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Attack of the Central Banks Points to Impending Recession

attack puppet peopleThe Central Banks went on the move. Within 45 minutes of each other, the ECB lowered interest rates, the Chinese central bank did too and the U.K. just enacted more glorified quantitative easing. BoE increased their asset purchases by £50 billion to a grand total of £350 billion.

While it appears we have a global, coordinated plan of attack by Central banks, one might also notice we have a global coordinated plan to counter an economic slowdown. In other words, by all acting in concert, this gives more confirmation that we have a global economic mini-implosion going on.

We already know a U.S. recession is projected for 2013. The IMF not only scolded the United States but also is warning on a global economic growth downgrade, coming to a press release near you on July 16th.

Ay, Caramba! Spain Asks for a Whoppin' Bail Out

eurozoneWell, it's happened as we earlier said it would. Spain is getting a bail out, worth €100 billion. Guess where that money is going - directly to Spanish banks! The loan is purely to recapitalize the banking system and to be given to Spain's FROB, a financial restructuring fund. From the Eurozone press release:

The Eurogroup has been informed that the Spanish authorities will present a formal request shortly and is willing to respond favourably to such a request.

The financial assistance would be provided by the EFSF/ESM for recapitalisation of financial institutions. The loan will be scaled to provide an effective backstop covering for all possible capital requirements estimated by the diagnostic exercise which the Spanish authorities have commissioned to the external evaluators and the international auditors. The loan amount must cover estimated capital requirements with an additional safety margin, estimated as summing up to EUR 100 billion in total.

The Eurogroup considers that the Fund for Orderly Bank Restructuring (F.R.O.B.), acting as agent of the Spanish government, could receive the funds and channel them to the financial institutions concerned. The Spanish government will retain the full responsibility of the financial assistance and will sign the MoU.

Delightful News Out of Greece This Morning (for bankers)

Traders in New York this morning were greeted with this happy headline from The Wall Street Journal:

US Stock Futures Higher; Buoyed by Greece

greece austerity protestYes indeed, the Dow Jones index is set to open at least 70 points higher because the Greek parliament approved the additional austerity measures demanded by the European Union, the European Central Bank, and the International Monetary Fund. In exchange for €130 million in a second bailout by the “Troika”, as the three lending institutions are called, Greece will have to cut its minimum wage by 22% and the government will have to lay off an additional 150,000 workers. This is in a country that is in its fifth year of recession, with an official unemployment rate of 21%. Business has virtually collapsed, with many private sector companies on the verge of bankruptcy. The health system is so starved for funds that a bacteria resistant to all medicines is raging through hospitals, forcing the chronically ill to decide whether to even risk seeking professional care. Poverty is reaching extreme levels and is well-entrenched among what used to be the middle class. Children are sent to school so hungry that they are fainting in the classrooms. As of last night, the crowds that were storming through Athens and other large cities no longer were content to throw rocks at the police; Molotov cocktails were used to set at least forty buildings in Athens on fire. The police in Athens, facing crowds estimated from 80,000 to 100,000 people, were forced off Syntagma Square, and appeared to have run out of tear gas. Journalists described the business center of Athens as a war zone. The country is slipping into social disorder, if not anarchy. But stock markets in Europe were up today on the happy news that the Greek parliament approved the additional austerity measures.

Greece on the Verge of Default

greek dominoesThe rumors are swirling that a Greek Default is imminent:

Despite strong denials that the country is heading for a default, rumours have grown that the end game is approaching. Wolfgang Schäuble, the German finance minister, has insisted that a sixth, €8bn (£6.8bn) instalment of aid will not be released unless Greece enacts corrective measures to kickstart its economy and improve competitiveness. Experts from Washington and Brussels will fly into Athens this week to assess whether Greece is sticking to its programme of drastic spending cuts and tax rises, amid fears that its creditors could be ready to pull the plug.

Literally there are talks about seizing Greek assets, by force.

Germany’s EU commissioner Günther Oettinger said Europe should send blue helmets to take control of Greek tax collection and liquidate state assets.

Greece, assuming in response, announced a new property tax, collected through electricity bills:

The tax is €4 per square meter (about $0.50 per sq. feet). The government is projecting this levy will make up for the revenue shortfall due to the sharper than expected contraction in the Greek economy.

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