The Catalan Integrative Co-op

SUBHEAD: A cooperative organization designed to transfer away from capitalism to sustainability.

By Ruby Irene Pratka on 16 November 2017 for Shareable -
(https://www.shareable.net/blog/new-report-shines-light-on-groundbreaking-catalan-cooperative)


Image above: Meeting of CIC participants. From (http://commonstransition.org/catalan-integral-cooperative/).

An intriguing blueprint for a post-capitalist world is gradually being built in a converted spa in Barcelona, Spain. Founded by the Catalan dissenter Enric Duran, who made headlines in 2008 after “borrowing” thousands of Euros from Spanish banks and donating it to social causes, the Catalan Integral Cooperative  (CIC) is a wide-ranging operation which encompasses diverse services: a financial co-op, a food pantry, a legal-aid desk, an open-source tool workshop, and a bed-and-breakfast for tourists in a medieval watchtower.

It has developed its own local exchange currency — the eco — and launched a cooperative credit mechanism for funding social projects.

A readable and eye-opening new report commissioned by the P2P Foundation and the Robin Hood Coop for Commons Transition summarizes the co-op’s numerous projects and wide-ranging ambitions.

The goal of the Catalan Integral Cooperative (“Integral” is a Spanish word best translated as “holistic”) is to build an anti-capitalist cooperative structure not just for the benefit of its own fee-paying members, but for the Commons as a whole.

“The main objective of the CIC is nothing less than to build an alternative economy in Catalonia capable of satisfying the needs of the local community more effectively than the existing system, thereby creating the conditions for the transition to a post-capitalist mode of organization of social and economic life. …

It is the conviction of the CIC that the goods required for satisfying the basic needs of society should be freely accessible social goods, rather than commodities,” the author George Dafermos writes.

Like many co-ops, the CIC resists hierarchical organization; about a dozen committees manage its day-to-day activities. The co-op itself has more than 2,000 members, whose levels of involvement vary from paid committee members to freelancers (auto-ocupados), to the many subscribers to the CIC’s local product exchange networks.

The product exchanges provide local farmers and other producers with a market and allow the cooperative to fund its operations with a small percentage from each sale.

The cooperative was formed seven years ago and since then has enjoyed rapid growth. Dafermos spent two months in 2016 studying the CIC, its projects and its aspirations.

“It’s an amazing and crazy thing, unlike anything I’ve ever seen before,” he says. “On paper, it doesn’t really exist, but at the same time, it creates legal entities which allow people, mostly young professionals, to do their own thing. It’s a highly ideological co-op meeting practical needs.”

In other words, the CIC thinks globally and acts locally.

The nerve center of the CIC is AureaSocial, a converted spa in downtown Barcelona which serves as a co-working and workshop space and houses a CIC-run library and food pantry in addition to headquarters.

Its daughter projects, including the bed-and-breakfast (called SOM Pujarnol), a tool lab (maCUS), and a self-managed cooperative community, are spread across Catalonia, attracting the interest of increasing numbers of potential members at a key time in history.

The report describes it as a “network of projects” that has a long-term aim of creating a fairer world.

“Young people are seeing less hope now than in the past…if you do get a job in the corporate structure, it’s not appealing,” Dafermos says. “People want to experiment, and that’s why we’re seeing the re-emergence of co-ops in general, and of this one in particular.”

To learn more about the CIC’s activities, read the report here.

See also:
Coopertiva Integral Catalana (english)
Ea O Ka Aina: To find alternatives to Capitalism 8/15/17
Ea O Ka Aina: Adios autos - Children have legs 8/14/17
Ea O Ka Aina: Build a local low-tech internet 9/12/16
Ea O Ka Aina: Chicago Worker Cooperative 10/16/15
Ea O Ka Aina: A Commons Based Economy 6/30/15
Ea O Ka Aina: Cooperatives, Collectives, Commons 4/7/15
Ea O Ka Aina: Economy under a new management 3/1/13

The Greek Butterfly Effect

SUBHEAD: Angela Merkel wanted a concluded Greek deal before markets open on Monday. Now she has a mess.

By North Man Trader on 27 June 2015 for NorthManTrader -
(http://northmantrader.com/2015/06/27/the-greek-butterfly-effect/)


Image above: An illustration of the "Butterfly Effect" in Chaos Theory. From (http://ledaza.com/blog/how-many-butterflies-do-you-have-in-your-company/).

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.

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 everybody else 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 on Twitter:

Democracy deserved a boost in euro-related matters. We just delivered it. Let the people decide. (Funny how radical this concept sounds!) 2:55 PM - 26 Jun 2015

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:

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

And it couldn’t come at a worse time. No, odds are they’re not going to let Greece default. They can’t afford to. The math has to work.

---

Greek Black Monday

SUBHEAD: G-7 and EU banking officials hold emergency calls ahead of Black Monday

By Tyler Derden on 28 June 2015 for Zero Hedge -
(http://www.zerohedge.com/news/2015-06-28/g-7-eu-banking-officials-hold-emergency-calls-ahead-black-monday)


Now that the Greek parliament has given PM Alexis Tsipras’ euro referendum the go ahead (the vote will effectively be a poll on euro membership or, on the choice between sovereignty and servitude if you will, because as the IMF flatly noted on Saturday, the proposal that was supposed to form the basis for the referendum will be null and void by the time Greeks go to the polls) and now that Greeks have pulled another €1 billion plus from the ATMs, capital controls are all but certain early next week, especially now that the ECB has frozen the ELA cap. This means the crisis, to use Irish FinMin MIchael Noonan’s words, “has now commenced” and a “Lehman weekend” is indeed underway.

Against this backdrop, multiple “emergency” meetings have been scheduled for Sunday as EU officials scramble to figure out how best to deal with what is likely to be a turbulent week and to consider the financial impact a potential Grexit will have on the currency bloc, its member nations and institutions, and on the global financial system as a whole. Here’s Bloomberg with more:

G-7 deputies to hold conference call Sunday to discuss development of Greek crisis, Handelsblatt reports, citing unidentified euro region official.

Purpose is to inform non-European govts

European banking supervision officials also will hold conference call on situation of Greek banks and possible impact of Greek developments on European financial system

Euro Working Group to hold evening conference call

European Systemic Risk Board to convene immediately after ECB Governing Council meeting: Skai TV

And more from Handelsblatt (via Google translate):

Because of the impending bankruptcy of Greece are on Sunday a series of crisis talks planned. The most industrialized countries (G7) wanted throughout the day to advise on a conference call, said a representative of the Euro zone the Handelsblatt.

The conversation should at Deputy level, ie between the state secretaries, take place. It serves mainly to inform the non-European governments on the developments in the Greek crisis.

In addition, was also a Sunday teleconference of European Banking Supervisors (SSM) planning, told the Handelsblatt. There are representatives of the European Central Bank (ECB) and the national supervisory authorities. In the Phone Unlock should be advised on the situation of Greek banks and the possible impact on the European financial system, it said.

Meanwhile, German Chancellor Angela Merkel is set to confront lawmakers in Berlin on Monday and apprise them of the latest developments in the Greek drama. Over the course of the last two months, political support for continued aid to Athens has worn thin among German MPs, while influential Finance Minister Wolfgang Schaeuble has at every turn expressed reservations about the lengths Europe has gone to in order to keep Greece afloat. Here's Bloomberg again:

"German Chancellor Angela Merkel will brief leaders of German parties and parliamentary groups on Monday at 1:30 p.m., her spokesman Steffen Seibert says in e-mailed ."

Expect some lawmakers to ask how exposed Germany is to a Greek default. After all, given Berlin's role as the EU paymaster and the country's massive TARGET2 credit with the ECB, Germany stands to lose the most (financially anyway) from a potential Grexit, considering EFSF contributions and the country's share of committed ECB credit lines. Once more, via Bloomberg:

German public coffers face loss of at least EU80b from a Greek default, lawmaker Gunter Krichbaum, chairmanof European Affairs Committee in lower house of parliament, tells Leipziger Volkszeitung newspaper. Amount includes exposure to bailout mechanisms, ECB measures.

And indeed, Germany's financial 'obligation' to assist its ailing EU 'partner' may persist long after Grexit, because as we've warned repeatedly, the economic malaise that will almost certainly accompany default and redenomination will create a political and social crisis, the magnitude of which will likely necessitate outside intervention. With that, we'll leave you with the following, again from Bloomberg, citing Gunter Krichbaum:

Lower house of parliament may have to meet during summer recess to vote on measures related to Greece. German lawmakers may need to approve “humanitarian aid” because a Greek default may ignite unrest.

.

Solar Dreams - Spanish Realities

SUBHEAD: We need to deurbanize and localize, return to the countryside, and to use draft animal force.

By Andrew Nikiforuk on 1 May 2013 for The Tyee  -
(http://thetyee.ca/News/2013/05/01/Solar-Dreams/)


Image above: Three power tower plants at the Solucar Platform in Seville, Spain. From (http://www.worldalldetails.com/Pictureview/1386-Seville_Spain_Three_power_tower_plants_at_the_Solucar_Platform.html).

"We had a lot of hopes and now we're more skeptical."

That's how Pedro Prieto, a 62-year-old global telecom engineer and solar entrepreneur, sums up Spain's famous solar revolution.

Spain's renewable dream, of course, began as sunny-multi-billion-dollar boom. Quasi-religious images of fields of photovoltaics and radiant concentrated solar towers wowed North American greens. (Concentrated solar uses 624 mirrors to focus radiation to a receiver that heats steam to drive a turbine.)

But the revolution rapidly collapsed into a messy economic bust that has left more questions than answers. Moreover, Prieto and his Spanish compatriots are still counting the unpredictable casualties of the nation's stalled energy transition.

Now the engineer is no stranger to solar power. As a telecom engineer he has worked with photovoltaic panels in remote locations since the 1970s. Nor is he a cheerleader for fossil fuels. As the co-founder of the Spanish Association for the Study of Energy Resources, Prieto has long advocated abandoning oil before its volatile pricing and pollution leave the globe in financial and atmospheric chaos.

Since 2004 he has designed, consulted and helped to build more than 30 megawatts (MW) of solar photovoltaic (PV) plants. He even manages, operates and partially owns a PV plant that spills one megawatt of juice (enough to power up to 1,000 homes) onto the national electrical grid in the province of Extremadura.

Given his vast technical experience Prieto also consults with governments around the world on solar renewable prospects. And he has also teamed up with ecologist Charles Hall to produce a provocative book: Spain's Photovoltaic Revolution: The Energy Return on Investment.

These days Prieto ends his presentations, more often than not, by asking to his audience to "pray for alternatives to nuclear."

Prieto is also the sort of guy that practically beams out inconvenient statistics. In 2007 installed solar power amounted to .0006 of the world's electrical consumption and did not keep pace with the growth of electric consumption.

Or as Prieto put it in 2008: "The Energy Consumption Chariot goes over 200 times faster than the Solar Power horses."

Spain, of course, has gained some fame and notoriety as a global solar pioneer. One-tenth in 2009 and one-fifteenth of the world's installed solar power modules now dot the Spanish countryside. But these expansive operations provide but 4.3 per cent of Spain's electricity.

The sun's sheer abundance has always made it the world's most popular renewable form of energy. Of all green alternatives solar energy is the only one whose potential harvest far outstrips the demand for fossil fuels. Enough radiation hits the earth every hour to meet all of the world's electrical needs for a year. By some very optimistic estimates the rapidly growing solar industry could account for 10 per cent of the world's electrical production by 2020.

Sunny Climes
Spain, of course, gets more irradiation than any other European country. The nation's sunny plains and deserts absorb about 1,500 terawatt hours of solar energy every year. That represents at least three times more power than what Spain's 46 million citizens actually consume. (A terawatt hour by the way represents enough energy to operate one billion washing machines.)

But achieving that goal might come with some staggering financial costs, significant land disturbance as well as disappointing energy returns. Prieto has even come to view solar power in its current big industrial mindset as just "another extension of fossil fuels."

And he's not short of examples. The sun is renewable but photovoltaics are not. Just to make the silicon used to trap the sun's rays on manufactured wafers requires the melting of silica rock at 3,000 Fahrenheit (1,649 Celsius). And the electricity of coal-fired plants or ultrapurified hydrogen obtained from fossil sources provide the heat to do that. It also takes a fantastic amount of oil to make concrete, glass and steel for solar modules.

But Spain's interest in renewables is no mystery. Not only does the world's 14th economic power rely on fossil fuels more than any other European nation (consumption has doubled in the last decade), but it suffers from a 90 per cent dependency on foreign imports.

This energy servitude combined with the nation's concerns about climate change spurred an unusual revolution in 2004. That's when the government offered generous subsidies or premium tariffs for solar and wind-made electricity added to the national grid. The initiative guaranteed 25-year-long profitable returns of at about 20 per cent for solar entrepreneurs. The government also came up with an inviting mantra, "The Sun Moves Us."

Solar Boom
Within short order farmers signed over orchards and plots of land for solar PV farms. Next came concentrated solar tower installations. Unlike Germany's solar revolution, which planted thousands of modules on rooftops, Spain focused its solar growth on installed ground facilities. They are, says Prieto, much more efficient and easy to maintain.

In response to the subsidies factories making silicon wafers and/or assembling modules popped up like orange trees across the nation. Sensing a financial killing, global banks and pension funds poured money into Spain's solar boom the same way they funded financial derivatives or the shale gas revolution in North America.

By 2008 Spain's solar explosion eagerly swallowed half of the globe's photovoltaic module production. Facing module shortages the country even started to import products from Germany, the U.S. and China.

This unexpected development undermined the goal of growing a renewable Spanish industry, says Prieto. (At one point China-based Suntech, the world's largest solar panel manufacturer, sold 40 per cent of its product to Spain. Last month Suntech declared bankruptcy.)

Meanwhile, the boom surpassed every government electrical target says Prieto. The government set an initial goal of creating 400 MW of power from solar power by 2010. But industry surpassed that goal in 2006-7. "Banks and investment funds treated solar like a financial product. These were the days of wine and roses."

But by 2008 the excesses of the boom became readily apparent. For starters, the government realized that it could no longer subsidize renewables for 25 years to the tune of 2.5 billion Euros a year.

And so it issued new royal decrees cutting promised returns from 46 cents a KW hour to 32 cents for investors. Later decrees forced more reductions putting brakes on the entire solar module industry.

"There have been 15 royal decrees on renewables since 2004," explains Prieto. "Each one tries to fix the unanticipated problems of the last one. Each one is worst than the last. But each decree makes renewables less credible." A raft of lawsuits has predictably clogged the courts.

The Crash
An industry poised for a massive build-up based on guaranteed returns, explains Prieto, then laid off workers as a debt-heavy government cancelled or lowered promised financial returns from the sun. The solar PV sector now estimates that 44,000 of the nation's 57,900 installations are on the verge of bankruptcy.

During the solar "craziness" as Prieto calls it, other problems emerged too. Investors often planted installations of poor quality and design across the landscape. Many facilities weren't even located in the sunniest parts of Spain.

Spain's renewable boom (wind installations now make up 17 per cent of Spain's electricity supply with peaks covering up to 56 per cent) also created havoc with the nation's energy balance. Government investment in natural gas fired plants (a backup for intermittent wind) combined with renewables resulted in overcapacity in the system. Even the nation's nuclear power plants had to power down from 7.7 to 6.7 gigawatts for a while.

"The energy industry is much more complicated and integrated than anyone thought. The left side of Spain's energy planning brain didn't know what the right side was doing."

But what troubled Prieto most were the paltry energy returns of some 57,900 solar plants, both big and small. He reviewed Spain's excellent data on the energy outputs of the nation's solar network and than compared those findings to actual energy inputs. To his dismay Prieto found that solar offered only slightly better returns than biofuels. Or 2.4 to one.

"That is not enough to maintain society as it is today."

His finding surprised many researchers and for good reason. Previous studies put solar returns as high as eight or even up to 30 to one in some cases, or almost on par with conventional oil.

But most of this research used the same sort of best-case scenario modelling typically employed by car industry mileage studies. As long as the roads are flat, the fuel is good, the tires full and the driver competent, then great mileage can be achieved.

But real life experience can be different for car mileage as well as the energy output for solar installations.

Solar power, fossil fuel inputs
Spain discovered, for example, that the earth is rarely flat (a big issue for tracking and directing solar rays in the right direction). Moreover the modules (only 15 per cent efficient on average) rarely perform as expected. Not only do the panels require regular maintenance but constant cleaning to remove films of dust. And they only last 25 years.

But Prieto added together another 24 factors illustrating the industry's profound dependence on fossil fuels. They included road maintenance, rights of ways, module theft, intermittent loads, as well as the cost of natural gas fired back-up stations. In the end he concluded that the solar industry "eats and spends considerable energy."

Moreover countries such as Germany which receive but two-thirds of Spain's sunlight in the best case and on average deploy much less inefficient rooftop arrays will probably have returns one-fifth to one-third lower than Spain.

"Solar installations are dependent on a fossil fuel world and there are difficulties scaling up the power of the sun," says Prieto.

And what does Prieto think of big plans to industrialize the deserts of the U.S. southwest to provide power for the east? Or plans to colonize the Sahara desert of North Africa for European delights?

Not much, he replies sadly. The engineer calculates that just one plan proposed by former French prime inister Nicolas Sarkozy was so big that it was obsolete before it harvested one solar ray. The plan would have covered 400 sq. km of land and burned three to six million tons of coal to erect 1.8 to 3.6 million tons of steel and two to four million tons of glass. Vast amounts of clean water and lakes of desalinated water would have been needed to maintain the plants. Yet the plan would have generated only three per cent of the electricity that nations of the Mediterranean basin now consume. Such a scheme would exchange the political insecurity of oil and gas pipelines with high voltage cable lines.

"It would be far more rational to strive for a world with far lower levels of more localized demand and widely distributed, small and local generation and distribution networks where possible," the engineer concluded in a recent editorial.

Nations as solar plantations
Big Solar would also turn poor countries like Morocco into virtual solar plantations or colonies that feed electrical power to wealthy at a project cost of $60-billion. (Another unrealistic forecast suggests that industrial solar plants in the Sahara could produce enough energy for 100 million homes for half a trillion dollars by 2050. Prieto says this plan, dubbed Desertec would be lucky to achieve 30 per cent of Europe's electrical needs.)

But the big issue for solar is simply scaling up the enterprise to capture enough of the sun's rays to retire just a fraction of fossil fuels. Prieto calculates, for example, that to replace all electricity made by nuclear and fossil fuels in Spain would take a solar module complex covering 6,000 sq. km of the country at the cost the entire Spanish budget (1.2 billion Euros in 2007). It would also require the equivalent of 300 billion car batteries to store the energy for night-time use.

Prieto is not alone in reaching such sobering conclusions. A 2013 Stanford University report, for example, calculated that global photovoltaic industry now requires more electricity to make silicon wafers and solar troughs than it actually produces in return. Since 2000 the industry consumed 75 per cent more energy than it put onto the grid and all during its manufacturing and installation process.

Moreover it won't pay off this energy debt or energy consumed in its construction until 2016. As a consequence, ramping up of industrial solar production produces more greenhouse gases than it saves for nearly a decade. The study also recommended that reducing the fossil fuel inputs for a next generation of photovoltaic systems be a key priority.

"We have to leave oil before it leaves us," says Prieto paraphrasing the famous Fatih Birol quote, "and it is not good for nature or the planet."

Back to the village
"In my opinion we can use solar PV energy, as far as it is available and we can afford it for specific applications," says Prieto. But he now views solar PV systems as "non-renewable energy systems that can only capture a portion of the renewable energies temporarily."

Moreover there is no way solar power can sustain "our present wasteful way of living."

In Spain where nearly a quarter of the workforce sits idle and political unrest smolders in the cities, there is much talk about "La vida buena" or what the French call "decroissance" or degrowth.

The grassroots movement is all about living better by consuming less and sharing more. Prieto suspects the future may be determined more by behavior change than by investments in renewables.

"In general terms, I would suggest we make every possible effort to move towards a lower consumption and lower mobility society," sums up the 62-year-old.

"We need to deurbanize and localize as much as it is possible, and to return to the countryside, as much as it is possible, and to use more animal draft force."

When asked for advice on what other nations should do, Prieto thoughtfully pauses.

"It is difficult to give advice."

.

Splitting the Eurozone

SUBHEAD: There's only one way forward for Europe, and this isn't it.

By Raul Ilargi Meijer on 27 September 2012 for Automatic Earth - 
(http://theautomaticearth.com/Finance/theres-only-one-way-forward-for-europe-and-this-isnt-it.html)


Image above: Detail of map of Europe in the Medieval 13th Century. Click to enlarge. From (http://www.zonu.com/fullsize-en/2009-09-17-794/Medieval-Europe-in-the-13th-Century.html).

As Groucho once put it: "I've had a perfectly wonderful evening, but this wasn't it."

Vaclav Klaus is perhaps the only man out there I've seen so far who says the right things. Well, other than myself, that is. Chest thumping? I'm just worried, and increasingly so, by the level of complacency I witness every single day in whatever it is I see and read about Europe (I read a lot).

People follow stock markets. In the sense that if the markets are doing fairly well, they think everything else must be doing fairly well too (like their own lives). And that's all they do. But you can't gauge European reality through looking at stock markets. That seems to me to be so obvious, and I've written about it numerous times, that the ongoing head in sand blinders become harder to bear every single day. We're not talking about the number of flatscreen TVs the Greeks and Spanish can buy, we're talking about their bare survival.

That head in sand following of stock exchange digits is not smart, not for anyone. It allows for Ben Bernanke to claim he wants to attack unemployment - something that sounds good, beneficial - (but hardly his mandate to begin with), while all he actually does with QE 1,2,3,4,5, n..., is transfer bank losses to the public account. Ditto for Draghi. Central bankers don't help the nations they purport to represent, they represent the banks in those nations. And since the largest banks are multinationals, the central bankers largely represent international banking interests. Not you or me.

Central banks are the ideal conduit for Grand Theft Auto. And they will remain so for as long as the people in the street can be fooled into thinking that it's their interests that are the focus of the bailouts. More jobs, cheaper mortgage loans, that sort of thing. It doesn’t stop, does it? I see a big coordinated push from builders, unions, banks, developers etc. for the yet to be formed new Dutch government to make it easier for more people to borrow more money, in the face of the 5% drop in sales and 8% drop in prices the country saw in 2011.

And tons of people undoubtedly WANT to borrow more. Because they see no connection with the lower prices. On the contrary, they've been fed the idea that lower prices, like the entire recession, is something temporary, so they even see it as an opportunity. To buy more. To buy larger. 10 years ago Dutch home prices rose 20% per year, for years on end. And they all think that is some sort of new normal. Why the builders and banks think so is obvious. Why the buyers do, not so much. They are simply never told what is real. Not by builders, not by banks, and not by the people they voted into government.

Well, here's your reality, homebuyers in Holland and everywhere else in the western world: you're signing up to be shoved into the lower ranks of a pyramid scheme. You will start losing your jobs, your benefits, your pensions, but your debts will remain as high as they are now. And if you can't pay them off, your debts will grow.

Who should take preference when it comes to government protection and information, banks and industries, or the people? The official line of course is that if and when the government makes sure the banks and large industries do well, the people's interests will trickle down and follow. But we have seen five years, at the very least, of proof that this is bogus. You can pour behemoth amounts of money into your banking system, but if its debts are behemoth squared, nothing will trickle down. Oh wait, that's not true. Something will start trickling down. Debt.

The people who are already knee and neck deep in obligations they will never be able to meet, have new debt laden on their shoulders every single day, and more so with every iteration of QE, and they will never be the wiser for it; the poorer all the more, however.

Along the same lines, the EU is trying frantically to keep itself together, and most of all obviously the eurozone. Why? Because it puts the interests of the banks and industries before those of the people, just like the national governments do. It's even working hard to get more power over more aspects of life in member countries, especially financial aspects. Nothing could be worse for member states. Once you give away the freedom your ancestors fought so hard for, you'll have to fight the same battles all over again to get it back.

Look, in the end it's real simple: the Germans and the Dutch don't really want to buy Greek products, they want the Greeks to buy theirs. But there’s no way, never was, that the Greeks can produce all the extra wealth they would need to buy those products. Selling off the Acropolis for cheap was always in the works. Not because the richer countries are so much smarter than the poorer, but because neither understand basic math. After all, how much olive oil can the average German household consume?

Which leads us to the point that Greece doesn't have now, and never had, any long term reason to be in the eurozone. Nor do Portugal, Spain, Ireland and a bunch of other nations, for that matter. Italy is a different case: it simply screwed up big time. Thanks to the Vatican, the Cosa Nostra and all the links in between.

Let's move on to Vaclav Klaus. Again. And again, let me say he's not my favorite man. Not even my fave Czech. He just happens to have the proper words. Here goes, as per Laura Zelenko for Bloomberg:

Euro Can Bear Fewer Members as Czech Leader Calls Greeks Victims

The exit of one or more member states from the euro won’t destroy the monetary union or the project of European integration, Czech President Vaclav Klaus said.

And a Greek departure from the currency would be a “victory” for that country, which has been a victim of the monetary system, 

The Czech Republic, which pledged to adopt the euro as part of its agreement to join the European Union in 2004, is under no official deadline to do so and the question of joining the common currency is a “non-issue” in the country [..]

“I don’t think the euro as a currency disappears,” [..] 

“The issue is whether all of the 17 countries and potentially a few others should be or will be in this system or not.”

[..] the euro- zone system is punishing some countries that would be better off pulling out.

“Greece is a victim of the monetary union,” he said. “It would be much better for them not to be in the straightjacket. It would be a victory for them.”

[..] .. he supports European integration while not embracing the shift towards “unification, centralization, harmonization, standardization” of the whole continent, including the single currency.

“We were aware of the fact that joining the euro system was one of the conditions. But we are quite happy with the fact that there was no timing."

“So perhaps in the year 2074 we can join the European Monetary Union as well,” he said. “No one is pushing us.” [..] 

Poland, which three years ago shelved plans to join in 2013, deems the euro “completely unattractive,” Prime Minister Donald Tusk said in July. Hungary won’t adopt the currency before 2018, Premier Viktor Orban said in March. Bulgaria has indefinitely delayed plans to scrap the lev, Prime Minister Boyko Borisov told the Wall Street Journal [..]

“It’s technically possible,” to manage the departure from a common currency, Klaus said. “It’s not true what all the politicians are saying about disastrous consequences. You have to do it in an organized way. You can’t allow an anarchy situation.”

Before we get back to Klaus, here's a relevant quote from the Guardian:

The Spanish public won't accept a financial coup d'etat

Spanish citizen movements, like those in Greece, Ireland, Portugal, Italy and France have demanded a debt audit, to see who really owes what to whom. Opposition politician Cayo Lara is asking for any bailout conditions to be debated in parliament, while a group called Judges for Democracy are looking at whether the virtual deconstruction of the social state could be unconstitutional.

Every single EU country should have a debt audit, it's just common sense. None are scheduled to have one, Why do you think that is?

What Vaclav Klaus says, and what I've been saying for a while, is that letting, allowing, Greece and other PIIGS to leave the eurozone is not as big of a negative deal as the politicians and bankers make it out to be. Not from the point of view of those countries.

The reason Merkel and Monti et al. keep on holding on to the Armageddon idea is that Greece, Spain, etc. leaving the EMU, will trigger actions in the financial world. There will be credit events, i.e. credit default swaps will have to be settled. Banks, governments, pension funds will have to write down losses. But those losses have already been incurred, they just haven't been put to paper. Creative accounting goes a long way, but not all the way. Of course, the EU and ECB will have to incur and declare losses on their PIIGS bond holdings too.

The only way forward for the EU and the Eurozone is to let the weaker members leave, and to let them do that with grace, respect and dignity. Anything else is not just doomed to fail, it's doomed to incite violence. Europe has a long history, and it doesn't take much to evoke lots of that, any and all of that. Not something to leave in the hands of Mario Draghi, that's for sure.

Look, I'll say it here and now and you can hold it against me on future developments: The EU must, make that capital MUST, not just allow, but facilitate for its weaker members to leave the eurozone. If it doesn't do that, it calls upon itself the wrath of the gods (Europe has lots of those).

As per Draghi and Merkel and Monti et al., they have no plans for that kind of facilitating. Not because they like the Greeks so much, but because their banks would need to - at least partially - come clean; derivatives, don't you know. And those banks are far worse off and much more broke than anyone has been allowed to know.

Unless a sufficiently large number of us wake up in time, as in right now, people will be shot to death in the streets of Athens and Barcelona just so the banks can continue to hide their losses. Is that the kind of world you want to live in? If not, why are you sitting in that chair?

So yeah, you're right, there's more than one way forward for Europe. Most of them lead to futures ugly enough for all of us to reject right out of the bat. The one that doesn't is the only real way, and it requires for all of us, Europeans, Americans, everyone, to stand up and act. Too bad we're too busy counting our pieces of silver and gold.
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EuroVegas to save Spain?

SUBHEAD: Las Vegas billionaire plans to build up to 36,000 room casino hotel complex in Madrid.

By Giles Tremlett on 10 September 2012 for the Guardian -
(http://www.guardian.co.uk/world/2012/sep/10/eurovegas-madrid-sheldon-adelson-las-vegas)


Image above: Sheldon Adelson, gambling billionaire, at his Venetian casino complex in Las Vegas. From original article.

Half a dozen casinos and 12 huge hotels are expected to emerge from farmland around Madrid over the coming decade after the gambling billionaire Sheldon Adelson confirmed he will build a Las-Vegas-style casino strip on the outskirts of the Spanish capital.

A deal to build Europe's biggest gambling mecca has been struck between Adelson and the regional government of Madrid, bringing with it the promise of tens of thousands of construction jobs.
The Spanish capital beat its arch-rival Barcelona in the battle to win the controversial EuroVegas gambling project.

Adelson, the Las Vegas Sands chairman and chief executive, said in a statement released in Las Vegas late on Friday: "The regional government of Madrid has been a strong advocate for this potential development, and we are appreciative of the energy they have brought to this process.
"Barcelona is an outstanding tourism destination, and choosing Madrid over Barcelona was not an easy selection."

However, he announced that Las Vegas Sands was only willing to finance 35% of the multibillion-euro resort, and that it would demand certain changes in local planning laws.

Adelson, rated America's eighth richest person with a net worth of $24.9bn (£15.6bn) by Forbes magazine, visited both Madrid and Barcelona in recent months as negotiations over where to locate the gambling resort progressed.

The project is expected to be half the size of the famous Las Vegas strip, the four-mile stretch of megacasinos in Nevada. It is also expected to be split into a dozen sectors, built one by one, eventually offering some 36,000 hotel beds, although Adelson held back from confirming details of the project on Friday.

Adelson is hoping to attract visitors from around Europe and areas of the former Soviet Union. Gambling would reportedly account for one-third of income.
While the deal may bring jobs to a country suffering 25% unemployment, it has provoked outrage among an unlikely coalition of opponents, including local Catholic bishops and the indignado protest movement.

Local bishops have warned that the complex will bring gambling addiction, bankruptcies and suicides.
Indignado protesters have pointed to reports of investigations by US authorities into allegations of corruption, dealings with Chinese mafia members and failure to report potential money-launderers.
Neither Las Vegas Sands nor Adelson have been formally accused of any of those things, and the company insists it helps investigators with inquiries.

Adelson is one of the chief financial backers of the Republican presidential candidate Mitt Romney. His casino empire stretches to Singapore and Macao, where sales are 13% of local GDP. It runs several Las Vegas casinos, but 90% of profits come from Asia.

Madrid's regional president, Esperanza Aguirre, from the liberal wing of the centre-right People's party (PP), has promised to introduce whatever law changes are needed.

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Europe a 1000 Miles Behind

SUBHEAD: This is a classic Mexican stand-off. Europe can't afford to save Spain, and it can't afford to not save it. By Raul Ilargi Meijer on 9 June 2012 for the Automatic Earth - (http://theautomaticearth.com/Finance/europe-a-thousand-miles-behind.html) Image above: Dragged behind, the dead bull is taken out of Spanish arena. Keep on moving folks!. Nothing left to see here!. From (http://blogs.crikey.com.au/northern/2012/06/03/bullfights-at-nimes-blood-death-and-glory-in-the-arena/).

Production and exports are plummeting in Italy, Holland, Finland, Germany, just about anywhere; in China, production growth falls sharply. But your "leaders" will keep on talking about restoring growth, recovery etc. Spain will - secretly - ask for some $200-300 billion in bank bail-outs on Saturday (and get much less, the Wall Street Journal reports it will be €125), and 24 hours later play its first game in the Euro Cup, for which it's the great favorite.

The potential Spain bailout will need to be financed through EFSF bonds. The IMF has stated that the banks will need €40 billion, but that number looks ridiculously low. €40 billion every week over the entire summer sounds more like it.

Ambrose Evans-Pritchard quotes a few voices:

Is a Spanish bail-out viable?

Megan Greene, from Roubini Global Economics, says Spain's banks will need up to €250bn - a claim that no longer looks extreme. New troubles are emerging daily. The Bank of Spain said yesterday that Catalunya Caixa and Novagalicia will need a total of €9bn in new state funds.

JP Morgan is expecting the final package for Spain to rise above €350bn, while RBS says the rescue will "morph" into a full-blown rescue of €370bn to €450bn over time - by far the largest in world history.

But then there's always that nasty and inconvenient question:

"Where is the money going to come from?" asked Simon Derrick, from BNY Mellon. "Half-measures are not going to work at this stage and it is not clear that the funding is available."

In theory, the European Financial Stability Fund (EFSF) and the new European Stability Mechanism (ESM) can raise a further €500bn between them, beyond the sums already committed to Greece, Ireland, and Portugal. "There is sufficient firepower available. In addition, the EFSF/ESM can leverage resources," said Christophe Frankel, the EFSF's chief financial officer.

In theory, sure, Europe can further leverage and rehypothecate till Kingdom Come. But only in theory. The EFSF depends on international finance markets for their bond issues. Leveraging collateral won't exactly help it build or restore credibility there. And that's not all:

It may not prove so easy to convince global investors to mop up large issues of debt. "Our clients won't touch the EFSF because nobody knows what it really is. They have cut it out of their benchmarks altogether," said one bond trader.

The Chinese issued their own verdict yesterday. The country's sovereign wealth fund said it will not buy any more debt in Europe until the region takes radical steps to restore credibility. "The risk is too big, and the return too low," said Lou Jiwei, the chairman of China Investment Corporation. "Europe hasn't got the right policies in place. There is a risk that the eurozone may fall apart and that risk is rising," he told the Wall Street Journal. The EFSF had hoped to sell yuan "Panda bonds" but this may prove hard.

Eric Dor, from the IESEF School of Management in Lille, said Spain would have to step out of the EFSF as a creditor the moment it asks for funds. This has instant effects on the residual core. Italy's share rises from 19pc to 22pc, and Italy is in no shape to face extra burdens. France's share rises from 22pc to 25pc, and Germany's from 29pc to 33pc.

"The credibility of the guarantees given to EFSF bonds would collapse. This would cause an incredible turmoil on the European sovereign debt markets," he said. [..]

If you think this through, and include Italy ceasing to be a Eurozone emergency fund creditor, with other countries on the verge, you're left with Germany in the not too distant future paying over 50% of what's needed to "save Europe". If the Germans accept that at all (they probably won't), it will do so only with very stringent strings attached, like a much stronger political and fiscal union effectively run by Berlin. There is zero chance of a consensus for that in all member countries.

Any rescue must be a loan to the Spanish state, even if the money goes to the bank restructuring fund (FROB). The cost will push Spain's sovereign debt even higher .[..]

The EFSF had trouble raising funds last year. The spread on 10-year EFSF yields over German Bunds reached 177 basis points in November. Moody's said at the time that the EFSF "cannot meaningfully support the euro area's large government bond markets".

The fund placed a three-year bond last week at 1.116pc, compared with 0.15pc for German three-year debt, or 0.69pc for French debt. In effect, the EFSF is already paying a premium, and that was before the Spanish crisis had fully metastasized.

The permanent ESM may have more luck when it comes into force next month, since it will have €32bn of paid-in capital and a stronger mandate - but it still bears the stigma of EMU break-up talk. "If they want anybody to the buy the rescue bonds, they should make them redeemable in the German currency on the day of the redemption: let us call them D-Mark bonds," said Charles Dumas, head of Lombard Street Research.

The Spain bank bailouts, if they happen, will be a temporary "solution", more like a bank band aid, and it will, for one thing, do absolutely nothing to alleviate the (debt-)pressure on the Spanish government, let alone its regions, which are also miles over their necks in debt (re: China). Nor will it do anything at all to help the over 50% of unemployed young people find jobs.

Which means that all hope of recovery or growth in the Spanish economy remains a lost and lonely mirage for many years to come. Which in turn guarantees that all numbers used to figure out the right number of billions for the banks will turn out to be hugely over-optimistic. And that of course guarantees more talks and more bailouts in the future.

One of the smartest things I read the past week was the assertion that it doesn't make one iota of difference who wins the June 17 Greek elections; just like in Spain, Greece's economy is getting so much worse so fast that any and all treaties concluded in the past will need to be renegotiated regardless of what anyone claims.

The idea is that if the "traditional" parties win, which support the "Troika treaty", all will be fine, but that's just a load of doo-dog-doo. Everything Europe and the IMF have come up with so far has been one too many mornings and a thousand miles behind the reality that underlies what they're talking about in the first place. If they would address the actual reality, nobody would show up at the negotiating table anymore. And the Spanish people would perhaps not quite as peacefully stay home to cheer their team.

So reality is off the cards. No truth for you; word is you can't handle it. And if you can't handle the truth, what are the chances you can handle reality when it catches up with you?

And now that we're asking questions, answer me this one: where's the growth going to come from that your leaders are dangling before you?

Tick 'em off: not from Spain, not from Greece, that's the easy ones. Not from the PIIGS. And not from the FANG countries (Finland, Austria, Netherlands, Germany): their production numbers are falling as we speak. Not from the US, which are hopelessly stuck in their unemployment swamp (officially and unofficially), which have a housing market that has a long way down ahead yet even with (or because of) 40 million underwater "homeowners“, and which have so much government debt only divine intervention would offer solace (which is perhaps why so many Americans attend church). And not from China either, where numbers are falling so hard a soft landing looks like a faraway dream.

This is a classic Mexican stand-off. Europe can't afford to save Spain, and it can't afford to not save it. I've said it before: there is no solution for Europe. In its battle for credibility, it destroys that very credibility, since it has no choice but to expose its weaknesses in the process.

Weaknesses like Germany's potential inability to pay for bailouts. Satyajit Das writes this:

Germany and France can’t afford euro-zone bailout

The standard narrative states that Germany does not want to bail out troubled peripheral nations within the euro zone. The reality is that the more highly rated and larger euro zone members, Germany and France, may not have the necessary financial resources for the task.

• German Gross Domestic Product is €2.5 trillion and its debt levels are around 80% of GDP. French GDP is €2.1 trillion and its debt levels are around 90% of GDP.

• Germany and France’s greatest vulnerability is the large financial exposures arising from the current European debt crisis. Their exposures to the troubled peripheral economies are large. German and French banks have exposures of around €800 billion to the debt issues of peripheral nations.

• The German and French states have indirect exposure through support of various official institutions such as the European Union, European Central Bank, the International Monetary Fund and special bailout funds. As of April, the exposure of the ECB to Greece, Portugal, Ireland, Spain and Italy was €918 billion and rising rapidly, driven by capital flight from these countries.

• German and French guarantees supporting the European Financial Stability Fund are around €200 billion each.

• Germany also has the additional burden via the Bundesbank’s €644 billion exposure to other central banks in the euro zone under the TARGET2 (“Trans-european Automated Real-time Gross Settlement Express Transfer System”), which is designed as a payment system to settle cross-border funds flows.

Surplus countries such as Germany have been forced to use TARGET2 to finance peripheral countries without access to money markets as a way of funding trade deficits and offsetting capital flight. Germany is by far the largest creditor in TARGET2. The Netherlands, Finland and Luxembourg are the other creditors, with all other euro zone countries being net debtors within the system.

.. [greater monetary and fiscal integration] would require mutualization of debt through the issue of euro zone bonds backed jointly or severally by all member states. Germany’s and France’s financial exposure would increase through their liability for euro-zone bonds.

• Germany’s TARGET2 exposure would also continue to increase, at a rate of €80-160 billion annually to finance expected trade deficits in the rest of Europe. The increase in exposure may be higher if needed to finance budget deficits of weaker euro zone members and the anemic banking sector.

• A credible deposit insurance scheme would have to be around €1.3 trillion in size. A European deposit guarantee system, provision of capital or further funding of banks would potentially increase Germany and France’s financial liability.

• If integration is not undertaken or the partial solutions fail, then some European countries will need to restructure their debt and potentially leave the common currency. Germany and France would suffer immediate losses. A Greek default would result in losses to Germany of up to €90 billion. France would suffer losses of up to €65 billion.

The BBC reports that Spain has restated again on Saturday morning that it doesn't need or want a bailout, at least not before a domestic stress test which will be made public 2 weeks from now. However, the EU and ECB want it all done in one week, before June 17, the Greek election. It will be. But once again, nothing will be solved when it is.

Still, the Eurozone countries are stuck with each other and with nowhere to go. But down.

Greece can't leave, or be allowed to leave, because other countries (the PIIGS) would follow. Either of their own will or because the bond markets would force them. It's possible that Germany et al. could at some point think a Greek exit could be controlled, but that would be a huge miscalculation.

Germany can't leave either, and also because other countries would follow. The Netherlands, Finland, Austria, maybe one or two others. France would want to join this group, but the other countries wouldn't want it to. And France would never accept being in the PIIGS group.

The only thing that's certain is chaos.

It's a restless hungry feeling
That don't mean no one no good
When ev'rything I'm a-sayin'
You can say it just as good
You're right from your side
I'm right from mine
We're both just too many mornings
An' a thousand miles behind.
- Bob Dylan

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