Mish's Global Economic Trend Analysis

German Newspaper Tells Greek Prime Minister the "Tortured Body Will Surrender" because Greece is Insolvent
Late Mortgage Payments or No Payments Drop for Fifth Straight Quarter; At Current Pace, Situation will be Normal in 8 Years
EU ministers to Announce on Monday: Mario Draghi, Bank of Italy Governor and Ex-Goldman Managing Director, to replace Jean-Claude Trichet
IMF Chief Pulled from Plane in New York on Rape Charges; Greece Says "Nothing Changed"; Talks Persist in Brussels; Time to Dissolve IMF

German Newspaper Tells Greek Prime Minister the "Tortured Body Will Surrender" because Greece is Insolvent

Posted: 15 May 2011 09:00 PM PDT

The editor-in-chief of Handelsblatt, a leading German business newspaper, published a Letter to Georgios Papandreou, Prime Minister of Greece, called "There is a life after death"

Here are a few excerpts...

Dear Mr. Papandreou,

With the greatest respect, the Western world is monitoring your efforts to master your country's debt crisis. No other democratic country has ever managed anything like that in peacetime. You are shrinking the state apparatus; you are fighting corruption; you are teaching your fellow countrymen how to become honest tax-payers.

You are a modern hero. You are attempting the impossible. ....

The bitter truth to which you and all parties who wanted to help Greece have to admit is that the help doesn't help. Your country is getting deeper and deeper into the mess.

The truth that Greece has to cut back and save has turned into an untruth. The right thing has turned into the wrong thing. You already cut pensions, lowered the salaries of civil servants by 30 per cent and raised the prices of gas by almost 50 per cent. You can't restore the health of your country by saving. And the European Union can't restore your country's health by again and again injecting new loans.

Soon, the day will come when the tortured body will surrender. The Greek construction industry already shrank by 70 per cent. Sales of car dealers sank by half. A daily export volume of 50 million Euros Greece is achieving far too little. Soon the day will come which investors fear in their nightmares. Then the word "insolvency" will be on everyone's lips.

But it is also the day when a new truth will be born: Don't save but invest, they will tell you – so that the Greek economy will grow again. Do not service debt with debt, you then will be recommended, but spread out the debt service, cut it and maybe even completely suspend it for a while. It will be a day of impositions, especially for those who lend money to you and your people. Financial markets will grind to a halt in horror – and then they will turn to embrace the future. Because Argentina in 2001, Mexico at the beginning of the eighties and Germany after World War II taught us that there is a life after death - at least, in the case of highly indebted states.

Mr. Papandreou, so far, you attempted the impossible. Now you should do the possible. Just as you deceived the officers as a boy and denied to know where your father was hiding you now must repudiate the pride of the Greeks - in order to save your country. Come to meet the new uncomfortable truth before it knocks at your door. It's already on its way.

Respectfully yours,

Gabor Steingart

Once needed structural reforms are in place, the sooner Greece defaults, the better off it will be. The sooner the IMF, ECB, and EU accept the fact that Greece is insolvent and cannot possibly return to growth via forced austerity, the better off the Euro-Zone will be.

Greece needs structural reforms but is not savable. Nor is Ireland, Portugal, or Spain. What can't be paid back, won't be paid back. Bond-holders are going to learn a much needed lesson.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Late Mortgage Payments or No Payments Drop for Fifth Straight Quarter; At Current Pace, Situation will be Normal in 8 Years

Posted: 15 May 2011 06:50 PM PDT

The good news is the rate of late payments is falling. The bad news is that at the current rate it will take 8 years to get to normal.

TransUnion finds Late payments on mortgages fall again in 1st quarter

The number of homeowners making late payments -- or no payments -- on their mortgages fell for the fifth straight quarter in the first three months of 2011. But the figure remains stubbornly high compared with the pre-crisis norm, likely because of the huge backlog of homes waiting to be foreclosed.

The rate of borrowers nationwide who were 60 days or more past due on their mortgage payments fell to 6.19 percent for the three months ended March 31, according to credit reporting agency TransUnion. That was down from 6.77 percent at the same time last year.

Delinquency rates were highest in Florida, at 14.37 percent, down from 14.65 percent a year ago, followed by last year's leader, Nevada, at 14.19 percent, down from 15.98 percent.

Arizona was next, at 9.14 percent, compared with 10.94 percent in the 2010 first quarter. California, fourth at 8.58 percent, showed the biggest drop of any state in the past year, falling from 10.68 percent. These four states were the hardest hit by the housing meltdown.

If delinquency continues to improve at its current pace, Martin said rates won't return to normal for another 8 years. "It just gives you a sense for how high these rates are, historically speaking, and how far we have to go at this kind of slow improvement pace," he said. TransUnion expects rates to continue drifting down through the rest of the year.

Improvement is a Mirage

Much if not all of the improvement is a mirage. After foreclosure, people no longer have to make payments and are no longer late. Thus, the improvement to a certain extent reflects the number of foreclosures.

If everyone 90 days or more late lost their home to foreclosure tomorrow, we would see a stunning drop in the late payments category as well as a stunning rise in bank REOs.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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EU ministers to Announce on Monday: Mario Draghi, Bank of Italy Governor and Ex-Goldman Managing Director, to replace Jean-Claude Trichet

Posted: 15 May 2011 01:22 PM PDT

Jean-Claude Trichet's term as ECB president expires on October 31, 2011. Mario Draghi, former managing director of Goldman Sachs International and current head of Bank of Italy will take over from Trichet.

Via Google Translate, please consider The European finance ministers on Monday elected as president of the ECB Draghi

Economic ministers of the eurozone on Monday to elect the current governor of the Bank of Italy, Mario Draghi as the new chairman of the Central Bank (ECB) to replace Jean-Claude Trichet when his term expires on October 31, 2011, as have European sources reported.

Draghi formal appointment will be made at the summit of European leaders held on 23 and 24 June after consulting the European Parliament.

German Chancellor Angela Merkel, has sought alternatives to the last moment for fear that their voters will not accept a candidate from Italy, where inflation seen at the head of the European monetary authority.

But French President Nicolas Sarkozy, chose to support the election for the first time publicly Draghi on 26 April, after the Italian gave a series of interviews in various media in Europe displaying their anti-inflation credentials. Merkel cedió y dijo el pasado 11 de mayo que respaldará al italiano por considerarlo "muy cercano a nuestras ideas de estabilidad y solidez de la política económica". Merkel relented and said May 11 that Italy's support for being "very close to our ideas of stability and soundness of economic policy."

For those who can read Spanish, here is the original link: Los ministros de Economía europeos elegirán este lunes a Draghi como presidente del BCE

All we need now to complete the picture is for an ex-Goldman employee to run for president of the United States and for another ex-Goldman employee to replace Bernanke at the Fed.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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IMF Chief Pulled from Plane in New York on Rape Charges; Greece Says "Nothing Changed"; Talks Persist in Brussels; Time to Dissolve IMF

Posted: 15 May 2011 09:19 AM PDT

Dominique Strauss-Kahn, IMF chief faces arraignment in New York on rape charges.

IMF leader and potential French presidential candidate Dominique Strauss-Kahn, 62, was pulled from an airplane bound for Paris just before its departure Saturday in New York, the Associated Press reported.

The IMF chief was arrested after a 32-year-old maid told authorities Strauss-Kahn attacked her Saturday afternoon after she entered his suite at the luxury Sofitel hotel to clean the $3,000-a-night suite, which she had been told was empty, the AP reported.

According to an account given by the woman to police, Strauss-Kahn came out of a bathroom naked, pursued her down a hallway, and pulled her into a bedroom, where he started to sexually assault her. The woman said she fought him off, then he pulled her into the bathroom, where he forced her to perform oral sex on him and attempted to remove her underwear. The woman once again broke free and alerted hotel staff, who called police, the authorities said.

Strauss-Kahn, considered a potential Socialist Party challenger to French President Nicolas Sarkozy in 2012, was arrested on an Air France jet about to depart from John F. Kennedy International Airport.

2008, Strauss-Kahn was investigated by the IMF about whether he'd had an improper relationship with a woman subordinate. He was cleared of abuse-of-power allegations but apologized to the IMF staff, The Wall Street Journal reported. The IMF said then that his actions had shown "a serious error of judgment," AP reported.

Expect Successor To Be From Same Mold

I rather doubt this affects the market unless his successor is of a vastly different non-bailout mode, and that is unlikely. IMF clowns got to be where they are precisely because of what they stand for. Expect his successor to be from the same mold.

Greece Says Arrest Won't Change Reform Plans

The Wall Street Journal reports Greece Says Arrest Won't Change Reform Plans

Greece said that the arrest in New York of the chief of the International Monetary Fund, Dominique Strauss-Kahn, would have no impact on the government's resolve to fix the country's public finances.

"We have a specific program that the IMF also takes part in, and we are continuing to implement that program," Greek government spokesman George Petalotis said. "As such, it is not an issue of individual personalities, it is an issue of institutional arrangements."

Mr. Strauss-Kahn had publicly rejected talk of a Greek debt restructuring. But Greece remained hopeful that the IMF would agree that Greece needs more time to repay its debts.

Outside the government, Mr. Strauss-Kahn has been broadly criticized by protest groups and the media as a co-architect of harsh austerity measures imposed on Greece in exchange for last year's bailout.

During an protest strike against government reforms earlier this year, an effigy of Mr. Strauss-Kahn was burned in front of parliament. Public opinion polls show many Greeks blame the IMF for the country's current financial problems and recession.

Several Greek media outlets have also highlighted the IMF's own spending habits, focusing on the high-priced office that the fund rents in an upscale district of Athens, as well as Mr. Strauss-Kahn's pricey hotel bill during his last visit to the Greek capital.

Talks Persist in Brussels

Bloomberg reports Strauss-Kahn Arrest Overshadows Greek Crisis as Talks Persist

European officials are working to prevent the region's first default as Greek ministers plead for terms to be relaxed on 110 billion-euros ($155 billion) of aid from the IMF and European Union in a debt crisis that has also engulfed Ireland and Portugal. Economists said that talks to reconsider Greece's aid terms are taking place between institutions rather than individuals and so can endure such turmoil.

"It's not a fatal blow to the Greek situation," James Nixon, chief European economist at Societe Generale in London, said in an interview. "Any of these negotiations are larger than a single person."

Greek Prime Minister George Papandreou on May 13 opposed a debt restructuring, appealing to claims made by the IMF that the country's debt "is sustainable." Germany opposes a common-bond issue, saying such a move would weaken member states' incentives to cut their deficits.

It's "disappointing" that Strauss-Kahn's meeting with Merkel is cancelled because the IMF had been pressing for stronger measures that may involve the possibility of a restructuring of Greek debt, Societe General's Nixon said.

"The meeting could have been quite important in injecting some realism in the discussions and presumably now that voice won't be heard," he said. "The IMF have been pushing for a more realistic position, and presumably the gravity of that voice has been lost."

IMF Leadership Vacuum

Right now there is an IMF leadership vacuum. It would be best for the world if it stayed that way.

Countries that take loans from the IMF usually regret it.

Now would be a great time to take advantage of the situation and disband the IMF. Don't expect it to happen because IMF rescues are not aimed at rescuing countries, but rather rescuing big banks that made stupid loans to countries like Greece, Ireland, Portugal, Argentina, etc.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

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Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

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