July 6th, 2015
in Op Ed
by Reverse Engineer, Doomstead Diner
The Butterfly's Wings Effect- Small changes in intitial conditions lead to wildly different outcomes in complex systems.
Discuss this Rant at the Podcast Table inside the Diner
...What the Euroclowns are hoping here is that the Syriza Goobermint collapses under the weight of the capital controls, like people unable to withdraw more than €60/day from the ATMs, increasingly long lines at those ATMs, decreasing FOOD available for purchase on the shelves of the local Groger Grocery store, lack of Toilet Paper, etc. IOW, the Eurotrash version of Venezuela. Cut them off from the MONEY, and they will capitulate. No Bombs necessary, the population will riot, the Goobermint will be deposed, and a New Regime of your choice can be dropped in their place, amenable to administering the debt slavery. That's the plan, but it's not clear it will work this time, at least not before the whole EZ is caught up in the contagion. Contagion is really the problem here, not Greece itself.
It's a Chaos Theory problem, and Greece is the Lorenz Attractor in this real life example of the Butterfly's Wings effect. Normally used as an example in the genesis of a Hurricane, what this math shows is that just a small change in a complex system in its initial conditions has a vast effect down the line as those conditions change the state and a cascade of new conditions elsewhere in the system result from that. The Hurricane here is Financial Implosion of the Euro, and Greece is the Butterfly...
For the rest, LISTEN TO THE RANT!!!
Full transcript of this Rant will be available HERE in a few days
Earlier Rants in the Greek Kabuki Souvlaki Series
The Game Continues...
For you Rant Fans, I found a New Gear for this one, and got it into OVERDRIVE by about the 7 minute mark, channeling Peter Finch. A little Charlton Heston for Spice too!
Also, be aware I started the script for this last Friday during the first meetings, so the first part is not about the stupidity today, but a preview of that stupidity.
Greetings Doomfans, and welcome to another edition of the Frostbite Falls Daily Rant, here on the Doomstead Diner.e Believe it or not, FINALLY after around 5 years of Kabuki Theater in the Greek Soap Opera, the Greeks got some cojones and didn't swerve off the road in the Great Game of Chicken with the Banksters from Brussels.
In response to an ever escalating series of threats from Wolfgang Strudle the Kraut Fin Min and Jeroen Diesel-BOOM the EU Fin Min Chairman, along with utterly unpalatable proposals in the “agreement” offered up by the Banksters, Greek PM Alexis Tsipras pushed the Thermonuclear Button. Late last week on Thursday he refused to put his John Hancock on the agreement and instead called for a Snap Referendum of the Greek Population at large on whether he should sign this piece of shit document or not. This of course is precisely what the Banksters DON'T want, they want to negotiate with a few folks and not leave this to democratic decision making, because of course the voters are idiots and can't understand the complexities of High Finance like the Smartest Guys in the Room can.
It's pretty obvious which way the vote will go, because at this point the Greeks hate the “Institutions” (aka the Troika of the IMF, ECB and EU) and the Krauts running that show, but the problem is and always has been that while Syriza has a Mandate to reject further Austerity forced down Greek Throats or up lower orifices, they do NOT have a mandate to leave the Eurozone and drop the Euro as their currency. Even the average dumb ass Spiros Retsina Bottle is probably aware that the minute they start printing New Drachma is the minute it becomes worth less than a roll of Charmin, which likely will become completely unavailable to buy in Greek stores anyhow, and they'll be wiping their butts with Grape Leaves.
What really made this interesting as the weekend developed was that the Greek Fin Min Yanis Varoufakis wrote a Blog on Sunday detailing out what had gone on in the High Level meetings with the Banksters, including how he eventually got his ass excluded from further “emergency meetings” as the Banksters try to figure out how to deal with this clusterfuck.
In his Open Letter, he did a great job hammering home on how the Banksters are not bargaining in good faith, how they are attempting to circumvent the democratic process, and above all how politically impossible it would be for the Syriza Goobermint to accept the proposals they make, which don't do a damn thing to help their constituency, and in fact will only make their problem worse. If they sign off on this document, then it's a guarantee Snap elections are called, and their Goobermint is History in Greece.
So, they need a Mandate from the Greek people saying “Yea, you did the RIGHT thing”, and in fact in the aftermath of rejecting the proposal, Tsipras got a Standing Ovation from the MPs in the Greek Parliament. Finally, somebody had the balls to “Just Say No” to the Troika. Of course, the results of this complete breakdown of negotiations is already having HUGE ripple effects as I write this portion of the script on late Sunday night/Early Morning Alaska time.
While the case has been made by a few dimwits on the Diner that Greece is “small potatoes”, and Greece dropping off the map of Industrialized nations is little different from the closing of one Walmart Store in their vast chain of cheap Chinese merchandise distribution outlets, the problem is not that simple because of the interconnections between the Banking system and the Bond Market of Sovereign Debt, and how this is used as collateral to rehypothecate up and make still more loans to other people, corporations and nation states. Such Sovereign Debt has been in the past considered “Tier 1” Capital, the safest of investments, but as it becomes increasingly clear it is not so safe and in fact is probably worthless toilet paper, the utterly corrupt ratings agencies like Moodies and S&P are downgrading a lot of it to junk status. By itself this messes with the capital ratios the banks are supposed to follow by the ever changing and ever more fraudulent set of rules they are supposed to follow, impairing said capital ratios. It's a lot worse than that though once it becomes clear that they aren't just junk rated, they are in fact completely fucking WORTHLESS, and whoever holds them is not getting their money back. Forget for a moment they never HAD the money before the Bonds were issued, they borrowed that money at a lower rate of interest from the CB in order to buy them in the first place!
It gets worse than that though, because every large holder of Sovereign or Corporate Debt or Bundled Securities ALSO buys Insurance in the event something like a default occurs. This is every large Hedge Fund, bond Funds like Pimpco and of course all the TBTF Banks as well. This insurance market is generally know as the “Derivatives” market, and includes things like CDS or Credit Default Swaps and IRS, or Interest Rate Swaps. Buying one of these contracts from whoever issues it out (folks like AIG who went belly up in 2008 and needed a Taxpayer Bailout to keep the financial system from imploding that time) hedges you against the risk your bonds go worthless or the interest rate diverges from a given range. The problem here of course is nobody knows exactly how many of these insurance contracts are out there, who wrote them or who holds them and in what amount. It's the Big Mystery?
In any event, as we move through the mornng here on Monday, JC Juncker”When it gets serious, you have to LIE” made his Public Response to the Blog Yanis Varoufakis dropped on Sunday, full of such blatant LIES even the piglets on Zero Hedge could see through them. This after a weekend of dropping on numerous articles condemning the Greeks as “only having themselves to Blame”. Which has to be amongst the stupidest and most hypocritical of arguments the Tyler Durdens have ever pitched out, since for years they have been saying the Greeks need to give the finger to the Euro Clowns, and then when they finally do, the Tylers tell them it's all their fault! LOL. Not even Ambrose Evans-fucking-Pritchard is this hypocritical!
First off, it is obviously NOT all their fault, it's already documented that Goldman lied and falsified documents in order to get the Greeks into the EZ in the first place. Second, the Greeks obviously are NOT going to blame themselves, they blame the Troika and the Krauts for their problems. This argument is at least as valid as the argument that the Greeks are responsible for the clusterfuck.
As the morning progressed here around the Globe and I observed it from my Perch at the end of the Global Day as we spin before the Sun, sequentially every major trading bourse in the world is down between 3-5%. Wall Street is just opening up as I write this paragraph. How will Da Fed react to this? Will they pitch out ungodly amounts of currency swaps to get some liquidity back into global markets? Or has this slide finally past even their ability to intervene with freshly printed funny money?
Another day should give us more indication on exactly what TPTB are going to try here to keep this from escalating into an out of control unwind, so I'll stop here for now and pick this up tomorrow.
As of right now though, this is looking like Lehman on Steroids...
...OK! Back at the Doom Keyboard after a hellacious day on all the markets. Just about everybody everywhere got absolutely Hammered, probably $2T in market Cap was lost globally, easily. This without Greece not having yet actually defaulted, which is supposed to occur tomorrow if there isn't some sort of last minute stick save, which seems unlikely because the rhetoric from both sides just gets increasingly more dichotomous every day.
David Stockman, finance guru of the Reagan era has dropped in praising Tsipras for finally pushing this thing over the edge, which probably isn't making the Tyler Durdens on Zero Hedge too happy since they are painting this clusterfuck as entirely Greece's fault and their responsibility for what comes down the pipe in the aftermath. Which no doubt is not very good, but it sure isn't the fault of the Greek population at large. Nor is it Syriza's fault either, they just inherited a complete clusterfuck set up by Goldman Sachs the Squid and a corrupt oligarchy in Greece, along with successive bailout nonsense agreed to by previous completely corrupt Goobermints.
What the Euroclowns are hoping here is that the Syriza Goobermint collapses under the weight of the capital controls, like people unable to withdraw more than €60/day from the ATMs, increasingly long lines at those ATMs, decreasing FOOD available for purchase on the shelves of the local Groger Grocery store, lack of Toilet Paper, etc. IOW, the Eurotrash version of Venezuela. Cut them off from the MONEY, and they will capitulate. No Bombs necessary, the population will riot, the Goobermint will be deposed, and a New Regime of your choice can be dropped in their place, amenable to administering the debt slavery. That's the plan, but it's not clear it will work this time, at least not before the whole EZ is caught up in the contagion. Contagion is really the problem here, not Greece itself.
It's a Chaos theory problem, and Greece is the Lorenz Attractor in this real life example of the Butterfly's Wings effect. Normally used as an example in the genesis of a Hurricane, what this math shows is that just a small change in a complex system in its initial conditions has a vast effect down the line as those conditions change the state and a cascade of new conditions elsewhere in the system result from that. The Hurricane here is Financial Implosion of the Euro, and Greece is the Butterfly.
Hurricanes take time to develop after the first flutter of the Butterfly's Wings, and this is no different. The Euro will not implode tomorrow, but implode it will. When this hurricane hits the European continent, it will make Sandy, Katrina, and Neoguri SQUARED look like a Sunday Picnic.
And that's all the Doom, this time until next time, here on the Doomstead Diner.
...Well, a thoroughly anti-climactic day here in the Greek Souvlaki Kabuki, as DieselBoom and Souvlakis spent a whole day talking past each other, with absolutely no indication that anyone is going to give an inch here. The Can Kick for this now is back to the 'Deadline' date of next Monday and the ultimatum that the Greeks will be CUT OFF from their Euro Gold Card and left to twist in the wind.
So what's the chances that they can come up with a SOLUTION to the problem on Monday they couldn't come up with today? Slim & None of course, unless somebody capitulates, and neither side can do that. The market of course believes that this is just another one of the endless series of "Deadlines" that will be Can Kicked down the road once again, and that very well might happen. Or maybe not.
What will it take to get a reaction here? Basically, the day the Greeks finally declare a Bank Holiday and start printing New Drachmas. Then Mr. Market finally wakes up from the stupor and does a Charlton Heston Planet of the Apes scene.
You did it! You finally really did it! You Blew it all Up! Damn You! Damn you all the HELL! LOL...
For the rest, LISTEN TO THE RANT!!!
In case you missed them, here are the last 2 installments of Greek Kabuki...