A Holiday Gift From the Feds This Year

So Bloomberg is referring to Yellen now as a "Decemberist," suggesting a rate hike is not likely in the offing until the end of the year. 

http://www.bloomberg.com/news/articles/2015-06-18/three-hints-yellen-dropped-that-the-fed-might-not-raise-rates-in-September

So first we were looking at one in June and one later in the year, and then none in June but pretty sure one in September, and now we are thinking maybe December, with two of 17 fed members against any this year.  Looks like my prediction of no increase this year - and probably none next year -that I made back in April is looking pretty good at the moment.  Mind you, I said back then they should do an increase - and should have years ago - but given their Keynesian thinking and the direction of things economically I did not see it in the cards then and do not see it in them now.

Of course, with the Nasdaq setting new records today, I guess never say never, but that was in no small part due to the Fed standing pat for longer, so unlikely a market reaction to the "good" news from the Fed is going to cause the Fed to change its tune.  I do not see the stock rise lasting too long either way.  The DAX in Germany is in an official correction (albeit only back to levels seen in February and still over 10% over where it started the year),  and China markets are having the worst weekly drop in six years, so things are starting to pop.  Just a matter of time my friends, just a matter of time.

Hot News - Greece Economy Has Prospered Due To Its EU Membership!

So the Bank of Greece, which notably is not under Greek Government control but rather is more closely aligned to the ECB, submitted a monetary policy report to the Greek Cabinet and Parliament this morning.  While its message is clear, I am not so clear on where the Bank of Greece gets the support for one line in it.  I will not spoil the suspense for you.  Go ahead and see if you can figure out for yourself which line confuses me:

"As the Bank of Greece had assessed in its Governor’s Report for the year 2014, the conclusion of a new agreement with our partners is of the utmost importance to fend off the immediate risks to the economy, reduce uncertainty and ensure a sustainable growth outlook for Greece.

Failure to reach an agreement would, on the contrary, mark the beginning of a painful course that would lead initially to a Greek default and ultimately to the country’s exit from the euro area and – most likely – from the European Union. A manageable debt crisis, as the one that we are currently addressing with the help of our partners, would snowball into an uncontrollable crisis, with great risks for the banking system and financial stability. An exit from the euro would only compound the already adverse environment, as the ensuing acute exchange rate crisis would send inflation soaring.

All this would imply deep recession, a dramatic decline in income levels, an exponential rise in unemployment and a collapse of all that the Greek economy has achieved over the years of its EU, and especially its euro area, membership. From its position as a core member of Europe, Greece would see itself relegated to the rank of a poor country in the European South.

This is why the Bank of Greece firmly believes that striking an agreement with our partners is a historical imperative that we cannot afford to ignore."

Figure out yet the line that confuses me?  I think you have.

Let's consider a few stats and see if we all agree.  The EU was formed in late 1993.  Around that time the Greece unemployment rate was hovering around 9%, which is not great but it is much better than where it is today at around 25%.  At the time the EU was formed Greek government debt to GDP ratio was under 80% and now is well over twice that, pushing 180%.  Indeed, even before the great recession they were already over 100%, so you cannot blame it all on the recession.  Private sector debt as a percentage of GDP has also more than doubled. 

We could go on, but there is plenty of press out there about how bleak the situation is in Greece today.  And let me add that if it were not part of the EU it would not have to face collective creditor demands on austerity and could have negotiated bigger haircuts long ago in my view, or at least dealt with the debt by devaluing its currency and incurring some short term high inflation, kind of like Iceland did, which the IMF, one of Greece's creditors, cites as exemplar.  But hey, with things going so swimmingly in the EU, why would they ever want to do that.

I Shall Not, Will Not, Promise Not To Talk About That Place . . . You Know, That Birthplace of Democracy Place

All you read these days is that birthplace of democracy place defaulting, capital controls, Tsiprais this, Troika that, IMF wants this, ECB demands that, does Merkel's hair ever move, etc.  I am personally tired of it all, so I am absolutely not, no way, no how, going to talk about it. 

Let's instead talk about some of the other PIIGS, shall we.  Nothing substantive other than to note they are increasing their public debt and debt to GDP ratios at an alarming rate:

http://www.zerohedge.com/news/2015-06-16/there-one-problem-europes-so-called-austerity

So me thinks they may ultimately follow the lead of that other country, you know the one I promised not to mention, and do their own version of Grexit.  Sure, they will wait and see how that works for you know who, but assuming after a couple of years of extreme pain it looks like a smart move, they might start scratching the old backside and considering options.  But rather than speculate, let's just assume that they do and try to come up with some catchy names for it, like Grexit.  

We begin with Portugal.  If you have any thoughts on this just leave a comment.  I am thinking:

Portugo

Leaving Port

Port - a - potty

Porting Ways

Not really happy with any of these, so please help.  Let's try Spain instead, which is also a tough one:

Spain't-here-no-more

Spain't-going-to-take-it-any-more

Spexit

Spandexit

I like the last one though it is a bit of a stretch (okay, I really am digging)  Last but not least, we come to Italy:

Ciao

Italbegoinnow

Quitaly

Exitaly

Certainly the last couple have some promise. Oh, you disagree?  So you think this is easy do ya? Well, go ahead then, see what you can come up with.

Meanwhile, I will go back to not talking about Gree . . . oops, that was close.

June 20th Update

Lest you think I jest at the suggestion other countries might follow the Grexit lead, you should start following some European election results.  Seems a bit of frustration brewing with the whole EU thingy.

http://globaleconomicanalysis.blogspot.com/2015/06/euroskeptics-to-form-government-in_19.html

Who would have seen that coming? (though I did mention like six years ago here that the U was ultimately leaving the EU, a forecast that was not well received at the time.)

http://financialspiltmilk.blogspot.com/2011/09/eu_25.html

A monetary union without a fiscal union is not a good combination.