – eh?

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