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- Another “Wikileak” of a confidential NSA intercept, and yet another crucial insight into the vision not only behind the Obama administration’s desperate push for the Trans Pacific Partnership, but the strategic thinking – if one may call it so – when it comes to the entire US approach to global trade and commerce. Which may well explain why global trade has been imploding in recent years, masked first by just US QE and then by QE from all “developed” central banks.
- The synopsis:
- Intercepted communication between French Minister-Counselor for Economic and Financial Affiars Jean-Francois Boittin and EU Trade Section head Hiddo Houben, reveals Boittin’s discontent with U.S. approach towards a WTO pact. Additionally Houben stated that the TPP (being an American initiative) seems devised as a confrontation with China.
- EU Officials Perceive Lack of U.S. Leadership on Trade Issues, Skeptical of Pacific Initiative (TS//SI//OC/NF)
- (TS//SI//OC/NF) Washington-based EU trade officials ascertained in late July that the U.S. administration is severely lacking in leadership when it comes to trade matters, as shown by the absence of a clear consensus on the future course of the WTO Doha Development Agenda (DDA). French Minister-Counselor for Economic and Financial Affairs Jean-Francois Boittin expressed astonishment at the level of “narcissism” and wasteful contemplation currently on display in Washington, while describing the idea of scrapping the DDA in favor of another plan–which some U.S. officials are seen to favor–as stupefying. The Frenchman further asserted that once a country makes deep cuts in its trade barriers, as the U.S. has done, it no longer has incentives to offer nor, as a consequence, a strong position from which to negotiate with emerging nations. Boittin’s interlocutor, EU Trade Section head Hiddo Houben, after noting the leadership void in the Office of the U.S. Trade Representative, declared that with regard to the disagreement within his host government on DDA, a political decision must be made about what direction is to be followed. On another subject, Houben insisted that the Trans-Pacific Partnership (TPP), which is a U.S. initiative, appears to be designed to force future negotiations with China. Washington, he pointed out, is negotiating with every nation that borders China, asking for commitments that exceed those countries’ administrative capacities, so as to “confront” Beijing. If, however, the TPP agreement takes 10 years to negotiate, the world-and China-will have changed so much that that country likely will have become disinterested in the process, according to Houben. When that happens, the U.S. will have no alternative but to return to the WTO. Finally, he assessed that this focus on Asia is added proof that Washington has no real negotiating agenda vis-a-vis emerging nations, including China and Brazil, or an actual, proactive WTO plan of action.
- 1,000 Greek bank branches chanced a stampede in order to open their doors to the country’s retirees on Wednesday.
- The scene was somewhat chaotic as pensioners formed long lines and the country’s elderly attempted to squeeze through the doors in order to access pension payments.
- As Bloomberg reports, payouts were rationed and disbursals were limited according to last name. Here’s more:
- It’s a day of fresh indignities for the people of Greece.
- About a third of the nation’s depleted banks cracked open their doors after being closed for three days. But all they did was ration pension payments, hours after the country became the first advanced economy to miss a payment to the International Monetary Fund and its bailout program expired.
- On the third day of capital controls, a few dozen pensioners lined up by 7 a.m. at a central Athens branch of the National Bank of Greece, an hour before opening time. They were to receive a maximum of 120 euros ($133), compared with the average monthly payment of about 600 euros. Many left with nothing after the manager said only those with last names starting with the letters A through K would get paid.
- “Not only will I have to queue for hours at the bank in the hope of getting 120 euros, but I’ll have a two-hour round trip,” said Dimitris Danaos, 77, a retired local government worker who was making the bus journey from his home outside the Greek capital to the suburb of Glyfada.
AFP has more color:
- In chaotic scenes, thousands of angry elderly Greeks on Wednesday besieged the nation’s crisis-hit banks, which have reopened to allow them to withdraw vital cash from their state pensions.
- “Let them go to hell!” said one pensioner waiting to get his money, after failed talks between Athens and international creditors sparked a week-long banking shutdown.
- The Greek government, which closed the banks and imposed strict capital controls after cash machines ran dry, has temporarily reopened almost 1,000 branches to allow pensioners without cards to withdraw 120 euros ($133) to last the rest of the week.
- The move has again sparked lengthy queues at banks across Greece — and outrage from many retirees who are regarded as among the most vulnerable in society, exposed to a vicious and lengthy economic downturn.
- Under banking restrictions imposed all week, ordinary Greeks can withdraw up to 60 euros a day for each credit or debit card — but many of the elderly population do not have cards.
- Another customer, a retired mariner who asked not to be named, told AFP he had no cash to buy crucial medicine for his sick wife.
- “I worked for 50 years on the sea and now I am the beggar for 120 euros,” he said.
- “I took out 120 euros — but I have no money for medication for my wife, who had an operation and is ill,” he added.
- Here’s a look at the scene at National Bank in Athens courtesy of The Telegraph:
- As we outlined in detail earlier this morning, the latest polls show a slim majority of Greeks plan to vote “no” in the upcoming referendum (which, as far as we know, will still go on). Many analysts and commentators say a “oxi” vote would likely lead to a euro exit and with it, far more pain for the country’s retirees.
- Indeed, as we noted on Tuesday in “For Greeks, The Nightmare Is Just Beginning: Here Come The Depositor Haircuts,” Goldman has suggested that only once Syriza’s “core constituency of pensioners and public sector employees” sees the cash reserves (to which they have heretofore enjoyed first claim on) run dry, will they “face the direct implications of the liquidity squeeze the political impasse between Greece and its creditors has created. And only then will the alignment of domestic political interests within Greece change to allow a way forward.”
- And so, as sad as it is, the scene that unfolded today in front of the roughly one-third of Greek bank branches which opened their doors to pensioners, may have been preordained by the powers that be in Burssels because as we said yesterday evening, breaking Syriza’s voter base may have been necessary in order for the Troika to finally force Tsipras to relent or else risk being driven from office, after capital controls and depositor haircuts force public sector employees to collectively cry “Uncle”, beg Europe to take it back, and present Merkel with Tsipras and Varoufakis’ heads on a proverbial (and metaphorical, we hope) silver platter.
- It’s deja vu all over again.
- Just hours after Greece became the first developed country to default to the IMF, as a result being expelled from its existing bailout program, a little before 5am CET news hit that Greek PM Tsipras was willing to concede to virtually all creditor demands, with a few exceptions. As the FT first reported, “Greek prime minister Alexis Tsipras will accept most of the bailout creditors’ conditions offered last weekend, but is still insisting on a handful of changes that could thwart a deal according to a letter he sent late on Tuesday night.”
- The two-page letter to the heads of the European Commission, International Monetary Fund and European Central Bank and obtained by the Financial Times, elaborates on Tuesday’s surprise request for an extension of Greece’s now-expired bailout and for a new, third rescue rescue worth €29.1bn.
- The letter was sent as eurozone central bankers were preparing on Wednesday to raise the heat on Greece and its banks by restricting their access to emergency loans, a decision that could topple at least one Greek bank.
- Although the bailout’s expiry at midnight Tuesday night means the extension is no longer on the table, Mr Tsipras’ new letter, which marks a significant climbdown from his previous position, could serve as the basis of a new bailout in the coming days.
- Eurozone finance ministers are due to discuss Mr Tsipras’ new proposal in a conference call at 5:30pm, Brussels time (4.30pm BST).
- Mr Tsipras’ letter says Athens will accept all the reforms of his country’s value added tax system with one significant change: keeping a special 30 per cent discount for Greek islands, many of which are in remote and difficult-to-supply regions.
As Bloomberg added, “The letter is the latest indication that Tsipras may be more willing to yield to prevent the nation’s economy from cratering after more than five years of crisis-fighting. Today, euro area finance ministers will weigh the bid from Tsipras, while European Central Bank policy makers will discuss whether to maintain their emergency lifeline.”
- And as per the WSJ, “in the new letter sent to the country’s lenders late Tuesday night, Greek Prime Minister Alexis Tsipras proposes changes on several key parts of measures at the center of a five-month standoff between the two sides over funding Greece desperately needs.”
- Those include a later start of pension overhauls and exceptions on sales-taxes for certain Greek islands, measures that lenders already rejected when talks broke down last week.
- “If Friday’s proposals (from creditors) are the baseline, these measures would significantly increase (the) fiscal gap,” said one official. “And lots of clarifications would be needed on other aspects,” the official added.
- A second official said that the proposals from Mr. Tsipras are a weakening of the measures that have been discussed and would not be well received by the three institutions that oversee eurozone bailouts–the European Commission, the European Central Bank and the International Monetary Fund. A third official echoed that assessment.
- A senior Greek government official said that the Greek government was not planning to send additional proposals with more concessions on Wednesday.
- The letter is the latest in a flurry of drama over the bailout. In the last week, Greece has called a referendum on demands made by creditors and closed its banks to stop a flow of money out of the country. On Tuesday, it became the first developed country to default on the IMF, as the rescue program that has sustained it for five years expired.
- Curiously, this happens even after news that in one of the first polls conducted since the referendum announcement a majority of the Greeks would be willing to side with Tsipras gambit and vote No:
Efimerida ton Synatkton poll:
– 54% Greeks plan to vote NO
– 33% Greeks plan to vote YES
— Open Europe (@OpenEurope) July 1, 2015
- And yet, the question is: just what offer is Greece conceding to – the one which expired yesterday? And then there is also the question whether Europe is even willing to budge at this point, since it goes to the very core of the matter: just who is it that wants a Grexit (recall: according to Goldman, a Greek exit is just what the ECB wants to boost QE).
- To be sure the first countr headlines from the Troika were anything but supportive.
- EURO ZONE SOURCE SAYS TSIPRAS LETTER CONTAINS ELEMENTS MINISTERS WILL FIND HARD TO ACCEPT.
- Schauble made it quite clear that the Greek offer has now expired, and “any further negotiations on aid to Greece would be more difficult and fall under the European Stability Mechanism, which incidentally is just what Tsipras had requested overnight. He had a few more comments:
- SCHAEUBLE SAYS SECOND LETTER FROM TSIPRAS HAS ACHIEVED NO CLARITY
- SCHAEUBLE: TALKS BEFORE GREEK REFERENDUM MAKE NO SENSE
- SCHAEUBLE SAYS ACCORDING TO IMF RULES, GREECE IS INSOLVENT, IMF CAN NO LONGER PAY OUT AID
- SCHAEUBLE SAYS SEES NO UNCONTROLLABLE RISKS TO GERMAN BUDGET DUE TO CURRENT DEVELOPMENTS, INCLUDING FROM GREECE
SCHAEUBLE SAYS NOTHING CHANGED IN FACT THAT THERE WAS NO AGREEMENT BETWEEN GREECE, CREDITORS BY MIDNIGHT
- SCHAEUBLE SAYS OLD EFSF PROGRAMME FOR GREECE HAS EXPIRED, NOW A NEW ESM PROGRAMME WOULD BE NEEDED WITH DIFFERENT CONDITIONS
- SCHAEUBLE SAYS THERE IS NO BASIS TO HAVE SERIOUS NEGOTIATIONS WITH GREECE AT MOMENT
- SCHAEUBLE SAYS GREECE HAS TO MAKE CLEAR WHAT IT WANTS
- SCHAEUBLE SAYS WE ARE IN A COMPLETELY NEW SITUATION WITH GREECE, WE ARE ALWAYS READY TO TALK
- Others joined in: Reuters cites Italy’s PM who said that Greek Prime Minister Alexis Tsipras announced plans for a referendum on European bailout conditions for political reasons and the vote is “highly risky.”
- Austria’s FinMin Schelling said should the Greeks vote no in a referendum on Sunday on whether to accept Athens’ creditors’ bail-out terms, no new talks would be possible with the cash-strapped nation. “If Greece votes no, no further talks will be possible,” he said on the sidelines of an economic event.
- More from Reuters:
Euro zone officials said a letter sent to creditors by Greek Prime Minister Alexis Tsipras on Tuesday contained conditions for Athens’ acceptance of a loan offer that at least some governments would find hard to accept.
The letter, seen by Reuters on Wednesday, said Greece would accept terms published by the European Commission on Sunday but with a number of amendments, including maintaining a reduction on value-added tax for Greek islands and maintaining a pension supplement for the richest beneficiaries for the time being.
“There are still a lot of loose ends,” one euro zone official said. “The letter mentions, for example, reform of the labour market from autumn. It’s just one sentence, not more.
“I don’t think the Eurogroup still believes those promises just like that. By the way, they’re asking for the extension of a programme which has already expired.”
- But the biggest hurdle by far is that Greece still seems intent to proceed with the Referendum. Clearly at this point withdrawing the popular vote would be political suicide for Tsipras who just two days ago, full of bluster, addressed the nation and saying it would not be blackmailed. Flipping on that position would hardly win him any popularity points.
- Which begs the question: is this merely the latest ploy in the blame game, in which Greece can say: look, we tried absolutely everything, and they still did not budge, just to assure a “No” vote.
- Ironically, it is Europe who now appears to desire a referendum as much as Greece.
- And what happens then?
- To be sure, many “game theoretical” elements and nobody really has any idea what happens next as the Grexident unfolds.For now, however, at least the algos are happy if gradually fading the initial kneejerk bounce higher even as the EUR has now seen right through this latest diplomatic ruse and fallen back to unchanged since before the announcement.
- And just as promised earlier in the week, Greece has now passed the midnight deadline for repayment of the €1.6 billion bundled loans due to the IMF and in thus in default.
- Yes we are fully aware that using the pejorative term ‘default’ makes us members of the ignorati, but what else do you call it when you fail to pay back a contracted debt in a timely fashion? (and don’t say ‘arrears’) Anything else is semantics.
- *IMF SAYS GREECE FAILED TO MAKE PAYMENT DUE TUESDAY
- *IMF TO CONSIDER GREEK REQUEST FOR PAYMENT DELAY IN DUE COURSE
- *IMF BOARD INFORMED THAT GREECE IS NOW IN ARREARS
- “I can also confirm that the IMF received a request today from the Greek authorities for an extension of Greece’s repayment obligation that fell due today, which will go to the IMF’s Executive Board in due course,” IMF spokesman Gerry Rice says in e-mailed statement.
- This is the first time an advanced economy has defaulted to The IMF and is by far the largest default The IMF has ever faced.
- Below is the full list of countries who are (ahem Zimbabwe) or have been in “protracted arrears” to the IMF in the past. Greece is now officially on this list.
- And as AP reports,
Greece’s international bailout formally expires, country loses access to existing financing.
- What happens next:
- And therefore Greece is poised between remaining a member of the eurozone or leaving it. In fact, as WSJ’s Stephen Fidler explains, there are five possible future currency arrangements for Greece. Here they are…
1. Greece stays in the eurozone: This is the option likely to cause the smallest short-term disruption to the Greek economy. The Greek central bank would retain access to liquidity from the European Central Bank, and the Greek banks would stay on life support. This looks increasingly likely to be accompanied by some kind of further negotiated debt relief. To get it, Greece would almost certainly have to agree to more conditions of the sort successive Greek governments have found it hard to accept.
2. Greece keeps the euro, but sits outside the eurozone:Jacob Funk Kierkegaard of the Peterson Institute for International Economics in Washington calls this the “Montenegro option” and argues this is the most likely outcome should Greece exit the eurozone. This would not be “a new drachma, but Montenegro—i.e. Greece becomes just another relatively poor unilaterally euroized non-EU Balkan economy,” he writes here. In some ways, this would be the worst of all worlds because Greece would lose access to the ECB. Countries using a foreign currency as legal tender have no access to a lender-of-last-resort, which means that every bank liquidity crisis becomes a solvency crisis. They therefore tend to have stunted domestic financial sectors — which almost every academic study shows is bad for growth — or have a banking system owned by foreigners, which exports the lender-of-last resort role to other countries’ central banks. (Mexico didn’t adopt the dollar after the 1994-95 financial crisis — but in order to avoid an undue shrinkage of its banking sector, it allowed most of its banks to be bought by foreigners.)
3. A currency board: In this case, Greece would create a new currency but lock it to the euro – as Estonia did with the German mark in 1992 after it gained independence from the Soviet Union. The amount of new drachmas in circulation would be limited by the size of Greece’s international reserves: about $5.8 billion at the last count. Advocates argue that this would impose discipline on the Greeks — poor economic policies lead to an outflow of reserves and therefore of the domestic monetary base, which pushes up drachma interest rates, while good policies have the reverse effect. The drawback is that again the central bank is limited in its lender-of-last resort powers because it cannot create money freely. It also imposes discipline that, for now, may make it look unappetizing to Greece’s current rulers. It’s not much talked about, has a few enthusiastic and long-standing cheerleaders, but is a theoretical possibility. Here’s Steve Hanke arguing in favor.
4. A dual system: Here the drachma and the euro would circulate side-by-side. This has many historical precedents going back centuries. In practice, a dual system is likely to emerge when the Greek government runs out of euros and has to pay its domestic bills in government IOUs. The IOUs could at some future date be redeemed in euros, or could be eventually redeemed in drachmas, but they would initially be euro-denominated obligations of the government that would have a lesser value in the public mind than euro notes or coins. This state of affairs could continue for a long time, but there is an economic tendency called Gresham’s Law: ”Bad money chases out good.” Over time, euros would disappear from circulation because people would hoard them as a store of value – and people would spend the government IOUs. De facto, the drachma, whether or not it would so be called, would become the main means of exchange.
5. The new drachma: The move to the new drachma may well not come with a bang, but gradually — as described in 4 above. But an eventual formal switch of the currency would give Greece control over its own monetary policy. However, a new currency — which would likely float against the euro and other major currencies — would likely create enormous short-term disruption, not least because a heavy devaluation would follow and the banks would in effect be insolvent. Longer-term, it could be a motor for future growth of the Greek economy — because it would stimulate demand for Greek exports by lowering in real-terms the price of goods and services produced in Greece. Longer term, the effects of a devaluation depends on the quality of economic policies that accompany it. It will create inflation, by increasing the costs of imports. One important issue is how much the government raises wages and pensions to compensate for higher inflation. The more domestic wages and pensions are allowed to rise, the less impact the devaluation will have in simulating Greek exports longer term and the lower the benefits to economic growth.
- You’re probably sick of hearing about Greece, so today we’ll offer up something completely different. Every quarter we review a raft of unusual and less examined datasets with an eye to refining and adding perspective to our more traditional macroeconomic analyses.
- This quarter’s assessment of everything from large pickup truck and firearms sales to Google search autofills for “I want to buy/sell” shows a U.S. economy that is reasonably strong but growing only very slowly.
- The chief areas of concern: Food Stamp participation is still very high at 45.6 million Americans (14% of the total population) and indicators like used car prices and large pickup sales are flat.
- One good piece of news going into the July 4th long weekend: our Bacon Cheeseburger Index – a proxy for popular food prices – is down 3.7% from last year, led lower by declining bacon prices (down 18%).
If you are in the investment game for a few years or more, you pick up enough in the way of economics knowledge to be dangerous. You can quote the difference between U-6 and U-3 unemployment with ease, outlining a whole range of theories about which one the Fed really watches more carefully. You can quote the yield on the 10 U.S. Treasury versus its German and Japanese counterparts and what those spreads have done in the last few weeks. And no one parses a Fed statement like you can… Seriously. No one.
- But how about some real world questions to test your knowledge of, well, the real world that Americans actually inhabit? You know – like actual people. Not the world of statistics and trend graphs. For example, do you know:
- The price of a pound of ground beef? Your first answer should not be a price. It should be a question: chuck or beef? Yes, there can be a difference, usually based on the amount of lean meat in the grind. The U.S. Bureau of Labor Statistics survey of food prices for May shows a price of $4.31/lb for “Chuck” and $4.14/lb for beef, up 15-19% over last year.
- The price of a new Chevy Silverado full-sized pickup truck? As with beef, this is a trick question. You should ask: what towing capacity, and are we talking 2 door, double cab, or crew cab? Short box or standard? A real work truck, with crew cab, standard bed and V-8 is $40,211 according to the company’s website. Add the bucket front seats and a nice stereo and you are at $42,000, before applicable sales taxes. For reference, a reasonably equipped Mercedes C-Class sedan is about the same price.
- How much is dinner at Cracker Barrel? No tricks this time – and there are over 600 locations to choose from, so don’t tell me you’ve never heard of the place. The “Country Dinner Plate” is $7.69, which includes a main dish (choices include fried chicken livers and 2 interpretations of a catfish fillet), two sides and corn muffins or buttermilk biscuits. You can check out their website for other menu items – they all look like good home cooking to me.
Now, none of these will ever be market-moving information, but chances are good that you now have a few more heuristic wrenches for your economic tool box. A shiny new pickup truck with a contractor’s company name on the door shows that business is good. Like the better part of $50,000 new truck good. And two pounds of ground beef in the supermarket is close to $10 – real money to most Americans.
- In this spirit of staying connected to things actual consumers do, every quarter we review a range of “Off the grid” economic indicators. We don’t expect anyone will be reworking their econometric models to incorporate them. That’s not the point. Rather, they are meant to provide a series of windows into the actual state of the U.S. economy. We’ve included several charts and graphs immediately after this note, but here is a summary of the data.
- U.S. Supplemental Nutrition Assistance Program. Despite the notional recovery of the American economy since 2010, there are just as many Americans enrolled in SNAP (once known as food stamps) as July 2011: 45.6 million men, women, and children as of March 2015 (most recent data available). The good news, such as it is, is that this number is down from the peak of 47.7 million in June 2013. Of the current enrollees in the SNAP program, 16 million (35% of the total) are children. That number was just under 10 million in 2007.
- Our takeaway: one of the most vivid examples of how stretched many American households remain and a worrisome fact if the U.S. economy experiences an economic shock in the next few years.
- Used Car Prices. The price of 2-3 year old used cars has stayed remarkable firm since 2011, according to Manheim Auto Auctions proprietary sales data. This goes counter to many “Smart money” calls for the value of used cars to decline over the last 12 months. This is important because buoyant used car prices help support new car sales through strong trade-in values.
- Our takeaway: one of the most important positives for U.S. auto industry, not only with respect to new car sales, but also low payment terms on leases and even used car financings.
- Background Checks for Firearm Sales. The current year may well set a new record for the number of instant background checks for firearm sales, as tracked by the Federal Bureau of Investigations. As of May 2015 (latest data available), the run rate stands at 21.5 million. That is higher than the 21.1 million of 2013, which is the current record. Not every background check results in a sale, but in our experience most of them do. Prior to the Financial Crisis, annual background check counts never exceeded 10 million. Since 2007, there have been over 100 million such checks with the majority certainly representing a firearm sale. There are approximately 250 million adults in the U.S.
- Our takeaway: obviously a deeply contentious issue throughout the country, it pays to remember that firearms are not cheap and buying one is a reasonably large financial outlay. The typical rifle or shotgun is several hundred dollars, and the most popular full-power rifle in America – the AR-15 – costs over $1,000 new. So we are talking about a lot of money spent on firearms in 2015 and the continuation of a trend that is now almost a decade long.
- Precious Metal Coin Sales. The U.S. Mint publishes their sales for gold and silver coins on a monthly basis, and both are pretty slack at the moment. The dollar value of 1 ounce gold coins (Eagles) is just $52 million on a rolling 6 month basis, right where it was in early 2009. At its peak, the Mint was moving close to $200 million/month on average in mid-2013. Silver coin sales show a similar trend, with an average of $57 million/month sold over the last 6 months versus over $100 million/month average in mid-2011.
- Our takeaway: precious metal coin sales spike when Americans grow concerned over the health of the global financial system. Those concerns seem to be at a low tide just now. We’ll see what the Greek debt negotiations might do to that confidence, as well as when and if the Federal Reserve chooses to increase interest rates.
- U.S. Mutual Fund Flows. Despite a pretty consistent bull market for U.S. stocks since March 2009, mutual fund investors have been just as consistent at reducing their holdings of this asset class. The second quarter of 2015 continues the trend, with $34 billion in outflows for April and May. Much of that money went to overseas equities (at least on a net basis), where funds dedicated to those investments saw $30 billion of inflows.
- Our takeaway: prior to 2007, mutual fund inflows and absolute performance were tied at the hip. This is no longer the case, with stronger flows into international equities and fixed income funds. This quarter simply continued that trend, which we view as largely demographic.
- Job Quits and Consumer Confidence. As we point out in our monthly JOLTS review, the percent of workers who quit versus being fired is a strong indicator of near term consumer confidence as measured by the University of Michigan survey. As the accompanying chart shows, confidence has run out ahead of quits.
- Our takeaway: consumer confidence is set for a near term decline to match the long term relationship with quits.
- Pickup Truck Sales. We use full sized pickup truck sales as a proxy for the health of small business in America. Since the Financial Crisis, monthly sales of such vehicles have risen from 70,000/month to over 170,000/month now. The most recent readings, however, show zero percentage growth from last year.
- Our takeaway: Ford is in the middle of a major changeover of its full sized pickup product, and supply issues have slowed production and limited availability. For example, Ford dealers have 83 days supply versus 88-92 for GM and 89 for Dodge. We’ll have to wait another few months to see if the slowdown in full sized pickup truck sales is permanent or simply supply-related.
- Google Autofills. One of our favorite “Off the grid” indicators, this simply lists the top items Google suggests for simple phrases like “I want to buy” or “I want to sell” when entered into the company’s search engine. On the “Buy” side, “House” and “stock” routinely trade places for #1 – this time around “House” wins. And, thanks to Mad Men (I am told by reliable sources), “The world a coke” is in second place this quarter. The most commonly entered things people want to sell: “Car”, “House” and “Kidney”. Yes, the last one makes a regular appearance in these lists, along with “Hair” and “eggs”.
- Our takeaway: not much change here since mid-2013, showing a healthy level of demand for traditional items. And it is illegal to sell your kidney. Hair and eggs are legal, however.
- Bacon Cheeseburger Inflation Index. Saving the best for last, we average the price changes from the Consumer Price Index for beef, cheese and bacon. This time around, bacon is down 18% year on year, but beef (at least according to the CPI) is up 10%. Cheese is basically unchanged (down 1.1%). That means that the cost of a bacon cheeseburger is 3.7% lower than a year ago, a welcome change from the +10% increase last year at this time.
- Our takeaway: With so many pockets of food inflation rearing their heads this July 4th weekend, enjoy something that is cheaper than Independence Day 2014. I will take mine medium well, please.
So enjoy the barbeque and try not to think about the Greek drama for a few days. It will be here when you get back. Promise.
- While perhaps not on the scale of China or Russia assistance, Turkey has thrown its hat into the Troika-Greece farce by offering financial assistance to its embattled neighbor. As ekthimerini reports, “We are ready to help Greece survive its economic crisis with cooperation in tourism, energy, trade,” Turkish Prime Minister Ahmet Davutoglu said and Turkey’s left-wing parties showed solidarity by adding, “we believe that apart from imposing austerity policies on peoples of Europe, there can be more reasonable agreements.” While no aid has been asked fro Turkey says it is ready to evaluate options.
- As ekathimerini reports,
- Turkey on Tuesday said it was “ready to help” Greece out of its escalating financial crisis as its embattled neighbor edged closer to default.
- “We are ready to help Greece survive its economic crisis with cooperation in tourism, energy, trade,” Turkish Prime Minister Ahmet Davutoglu said in the capital, Ankara.
- “We want Greece to be strong… Therefore Turkey will be positive toward any proposal for cooperation,” he said in televised comments.
- Davutoglu added that a Turkish delegation would travel to Greece for a high-level cooperation meeting as soon as possible to consider joint steps on the financial crisis.
- Turkish Economy Minister Nihat Zeybekci said on Monday if an official proposal for financial aid is made by Greece, “we will evaluate it.”
- Turkey’s left-wing and Pro-Kurdish Peoples’ Democratic Party (HDP) also issued a message of solidarity with Greece, saying: “We are together with the Greek people and their government in their struggle for justice, equality and democracy and against austerity.”
- “We believe that apart from imposing austerity policies on peoples of Europe, there can be more reasonable agreements, which will be acceptable,” said the co-chairs of HDP, considered the Turkish equivalent of Greece’s ruling SYRIZA party.
It seems Greece has friends after all, and as we ‘joked’ previously:
Greece really just needs a DIP not bigger than $10 billion to last it 6 months. Should be easily 5-6x oversubscribed in 24 hours
— zerohedge (@zerohedge) June 28, 2015
- Perhaps Turkey will provide the DIP?
- Meanwhile, work goes on with other options… Greece hasn’t sought aid from Russia, support wouldn’t hurt, Energy Minister Panagiotis Lafazanis tells in intw with Russia’s state TV channel Rossiya 24.
- Lack of money from EU isn’t end of world
Greece expects EU to be reasonable, sees too much pressure from Brussels now
Lafazanis reiterates that accord with Russia on gas link isn’t aimed at Europe
Greece might get “hundreds of millions of euros” from Russian gas transit after link starts in 2019
- Update: EU finance ministers will reportedly hold a teleconference shortly to decide on Greece’s bid for an ESM loan. “Group of euro-area finance ministers have responsibility to choose whether to approve Greece’s bid for two-year bailout program from European Stability Mechanism,” Bloomberg reports, citing an unnamed EU official.
Extraordinary Eurogroup teleconference tonight 19:00 Brussels time to discuss official request of Greek government received this afternoon
— Jeroen Dijsselbloem (@J_Dijsselbloem) June 30, 2015
- With a sovereign default now just hours away, both Greece and Europe may be starting to second guess the decision to open Pandora’s Box with both sides cancelling press events citing “emergency meetings”. The latest headlines have Greece requesting an ESM bailout and pressing for debt restructuring.
- GREECE ASKS FOR 2-YR BAILOUT PROGRAM FROM ESM: PM’S OFFICE
- GREECE ASKS FOR FINANCING, DEBT RESTRUCTURING: PM’S OFFICE
- GREEK GOVT WILL SEEK VIABLE AGREEMENT WITHIN EURO: PM’S OFFICE
- Dijsselbloem Cancels TV Interview Due to Urgent Obligations
- Greek Govt Cancels Press Briefing Citing Emergency Meetings
- More, from Bloomberg:
Greek govt submitted request to European Stability Mechanism today for a two-year agreement, which will fully cover country’s financing needs and includes debt restructuring at the same time, according to an e-mailed statement from the PM’s office.
Greek govt will strive for a sustainable agreement within euro area; that will be the message of a No vote to a bad deal in Sunday’s referendum Referendum isn’t the end of negotiations, but the beginning of talks under better terms for the Greek people; Greece remains at the negotiating table
- To which we said:
And now the rejection
— zerohedge (@zerohedge) June 30, 2015
- Sure enough:
- MERKEL SAID TO SEE NO NEW GREECE TALKS, MUST AWAIT REFERENDUM
24 minutes https://t.co/OzXKXfxCa1
— zerohedge (@zerohedge) June 30, 2015
- Meanwhile, German lawmakers — who have grown increasingly frustrated with Chancellor Angela Merkel’s lenient negotiating tactics — are aggravated with the stream of headlines emanating from Athens and Brussels (via Bloomberg again):
It’s quite surprising that there are new proposals coming out of Brussels,” says Volker Kauder, parliamentary leader of German Chancellor Angela Merkel’s party.
“Things haven’t changed: Greece has broken off negotiations, there will be a referendum and the second aid program is expiring tonight.”
- And as usual, the ultimate decision will rest in the hands of the Germans.
Germany’s voting rights (27.0716%) give it a blocking minority in ESM – Tsipras may have to resign as price of a deal
— Bruno Waterfield (@BrunoBrussels) June 30, 2015
- May as well spoil the ending of what happens at midnight local time today. Nothing (as previously reported). From Reuters:
- GREEK FINANCE MINISTER SAYS GREECE WILL NOT PAY IMF ON TUESDAY.
- U.S. STOCK INDEX FUTURES PARE GAINS SLIGHTLY FOLLWING GREEK FINANCE MINISTER’S COMMENT THAT GREECE WILL NOT PAY IMF ON TUESDAY
To which Merkel had a prompt reply:
- MERKEL SAYS GREECE’S BAILOUT RUNS OUT AT MIDNIGHT
The default may be in the books, but the bluff continues: can Greece default in the Eurozone as Varoufakis has claimed all along, or will the collapse of the Greek banking system tomorrow after the ECB makes the ELA illegal topple the government? Find out in a few short days.
- For years we have mocked Venezuela’s economy (if not its long-suffering population): it got so bad, we even did a visual summary of selected Venezuela headline posts we wrote over the years.
- Most of these were expected, and in line with the transformation of any normal nation to a socialist utopia. None were more poignant than the images of supermarkets and grocery stores that have been ransacked empty as a result of the collapsing currency, devastated supply chains and soaring inflation (supermarkets which have since imposed fingerprint scanners in what is no longer capital but food controls).
- We are sad to announce that what was once a Venezuela trademark has now transitioned to a country that until recently was among the most developed nations in the west: Greece.
- As we noted yesterday, in clear rejection of Tsipras’ plea for calm, the Greek population stormed (now empty) ATMs, grocery stores and gas stations as they scrambled to obtain, or convert, paper currency into tangible products.
- This morning, the NYT picked up on the realization that for Greece ATM runs were last week’s story. Now, it’s all about the “Supermarket Sweep”… and hoarding. To wit:
Beside the lines at A.T.M.s, people were also lining up at gas stations and in grocery stories. In the small town of Spata, outside Athens, residents had stripped grocery shelves bare by Saturday night. The local Shell station had run out of regular unleaded and had only premium gasoline to sell. “Doom,” the gas attendant responded, when asked to describe the mood.
The frenzy at gas stations across the country prompted Greece’s largest refiner to issue a statement assuring that there would be enough supply…
- And this is how Athens is slowly starting to look like Caracas.
— Julia Damianova (@JuDamianova) June 29, 2015
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