Counter Gambit: Greece Votes NO On Referendum, Euro Falls By Over 1 Percent

(Bloomberg) — Greece voted against yielding to further austerity demanded by creditors, leaving Europe’s leaders to determine if the renegade nation can remain in the euro.

With 85 percent of votes counted, 62 percent of voters backed Prime Minister Alexis Tsipras and his Coalition of the Radical Left, or Syriza, by voting “no” to the latest proposals for spending cuts and tax increases. Thirty-eight percent voted “yes,” less than opinion polls predicted, according to results from the Interior Ministry.

The verdict turns the tables on German Chancellor Angela Merkel and her counterparts across Europe, who must decide if a financial rescue of the region’s most indebted country is still possible. It significantly raises the chances of a Greek exit from the single currency, as the country’s banks run out of cash and its economy staggers toward all-out collapse.

On the news of the overwhelming no vote to Europe, the Euro fell by over 1%.

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And S&P and Dow futures are down over 1%.

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Now comes the counter gambit. The IMF, etc will likely return will a counter proposal. And unless the ELA (emergency lending) increase is approved by the ECB, Greeks are likely to see deposit haircuts to preserve the banks. And maybe even if emergency funding is approved!

Stay tuned!

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Note to Greeks: I would not burn the Euro currency until you find out if Drachmas are being printed!

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Greek Scalping Rumor? Greek Banks Will Give 30 Percent Haircuts To Depositors Above €8,000 (Varufakis Denies It)

Twas the day before the Greek referendum … and all hell is breaking loose in Athens.

The Financial Times reports “Greek banks prepare plan to raid deposits to avert collapse” which was met with denial by Greek Finance Minister Yanis Varoufakis. In other words, Greek banks may be considering a Cyprus solution, where Cyrus levied a 47.5% haircut (aka, taking) of deposits with more than 100,000 euro in Cyprus’ two largest banks.

Greek banks are preparing contingency plans for a possible “bail-in” of depositors amid fears

The plans, which call for a “haircut” of at least 30 per cent on deposits above €8,000, sketch out an increasingly likely scenario for at least one bank, the sources said.

A Greek bail-in could resemble the rescue plan agreed by Cyprus in 2013, when customers’ funds were seized to shore up the banks, with a haircut imposed on uninsured deposits over €100,000.

It would be implemented as part of a recapitalisation of Greek banks that would be agreed with the country’s creditors — the European Commission, International Monetary Fund and European Central Bank.

“It [the haircut] would take place in the context of an overall restructuring of the bank sector once Greece is back in a bailout programme,” said one person following the issue. “This is not something that is going to happen immediately.”

Greek deposits are guaranteed up to €100,000, in line with EU banking directives, but the country’s deposit insurance fund amounts to only €3bn, which would not be enough to cover demand in case of a bank collapse.

With few deposits over €100,000 left in the banks after six months of capital flight, “it makes sense for the banks to consider imposing a haircut on small depositors as part of a recapitalisation. . . It could even be flagged as a one-off tax,” said one analyst.

If the rumor is true, a 30% haircut is better than Cyprus’ 47.5% haircut; at the same time, Greece would be going after the small fish.

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The Bloomberg poll on the Greek referendum is about 50-50. When banks open on Tuesday after the referendum, Greeks may be in for a BIG surprise, that is, the ones that haven’t already withdrawn their pensions and savings already.

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Of course, many private creditors have flown the coup since 2009,

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leaving global taxpayers on the hook.

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Have a Happy US Independence Day!

Big Trouble In Big China: Shanghai Stock Market Index Drops 5.77 Percent In One Day (And 29 Percent Since June 12)

China’s stock markets are having a bad second half of June and beginning of July. The Shanghai stock exchange has lost 1479.435 points (or 29%) since June 12.

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It’s a shame that even Jack Burton can’t save Big China from plummeting stock prices.

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On a side note, I had the privilege of sitting across the aisle on a plane trip from Phoenix to Los Angeles from actor James Hong (who played David Lo Pan in the movie “Big Trouble in Little China). What a nice person!

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Sweden: The Country With The Dragon Tattoo (Repo Rate Declines To -0.35 Percent)

Sweden is not doing too well these days.  The Central Bank of Sweden has lowered their prime repo rate to -0.35%.

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Sweden’s sovereign curve continues to remain negative in short maturity bonds along with several other European countries. The lowest, of course, being Switzerland.

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Well, maybe not a dragon. but something has Sweden snake bitten.

Speaking of snake-bitten, France isn’t doing too well in terms of unemployment (called “jobseekers.”)

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Americans Not In The Labor Force Jumps By 640,000 To 93.6 Million (Participation Rate Drops To 1977 Levels)

The June Jobs Report is out today and Federal Reserve Vice Chairman Stanley Fischer must be thrilled! Americans NOT in the Labor Force jumped by 640,000 to a whopping 93.6 million. Remember, according to Fischer, America is need full employment. So, Americans NOT in the labor force keeps rising as a percent of the potential labor force (NOT in labor force + labor force) and is above 37% at 37.35%.

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Other jobs-related information is not very good either. While the U3 unemployment rate dropped to 5.3%, the broader U6 unemployment rate is still above 10% at 10.5%.

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Labor force participation fell to 1977 levels.

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Wage growth? There was none in June. And the average hourly wage growth YoY FELL to 2.0%. So much for the vaunted “wages will rise!” meme.

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223,00 jobs were added in June which was less than expected, but that is a drop in the bucket compared to the 93.6 million NOT in the labor force.

Tune into CNBC and Fox Business and you will hear the talking heads singing “Keep Your Sunny Side Up”

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Fed’s Brainard says Fed examining possible drop in market liquidity (huh?)

(Reuters) The U.S. Federal Reserve has launched a study to see if U.S. Treasury markets are being hampered by a lack of liquidity, an issue some investors and others have cited as a potential risk to financial stability, Fed board member Lael Brainard said on Wednesday.

Brainard, speaking at a financial conference in Austria, said events like the sharp swing in U.S. bond prices last October and earlier this year in the market for German bonds added to anecdotal evidence that markets for the world’s safest assets are less deep and less liquid than they had been.

If true, she said, that could cause trouble in times of financial stress if investors cannot freely buy and sell safe haven bonds at other than fire-sale prices.

Sorry, Lael, are you saying that there may not be enough liquidity in the bond market?

You are aware the M1 Money Supply doubled since 2008 while M2 Money Supply increased by 50% since 2008.

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And The Fed’s Balance Sheet has exploded in size going along with a near zero Fed Funds Target rate.

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But here is the real problem Ms. Brainard. Wage growth has stagnated, real median household income is back at 1990 levels, labor force participation is falling, all which is causing M2 Money Velocity to crash.

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She went on to raise a red flag over high frequency traders (HFTs), but ignored the fact that … nothing is really working. Or at least not working too well. Except for creating asset bubbles.

There is so much liquidity sloshing around the banking system that it reminds me of the old Bobby Darin song.

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Central Bank Humor! Fed Vice Chair Stanley Fischer Claims That US Near Full Employment!

After sweating through several days of the expected Greek default, it is nice when the Central Bankers provide us with humor to help keep our sanity.

Federal Reserve Vice Chairman Stanley Fischer claims that the USA is finally near full employment!

Well, the number of people NOT in the labor force is greater than 37% of the labor force + those NOT in the labor force.

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37+% NOT in labor force is near full employment? Stan, you crack me up!

“And here is another one .,,”

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