Greece: ‘Alarming’ New Information About Its Economy

Greece says its recession is deepening and will present “alarming” information about the state of the country's economy this week to international auditors in a new effort to ease the terms of the government's latest bailout.
A government spokesman described the economic data as “astounding” in a television interview Tuesday, but gave no details. He said the information “shows beyond any doubt” that the austerity measures demanded by Greece's creditors are hurting the country's economy rather than helping it.
Deputy Finance Minister Christos Staikouras said the Greek economy, in its fifth year of a recession, would contract 6.7 percent this year compared to a previous forecast of 4.5 percent. At last count, in March, more than one of every five Greek workers was unemployed.
Debt inspectors from the European Commission, the European Central Bank and the International Monetary Fund are set later this week to take a new look at the precarious state of the government's finances. The auditors are in Athens to check on the limited progress the government has made in imposing spending cuts it agreed to earlier this year when it secured a new $168 billion bailout. It was the country's second rescue package in two years.
But even before the auditors take a look at the government's financial ledgers, political leaders in Greece's new coalition government are calling for at least a two-year extension to the 2014 mandate for the government to produce a budget surplus. But one European Central Bank official on Monday said Greece should not waste time seeking to ease the terms of the bailout and instead should push to carry out the austerity spending plan calling for pension and wage cuts and elimination of thousands of government jobs.
On Tuesday, a European Commission official, Horst Reichenbach, said Greece needs to start paying back the more than $7 billion it owes to suppliers, such as pharmaceutical and construction companies, to pump more money into the country's beleaguered economy.
“It would be very difficult to really improve the situation of the Greek economy, even with these reforms, if the very difficult situation of access to finance is not tackled. And here, the first step is to pay the arrears which have accumulated and obviously also the (valued added tax) contributions, which in particular for the export industry are accumulating and raising difficulties.''

The Real Economic Picture

If you have any money and you want to understand the lies that “your” government tells you with statistics, subscribe to John Williams shadowstats.com.
John Williams is the best and utterly truthful statistician that we the people have.
The charts below come from John Williams Hyperinflation Report, January 25, 2012. The commentary is supplied by me.
Here is the chart of real average weekly earnings deflated by the US government’s own measure of inflation, which as I pointed out in my recent column, Economics Lesson 1, understates true inflation.

This chart (below) shows the behavior of inflation as measured by “our” government’s official measure, CPI-U (bottom line) and John Williams measure which uses the official methodology of when I was Assistant Secretary of the US Treasury. The gap between the top and bottom lines represents the amount of money that was due to Social Security recipients and others whose income was indexed to inflation that was diverted by the government to wars, police state, and bankers’ bailouts.

This next chart shows the gains that gold and the Swiss franc have made against the US dollar. The Swiss franc is the top line and gold is the bottom. When gold and the Swiss franc rise, the dollar is falling. Notice that during President Reagan’s first term, when I was in the Treasury, gold and the Swiss franc dropped, that is, the dollar rose in purchasing power. Obviously, the supply-side policy that Reagan implemented strengthened the US dollar. It was only with the advent of the Bush policy of endless trillion dollar wars, reaffirmed by Obama, that the US dollar and economy collapsed relative to gold and hard currencies.
The recent drop in the Swiss franc is due to the Swiss government announcing that the country’s exports could not tolerate any further run up in the franc’s value, and that the Swiss central bank would print new francs to accommodate future inflows of dollars and euros. In other words, Switzerland was forced to import US inflation in order to protect its exports.

Here is nonfarm payroll employment. As you can see, the US economy has been in recession for four years despite the easiest monetary policy and largest government deficits in US history.

Here is consumer confidence. Do you see a recovery despite all the recovery hype from politicians and the financial media?

Here is housing starts. Do you see a recovery?

Here is real GDP deflated according to the methodology used when I was in the US Treasury.

Here is real retail sales deflated by the traditional, as contrasted with the current, substitution-based, measure of inflation.

These graphs courtesy of John Williams make it completely clear that there is no economic recovery. In place of recovery, we have hype from politicians, Wall Street, and the presstitute media. The “recovery” is no more real than Iraqi “weapons of mass destruction” or Iranian “nukes” or the Obama regime’s phony story of assassinating last year an undefended Osama bin Laden, allegedly the mastermind of Islamic terrorism, left by al Qaeda to the mercy of a US Seal team, a man who was widely reported to have died from renal failure in December 2001, a man who denied any responsibility for 9/11.
A government and media that will deceive you about simple things such as inflation, unemployment, and GDP growth, will lie to you about everything.
Paul Craig Roberts was Assistant Secretary of the Treasury for Economic Policy and associate editor of the Wall Street Journal. He was columnist for Business Week, Scripps Howard News Service, and Creators Syndicate. He has had many university appointments. His internet columns have attracted a worldwide following. Visit his website at http://www.paulcraigroberts.org

Iran Sanctions Conducive to Weak Dollar and Spiralling Gold Prices

We are trying to figure out the best way to describe the banking and oil sanctions against Iran, which are blatant acts of war. Just look back in history at similar situations and you will see what we are referring too. It is simple incompetence or is the allied plan a false flag feint in order to distract attention away from debt problems?
A month ago when the US was trying to terrorize Syria and Iran with oil and banking sanctions we said they did not have a chance of winning. Iran’s nations that are friendlies, such as China, India and Russia are major nations that will assist in the circumvention of some 70% of those sanctions. As we predicted all the excitement in the Straight of Hormuz was just that, another distraction. This week the USS Abraham Lincoln, an aircraft Carrier, went through the Straight, which tells us as we said earlier, it was all just a game. That relieved pressure of financial markets in Europe, the UK and US.
Most people forget an agreement has been in place for more than a year between Russia and China, so the precedent has been set and it works. To simplify things India wants to use gold in exchange for oil, a very simple and novel idea.
What does all this add up too? The basic common denominator is a growing existence of the US dollar and of the world financial system. What Washington has done has expedited the end of the US dollar as the world’s reserve currency. Worse yet for the dollar deals like this are in the works all over Asia. Alliances are forming as we speak and it is only a matter of time before it happens. We believe this will take place over the next two years, accompanied by higher interest rates. These countries are proceeding at their own pace and will soon have major agreements in place.
The movement toward an alternative trade, a monetary and financial system is underway and the US is trying to force dollar usage on everyone, like it or not. If the US doesn’t come up with an alternative soon they may be ejected out of world trade, because few will want their currency. These engineered events just make the US look weaker in the long run. Foreigners are already euro sellers and T-bill buyers.
Again, we return to the unnatural and unbalanced trade situation between Germany and the remainder of the EU. The gap in competitiveness between the industrial north and the south is enormous.
If the EU and euro zone had been properly set up as a political and fiscal union that might have succeeded. There was no political union – only a financial and trade union, which we wrote in 1992, could never work and it did not work as we are observing. What this has turned out to be and we predicted it, and that is an unending transfer of wealth from the north to the south. If you look at the pluses and minuses Germany should exit the euro zone. The euro has been used to stay close to France due to the experiences of the past. That is very difficult because the German culture is much different than that of other countries like France, England or the US. You have to live there in those countries and speak their languages to truly understand how they think and why they are the culture that they are.

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In addition to culture problems we have a group of Illuminists, who always happen to be appointed to the positions of power to further the aims and goals of world government. Today Mr. Draghi at the ECB is a prime example. All that was accomplished by previous ECB management has been cast to the 4-winds – a complete turnaround by following orders from London and NYC to crank up money and credit creation. This obviously is the only way these elitists know how to temporarily make an economy run. All they have done has saved the financial sector and done little for economic recovery. Why should anyone expect any different result?
Italy is buried in debt, as is Spain and they are uncompetitive. Spain’s real estate collapse is worse then that of the US. In Spain you also have to too big to fail syndrome, which means bank nationalization in both countries, as in England and in other various European countries. Spain has to go bankrupt. Real estate has not as yet hit a bottom. Spain and Italy are already caught up in a deflationary debt spiral and will eventually have to default and leave the euro. There was no vigilance. Few paid attention to their performance and plight, and now you are seeing the result of that.
We are now faced with tremendous deficit spending, that money and credit being supplied by the Fed, which, of course, will never be repaid.
While euro squabbles over the euro and sovereign debt the US is finding out that he who has the gold makes the rules. Rumors abound that India may pay for part or all of its oil purchases from Iran with gold. If this does become reality it will end up being negative for the dollar.
Iran is to be punished because they supposedly want to make nuclear weapons. These sanctions are on oil and its sale to others and being shut out of the world banking system. From our viewpoint these sanctions have already been a failure. These moves by the US, UK and Europe have only served to put more downward pressure on the US dollar. The petrodollars have been on their way for sometime but actions such as these two embargos will prove to be even more disastrous for the dollar. It shows the use of dollars can be circumvented. That also means those countries that had been buying US Treasuries may start to reduce buying and other currencies and perhaps gold will be used as alternatives. That has been happening over the past few months. Obviously, America’s problems are having a cumulative effect and those dollar sales are moving to other currencies and are a reflection of a staggering world super power. America no longer deserves its dollar reserve privileges – it has squandered them away. We see, zero interest rates for three years, QE 3 on the way and the Fed lending $1 trillion, or is it a fractionalized $10 trillion. The situation is not getting better, but getting worse and that means we have a solid three years or more of climbing gold and silver prices.

Brent buoyed by Iran threat, U.S. GDP weighs

Related News

• Oil ends up on Fed plan, U.S. data, Iran threat
  Thu, Jan 26 2012
• UPDATE 8-Oil up on weak dollar after Fed vow, data caps gains
  Thu, Jan 26 2012
• UPDATE 2-Brent rises above $110 as Fed vows low interest rates
  Thu, Jan 26 2012
• UPDATE 3-Brent steady above $110 on Iran, better demand outlook
  Wed, Jan 25 2012
• Iran says sanctions to fail, repeats Hormuz threat
  Tue, Jan 24 2012

Analysis & Opinion

• New gender detection technique: gift or curse for girls in India?
• UK needs to look beyond BRIC markets to emerging CIVETS

A Chinese-built drilling rig known as Scarabeo 9, is seen lit up off the coast of Havana January 22, 2012.

Credit: Reuters/Desmond Boylan

By Simon Falush

LONDON | Fri Jan 27, 2012 9:52am EST

LONDON (Reuters) - Brent crude held above $111 on Friday as comments from Iran that it might stop exports to the European Union intensified worries about security of supply, but weaker than forecast economic data from the United States capped gains.
Brent crude rose 85 cents to $111.64 a barrel by 1445 GMT. It was up around 1.4 percent so far this week, after two weeks of losses. U.S. crude fell 59 cents to $100.29.
A law to be debated in Iran's parliament on Sunday may halt oil exports to the European Union as early as next week, foiling an EU plan to phase in an oil embargo gradually to help its struggling economies adapt, lawmakers said on Friday.
If Iran stops crude exports to the EU earlier than July when an EU ban on Iranian crude takes effect, it could cause problems for some countries which are heavily dependent on the oil.
Royal Dutch Shell (RDSa.L) will implement the terms of a European Union embargo on Iranian crude but will need some time to study details of the sanctions which are likely to push oil prices higher, Chief Executive Peter Voser said on Friday.
The premium from geopolitical risk was offset by data that was not as positive as the market had anticipated.
The U.S. economy grew at its fastest pace in 1-1/2 years in the fourth quarter at 2.8 percent, but this was under the 3.0 percent that had been forecast, prompting investors to trim bets in demand sensitive assets.
Oil came off the day's peak, but was relatively resilient.
"Oil's come off with the data, but it's not collapsing because Iran is making noises that it might vote to cancel contracts with Europe," said Rob Montefusco, broker at Sucden Financial.
EUROPE WORRIES
Along with the disappointing U.S. data, worries about prospects for the euro zone due to ongoing uncertainty about the debt situation also kept oil's gains in check.
Portuguese five and 10-year government bond yields were set to remain under pressure after hitting euro-era highs on Thursday as fears grew that the country may follow Greece in requiring another bailout or seeking to restructure its debt.
Athens is locked in tough negotiations with its private creditors on a restructuring it needs quickly to avert a disorderly default when a major bond redemption falls due in March.
Greece's bondholders are demanding

Christine Lagarde Warns Of Global Depression If Governments Don’t Pay U

January 24, 2012
Treasury Secretary “Hank” Paulson was the trailblazer with his proposal for TARP in September 2008. He walked into the Capitol with a list of demands—unlimited powers to hand unlimited amounts of taxpayer money to whomever—and threatened that the whole world would collapse if his demands weren’t met immediately.
When Congress didn’t go for it, markets fell off a cliff, and Paulson’s world of finance appeared to come to an end. So Congress approved a more limited TARP, which ended up being irrelevant compared to the trillions the Fed would hand out. Thus, Paulson’s extortion had worked—though the source of money had shifted from the Treasury to the Fed. It would be copied.
In November, just after the G-20 meeting in Cannes, France, it was Greek Prime Minister Giorgios Papandreou’s turn. With a single sentence about a referendum on Greece’s exit from the Eurozone, he knocked the world’s financial markets into a tailspin. His message: give me more money and larger write-downs on Greek debt, or else I will say a whole paragraph. It reopened the spigot, and money started flowing again (temporarily).
In early January, it was Greece’s new Prime Minister Lucas Papademos. He threatened the world with “disorderly default.” His goal: impose salary cuts on private-sector workers and ever bigger “voluntary” haircuts on banks and hedge funds that hold Greek debt. “So we can get the next loan installment,” he explained. Unions rebelled, and bondholders dug in their heels, but they started talking again. For that whole debacle, read…. Greece’s Extortion Racket Maxed Out.
Now Christine Lagarde, managing director of the IMF, has stepped into the extortion racket herself and threatened that there would be another Great Depression—the red line on the financial threat-o-meter—if certain countries and their taxpayers didn’t fork over more money. She never mentioned Germany and the US by name, but those were her prime targets.
“It is about avoiding a 1930s moment,” she said at the German Council of Foreign Affairs in Berlin, “a moment, ultimately, leading to a downward spiral that could engulf the entire world.”
Paulson couldn’t have phrased it more darkly.

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The discussions Sunday evening between her and German Chancellor Angela Merkel must have been interesting, and there was no dog and pony show or even common statement afterwards. But Monday, Lagarde made clear what she wanted:
- €500 billion in mostly German taxpayer money to double the size of the future bailout fund, the ESM, to €1 trillion, so that it would be large enough to bail out Italy and Spain. Their insolvency “would have disastrous implications for systemic stability,” she threatened. So, pay up German taxpayers.
- $500 billion in taxpayer money from around the world, specifically from the US, Japan, and Germany, the three largest contributors to the IMF, to double its bailout lending power to $1 trillion.
- More government spending in those European countries that can afford it, to stimulate the economy for everyone else. She didn’t mention Germany, but German taxpayers, please step up to the plate. Your money is needed elsewhere. Or else—
- Common liabilities, such as Eurobonds, through which taxpayers in fiscally stronger countries, like Germany, would guarantee the debt of others.
- Elimination of trade imbalances by stimulating internal demand in countries with large trade surpluses. Alas, Germany’s economy lives and dies by its exports, and a drop in the surplus has a vicious effect on GDP. Read…. Germany’s Export Debacle.
Merkel and her government immediately rejected Lagarde’s demands on essentially all fronts. To commit more money to the ESM would also require a vote in the Bundestag where the last bailout increase passed only by a thin margin. And the US Congress is in no mood to hand over more money to the IMF. But as Paulson’s efforts have shown, extortion has a way of migrating. If recent history is any guide, Lagarde’s threat of another Great Depression will work, and money will start flowing from taxpayers to her anointed recipients.
Meanwhile, in one of the most above-board shining examples of a virtuous country in the Eurozone—the outright opposite of Greece—there has been a hiccup. Read…. Bribery, Kickbacks, and Money Laundering at the Austrian National Bank.

Iran Said to Seek Yen Payments From India for Oil Amid Sanctions

• Iran Says Only Negotiations Can Resolve Nuclear Standoff
• European Union Said to Weigh Asset Freeze on Iran’s Bank Tejarat
• Japan Says It Will Take ‘Concrete’ Steps to Cut Iran Oil Imports
• China Rejects Iranian Development of Nuclear Weapons, Wen Says
• Keeping Strait Open to Get Tougher as Iran Expands Forces

By Pratish Narayanan and Anto Antony

Jan. 23 (Bloomberg) -- Iran has asked India to pay for oil partly in yen as the two nations seek an agreement on how to maintain trade amid tightening global sanctions, according to three people with knowledge of the matter.

At talks in Tehran last week, India proposed to pay its second-biggest oil supplier in rupees through a bank account in the South Asian nation, said the people, declining to be identified because the information is confidential. Iranian officials sought partial payment in yen because they’re concerned that they may not get sufficient value from the rupee, which isn’t fully convertible, according to the people.

The nations have struggled to preserve $9.5 billion in annual crude trade after the Reserve Bank of India dismantled a mechanism used to settle payments in euros and dollars in December 2010. Transactions are currently routed through Turkiye Halk Bankasi AS, based in Ankara, which has told Indian refiners it may no longer be able to be an intermediary, four people with knowledge of the matter said Jan. 10.

European Union foreign ministers meet in Brussels today to consider an oil embargo and additional financial sanctions on the country for its nuclear program. Iran is already under four rounds of UN Security Council sanctions. The U.S. and its allies say they suspect its nuclear program is a cover for developing atomic weapons, a charge Iran has repeatedly denied, maintaining it’s for civilian purposes.

The Indian rupee has fallen 9.7 percent in the past 12 months, the most among major Asian currencies, according to data compiled by Bloomberg. Japan’s yen has strengthened 6.5 percent in the period, making it the best-performing currency in the region, according to data compiled by Bloomberg.

Yen Options

India is exploring how it could pay Iran in yen, although a plan hasn’t been decided, the people said.

The Persian Gulf nation is studying the option of opening an account in an Indian bank, which can be used by refiners to deposit payments in rupees and fund its own imports from the South Asian country, they said.

India’s central bank needs to give its approval for Iran to open a local account, the people said. The Reserve Bank of India is considering options to solve the payments issue over Iranian oil, Deputy Governor K.C. Chakrabarty said on Jan. 20.

The Gulf nation is concerned that India’s entire crude oil bill can’t be paid through exports to Iran, the people said. Iran’s imports from India are worth about $2.5 billion a year, while its annual oil sales to the South Asian nation are valued at about $9.5 billion, the people said.

Iran also wants India to invest in non-strategic infrastructure projects in return for crude supplies, the people said.

Currency Swap

Last month, Japan agreed to make $15 billion available to India in a currency swap arrangement as Europe’s deepening debt crisis threatened to curtail developing Asia’s access to dollar funding. Japanese Prime Minister Yoshihiko Noda renewed a bilateral swap agreement with Indian Prime Minister Manmohan Singh in New Delhi on Dec. 28. The two nations had signed a $3 billion accord in June 2008 that had expired.

Singh discussed alternative financial conduits with Russian officials during his visit to Moscow in December. India, which got 11 percent of its crude imports from Iran last year, is exploring the option of making payments for Iranian crude through Russia’s Gazprombank OJSC, though no deal has been reached, three of the people said Jan. 9.

Rising Tension

Tensions with Iran have risen, with Vice President Reza Rahimi warning on Dec. 27 that Iran, the second-biggest producer in the Organization of Petroleum Exporting Countries, after Saudi Arabia, may close the Strait of Hormuz if western nations block its crude oil sales.

A potential decision by the EU to freeze Iran’s central bank assets and impose a ban on Iranian oil imports requires unanimous backing among the bloc’s 27 nations. The embargo would hurt Greece, Italy and Spain, which depend on Iranian supplies and would need to find alternative sources.

U.S. President Barack Obama on Dec. 31 signed into law measures that deny access to the U.S. financial system to any foreign bank that conducts business with the central bank of Iran. The law includes language that allows the president to waive the sanctions if he determines they would threaten national security.

India opposes sanctions on Iran from anyone other than the United Nations, Ranjan Mathai, India’s foreign secretary, said Jan. 17. India continues to buy Iranian oil, he said.

hina and Japan plan direct currency exchange agreement

China has been pushing for the yuan to become an alternate reserve currency along with the US dollar

Continue reading the main story

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China and Japan have unveiled plans to promote direct exchange of their currencies in a bid to cut costs for companies and boost bilateral trade.

The deal will allow firms to convert the Chinese and Japanese currencies directly into each other.
Currently businesses in both countries need to buy US dollars before converting them into the desired currency, adding extra costs.
It is the latest step by China as it seeks a more global role for the yuan.
"Given the huge size of the trade volume between Asia's two biggest economies, this agreement is much more significant than any other pacts China has signed with other nations," Ren Xianfang of IHS Global Insight was quoted as saying by the Bloomberg news agency.
China is Japan's biggest trading partner. According to the Japan External Trade Organization, trade between the two countries stood at 26.5tn yen ($339bn; £218bn) in 2010.
More collaboration

Continue reading the main story

“Start Quote

This should encourage Japanese private investment into Chinese bonds, as well as into other Asian emerging currencies”

End Quote Takuji Okubo Societe Generale

The plans were announced during a visit to China by Japan's Prime Minister Yoshihiko Noda and after a meeting with Chinese Premier Wen Jiabao.

The two leaders also agreed to allow the Japan Bank for International Cooperation to issue yuan-denominated bonds in China, the first time a foreign government body has been allowed to do so.
At the same time, Japan said it was also looking to buy Chinese government bonds, a move that analysts believe may prove to be mutually beneficial to both nations.
"By adopting Chinese bonds as a part of official foreign exchange reserves, Japan is labelling Chinese bonds as an investable asset," according to Takuji Okubo of Societe Generale Tokyo.
"This should encourage Japanese private investment into Chinese bonds, as well as into other Asian emerging currencies. Such development in turn should help develop offshore currency trading in Japan," he added.
As for China, Mr Okubo explained that the move will help China further open up its financial markets.
The deal "is a manifest of a higher level of commitment from China to the open-up reform, which would add credibility to the ongoing offshore yuan experiment", he said.
Tripartite agreement? Along with promoting bilateral business ties, China and Japan said they had also made progress on a free trade agreement between China, Japan and South Korea.
The proposed agreement is expected to boost trade between the three nations.
"On a free-trade agreement among Japan, China and South Korea, we've made a substantial progress for an early start of negotiations," Mr Noda said.
China has been pushing for the three parties to speed up talks and proceedings on the deal, especially after Japan showed a keen interest to participate in the Trans-Pacific Partnership Agreement (TPP).
The TPP, a trade pact led by the US, includes Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam.
It is aimed at eliminating tariffs and other barriers to goods and services trade and investment among the member countries to boost growth.