UK losing the peace to Germany ? What would Winston Churchill say to all of this ? Meanwhile Argentina's Kirchner pffers her modest proposal - buy bonds or go to jail ( soon to be a template in Europe , Japan and US ? ) Japan told to play nice with the yen by US ......... Meanwhile , Spain is officially insolvent - get your money out now warns Jeremy Warner !

http://www.zerohedge.com/news/2013-05-11/now-its-britains-turn-choose

Now It's Britain's Turn To Choose

Submitted by Tyler Durden on 05/11/2013 10:51 -0400

• Belgium
 
• European Union
 
• France
 
• Germany
 
• Greece

From Mark Grant, author of Out Of The Box

Now Britan Will Choose And Hopefully Choose Wisely

“An appeaser is one who feeds a crocodile—hoping it will eat him last.”

        -Winston Churchill

Next week the House of Commons is going to vote on whether to stay in the European Union. It will not be an up and down vote on the subject but it will carry the same weight. The moment has finally arrived; at least for the politicians, though not for the citizens yet. I would like to take a moment and remind Mr. Cameron of Mr. Churchill's famous quote; noted above.

Britain may have been an equal partner in the European Union at inception but now they are a vastly minimized member of the clan. The Brits congratulate themselves that they avoided a number of problems by keeping their own currency. I say to my cousins, "Don't be in such a hurry to pat yourselves on the back." The simple truth is the England should never have joined the European Union at all. It was a great mistake that they now pay for not just with their currency but with an outside group trying and somewhat succeeding in running their country. Regulation by regulation, directive by directive; the Germans gain control.

“If you will not fight for right when you can easily win without bloodshed; if you will not fight when your victory is sure and not too costly; you may come to the moment when you will have to fight with all the odds against you and only a precarious chance of survival. There may even be a worse case. You may have to fight when there is no hope of victory, because it is better to perish than to live as slaves.”

       -Winston Churchill

I am not impolite but neither will I ignore the truth and dance around it in the name of proper European etiquette. I have been told, more than once, that it is not socially acceptable to mention the German past or what they are trying to do in the present. Yes, well, I am a tougher boy than that.

We do not even need to get to motivation. It is not necessary to undertake the tricky subject of just what the Germans are trying to accomplish. We can just remain on the surface and avoid that discussion. The simple truth is, for whatever reasons, that the Germans are totally in control of the European Union. Even France, once a partner, has been thrust aside. There are the Germans and then there is everyone else. The ball is called in Berlin and Brussels is just a front for the ambitions of the Germans and to think anything else is a colossal mistake.

If England does not wake up and recognize what is happening then it will be Neville Chamberlin all over again. Appeasement is never a good answer and today no war is threatened just financial domination. Over time, if Britain remains in the European Union, they will get pushed down into the mud, lose their ability to govern themselves, watch as their financial institutions get trampled by Frankfurt. The Germans will force them into a space presently occupied by Greece, Slovenia and Cyprus. Retribution for two World Wars will finally be won in Berlin.

In Europe today there are no tanks rumbling through the countryside. There are no bullets being fired across anyone's boundaries. What there is, however, is a war of domination and control being fought with money and the German's are winning the battle.

I will go further; there is no longer a European Union. The concept now exists just in name only. There is a German Reich and a bunch of appeased nations that cling to it. Money and trade are both the carrots and the sticks and Berlin uses both side of this coin effectively. It is a very clever ploy; Germany prospers as their neighbors suffer and the capital of a Continent is used to prop up the ambitions and lifestyle of a single nation.

Next week the British will decide for themselves as is their current right. However, my friends, if you decide incorrectly you may no longer be granted the right to make such a decision again as Brussels declares your right to decide "Verboten" sometime in the future. The directive may come from Belgium but the policy will be formulated in Berlin. Choose wisely now while you are still allowed to choose.

http://www.zerohedge.com/news/2013-05-11/argentinas-modest-proposal-buy-bonds-or-go-jail

Argentina's Modest Proposal: Buy Bonds Or Go To Jail

Submitted by Tyler Durden on 05/11/2013 11:29 -0400

• Barclays
 
• Bond
 
• Borrowing Costs
 
• Capital Markets
• Central Banks
 
• Corruption
 
• European Union
 
• Fail
 
• Gross Domestic Product
 
• Japan
 
• Nationalization
 
• New Normal
• Nikkei
 
• Purchasing Power
 
• Real estate
 
• Switzerland

While Argentina's recent extraordinary attempts at central planning have been widely documented, ranging from freezing supermarket prices in a (failed) attempt to control inflation, to banning advertising in a (failed) attempt to weaken the private media, so far nothing has worked at stabilizing the economy and preventing the collapse in the domestic currency (if leading to such humorous viral videos as #mequieroir). Ironically, this is both good and bad news. It is good news because as we showed two days ago, even the ludicrous speed rise in the Nikkei has been a snail's pace compared to that other unknown "Nation 1." We can now reveal that while Japan is Nation 2, Nation 1 is that inflationary basket case Argentina, and specifically its Merval stock index.

Of course, the surge in the stock index is nothing more than a reflection of the ongoing collapse in the economy, which in turn is reflected not by the official, government controlled exchange of the ARS (just try buying dollars at the official rate) which closed the week at a rate of 5.24 to the dollar, then certainly the black market one, showing just how weak the currency is for those who actually want to buy dollars in Argentina, which just hit a record high of over 10. In fact, as the chart below shows, when one factors in the 80% collapse in the real, unofficial exchange rate over the same time period, the stock index has barely kept up.

Furthermore, it is merely a time before the runaway inflation pushes corporate input costs so high, that not even the rise in the stock market can preserve wealth.

Still think soaring stock prices in the New Normal are an indication of anything but a collapse in the economy manifested by either current, or discounted, plunges in the purchasing power of a sovereign's currency?

And just to make sure there is no confusion, the full context here is that while the rest of the G-0 world at least has each other's central banks to fund mutual debt purchases, Argentina has been locked out from the global community for a variety of reasons. And yet, like any other Keynesian follower, the nation is desperate to borrow from the future in order to grow government now. However, without access to capital markets how will the country with the imploding currency do this?

Simple. 

Argentina's president Kirchner, a keen observer of recent events in Cyprus, has figured out a way to kill two birds with one stone, namely attempt to put an end to tax evasion, and fund the capex of the recently nationalized state oil company YPF (now that its former owner, Spanish Repsol, is less than keen to keep investing in its former Argentine subsidiary). To do that she will present the local tax-evading population (pretty much anyone with any disposable income and savings) with a simple choice: buy a 4% bond to fund YPF "growth" or go to prison.

From Bloomberg:

President Cristina Fernandez de Kirchner wants tax evaders hiding about $160 billion in dollars to help finance Argentina’s oil-producing ambitions. Her offer:Buy a 4 percent bond or face the prospect of jail time.

The tax authority announced the plan May 7, highlighting its information-sharing agreements with 40 nations and warning Argentines who don’t use the three-month amnesty window that they risk fines or arrest. Evaders have two options for their cash and the only one paying interest will be a dollar bond due in 2016 to finance YPF SA (YPF), the state oil company. The 4 percent rate is a third the average 13.85 yield on Argentine debt and less than the 4.6 percent in emerging markets.

Speaking of YPF's growth, we made it very clear a year ago when we reported on the latest "banana republic" nationalization of formerly efficient and private assets, that it was only a matter of time before an overarching government's epic misallocation of resources, leads to epic inefficiencies, and a liquidity scramble. It is not rocket science: only hardcore socialists can harbor any hope that a government is efficient at allocating capital, especially when one nets out the 50% or so in corruption "externalities" that are incurred along the way, be it in Argentina or the US. Once again we were right:

A year after seizing YPF, Fernandez is funneling more money into the nation’s energy industry as the government struggles to boost production from the world’s third-biggest shale oil reserves. With Argentina already committed to pumping $2 billion of central bank reserves into a fund for energy investments and the highest borrowing costs in emerging markets keeping it from issuing debt abroad, the government is eyeing the billions of undeclared dollars that Argentines hold to help shore up reserves that have dwindled to a six-year low.

“The authorities need to take steps to open up external resources in the energy sector and to finance the Treasury and local governments,” said Sebastian Vargas, a New York-based analyst at Barclays Plc. “The amnesty is not negative for markets but it’s disappointing because they do little to solve balance-of-payment difficulties.”

There are some cynics who will say what Argentina is doing on a semi-voluntary basis is what that other bastion of wealth expropriation, the European Union, did to Cypriot savers. They will be right of course, if only for the simple reason that Argentina does not know precisely where all the "illegal" tax-evading, offshore (and onshore) capital is held.

Argentines have at least $160 billion of undeclared funds, equal to about 36 percent of the nation’s gross domestic product, and $40 billion are hidden inside the country, Vice Economy Minister Axel Kicillof said at the May 7 press conference where he and other senior officials presented the amnesty.

Many Argentines hide assets to avoid a 35 percent income tax and a levy of as much as 1.25 percent on their personal wealth. Undeclared assets are also beyond the reach of the government, which in 1989 seized bank certificates of deposit in exchange for bonds and in 2002 converted dollar deposits into pesos.

In other words, unlike in Europe, where Russia's 'tax-efficient' billionaires had a bright shining red light blinking over Cyprus saying "we are here" (a light that is now blinking over Luxembourg, Lichtenstein and of course, Switzerland, not to mention other global offshore tax havens), in Argentina the government first has to find the money. Which is why its initial recourse is the conventional one: simple threats.

Those joining the plan would be immune from prosecution and won’t be forced to pay past-due taxes, said Ricardo Echegaray, head of the tax agency. The search for evaders, which includes cross-checking information on income and personal wealth reports with purchases of real estate and cars, foreign travel and credit card purchases, will continue, Echegaray said.

“You better bring your dollars back because we will find you,”Echegaray said at the May 7 press conference. Last year, tax collection in South America’s second-largest economy rose to 37 percent of gross domestic product from 16.5 percent in 2002, according to Economy Ministry data.

Former Vice Economy Minister Roberto Feletti, who is now a congressman for Fernandez’s Victory Front alliance, said the government expects to attract at least $5 billion under the program.

Good luck with that - the only thing Argentina will succeed is in forcing tax evaders to hide their money even deeper into the global shadow economy.

The amnesty program will probably fail because its benefits don’t outweigh investors’ mistrust of the government’s ability to rein in inflation, cut spending, attract foreign investment and restore confidence in the currency, according to Moody’s Analytics Inc.

“The problem the government faces is lack of credibility and lack of confidence,” Juan Pablo Fuentes, an economist at Moody’s, said in a telephone interview from West Chester, Pennsylvania. “That money is potentially there, it could come back eventually, but there needs to be a lot of changes. These bonds are not going to have any real impact.”

And in the meantime YPF, which can't afford to wait on capital infusion, will have less and less cash with which to operate and grow, until finally it is mothballed, dimming the one bright light in Argentina's economy, and leading to an even faster economic contraction, even more rapid devaluation of the Peso, if only in the black market of course, and an ever faster surge in inflation.

But at least the stock market will be off the charts: sounds like a fair exchange for yet another economy sent to an early grave by central planners.

Japan not a currency manipulator ? 

http://www.telegraph.co.uk/finance/economics/10049676/G7-US-warns-Japan-to-stick-to-rules-on-currency.html

G7: US warns Japan to stick to rules on currency

Japan is pushing the boundaries of international agreements to avoid competitve currency devaluations, the US Treasury Secretary has warned, as the International Monetary Fund said unprecedented monetary easing could lead to a "serious boom and bust".

There has been concern among policymakers that Japan is engineering an export-led recovery that could hinder other regions' ability to grow. Prime minister Shinzo Abe vowed to "free [Japan] from deflation" when he was elected last December, and the country's central bank has since issued a new wave of ultra-loose monetary policies, dubbed "Abenomics". Photo: AP

By Szu Ping CHan, and agencies

3:40PM BST 10 May 2013

41 Comments

Jack Lew said that Japan had "growth issues" that needed to be addressed, but that its attempts to stimulate its economy needed to stay "within the bounds" of international agreements to avoid competitive devaluations.

"I'm just going to refer back to the ground rules and the fact that we've made clear that we'll keep an eye on that," Mr Lew told CNBC.

The yen sank to a fresh four-year low against the dollar on Friday, a day after it pushed beyond the psychologically important 100 yen mark. Kathleen Brooks, research director at Forex.com, said that it would "take an almighty dollar negative event" to push the dollar back below the 100 level.

The dollar weakened slightly to 101.37 yen after a closely-watched speech by US Federal Reserve chairman Ben Bernanke on Friday made no mention of the central bank's plan to taper quantitative easing purchases, but managed to told on to yesterday's gains.

Japan insisted its tumbling currency would not be a hot topic at the G7 meeting of finance chiefs in London this weekend, despite revived rhetoric about a currency war.

"The Bank of Japan isn't targeting currency rates, which are determined by the markets," said Haruhiko Kuroda, Japan's central bank governor.

There has been concern among policymakers that Japan is engineering an export-led recovery that could hinder other regions' ability to grow. Prime minister Shinzo Abe vowed to "free [Japan] from deflation" when he was elected last December, and the country's central bank has since issued a new wave of ultra-loose monetary policies, dubbed "Abenomics".

Meanwhile, officials from the IMF said it was monitoring risks that cash from monetary easing could drive asset bubbles.

"There is a risk of overheating of domestic economies, so we have to pay close attention to this risk," said IMF Deputy Managing Director Naoyuki Shinohara. "There are some warning signals, but it is not up to the level to ring alarm bells," he said.

Yuko Kinoshita, assistant to the director of the IMF's regional office for Asia and the Pacific, warned of a potential spike or "bubble trend" in asset prices.

"If these are not controlled, there could be a serious boom and bust cycle," she said.

http://blogs.telegraph.co.uk/finance/jeremywarner/100024476/spain-is-officially-insolvent-get-your-money-out-while-you-still-can/

Spain is officially insolvent: get your money out while you still can

By Jeremy Warner Economics Last updated: May 10th, 2013

1218 Comments Comment on this article

I'd not noticed this until someone drew my attention to it, but the latest IMF Fiscal Monitor, published last month, comes about as close to declaring Spain insolvent as you are ever likely to see in official analysis of this sort. Of course, it doesn't actually say this outright. The IMF is far too diplomatic for such language. But that's the plain meaning of its latest forecasts, which at last have an air of realism about them, rather than being the usual dose of wishful thinking.

Let's take the projected budget deficit first. This is expected to decline quite steeply this year to 6.6 per cent of GDP, but that's mainly because the cost of bailing out the banking sector fell substantially on last year's budget. On a like-for-like basis, there has in fact been very little fall in the underlying deficit. And nor on the present policy mix is there ever likely to be, for that's where the deficit is projected to remain until the end of the IMF's forecasting horizon in 2018.

Next year, the deficit is expected to be 6.9 per cent, the year after 6.6 per cent, and so on with very little further progress thereafter. Remember, all these projections are made on the basis of everything we know about policy so far, so they take account of the latest package of austerity measures announced by the Spanish Government.

The situation looks even worse on a cyclically adjusted basis. What is sometimes called the "structural deficit", or the bit of government borrowing that doesn't go away even after the economy returns to growth (if indeed it ever does), actually deteriorates from an expected 4.2 per cent of GDP this year to 5.7 per cent in 2018. By 2018, Spain has far and away the worst structural deficit of any advanced economy, including other such well known fiscal basket cases as the UK and the US.

So what happens when you carry on borrowing at that sort of rate, year in, year out? Your overall indebtedness rockets, of course, and that's what's going to happen to Spain, where general government gross debt is forecast to rise from 84.1 per cent of GDP last year to 110.6 per cent in 2018. No other advanced economy has such a dramatically worsening outlook. And the tragedy of it all is that Spain is actually making relatively good progress in addressing the "primary balance", that's the deficit before debt servicing costs.

What's projected to occur is essentially what happens in all bankruptcies. Eventually you have to borrow more just to pay the interest on your existing debt. The fiscal compact requires eurozone countries to reduce their deficits to 3 per cent by the end of this year, though Spain among others was recently granted an extension. But on these numbers, there is no chance ever of achieving this target without further austerity measures, which even if they were attempted would very likely be self defeating. IN any case, it seems doubtful an economy where unemployment is already above 25 per cent could take any more.

In the past, the IMF has been guilty of being far too optimistic about Spain, both on the outlook for growth and the public finances, so it's possible it is now committing the reverse mistake of undue pessimism. Yet somehow I doubt it. Spain is chasing its tail down into deflationary oblivion.

All this leads to the conclusion that a big Spanish debt restructuring is inevitable. Spanish sovereign bond yields have fallen sharply since announcement of the European Central Bank's "outright monetary transactions" programme. The ECB has promised to print money without limit to counter the speculators. But in the end, no amount of liquidity can cover up for an underlying problem with solvency.

Europe said that Greece was the first and last such restructuring, but then there was Cyprus. Spain is holding off further recapitalisation of its banks in anticipation of the arrival of Europe's banking union, which it hopes will do the job instead. But if the Cypriot precedent is anything to go by, a heavy price will be demanded by way of recompense. Bank creditors will be widely bailed in. Confiscation of deposits looks all too possible.

I don't advise getting your money out lightly. Indeed, such advise is generally thought grossly irresponsible, for it risks inducing a self reinforcing panic. Yet looking at the IMF projections, it's the only rational thing to do.

PS. I don't include creditors of the British arm of Santander in this warning, who are ring fenced from the mothership back bome in Spain, theoretically at least.