Claims Redux

The writing was on the wall a long time ago for the claims data released this morning.  Sorta cute folks are "discovering" claims data now when its key importance started around this time July 2012.  Claims data then was the most important key input for Bernanke (along with how it was picked up in the new "spider graph" the Atlanta Fed started doing) such that he started the Fed towards a traditional tightening phase, ending QE and setting the stage for the end of ZIRP.  He was cut off at the knees by the politicos like Bullard, Yellen, and English and the "true believers" at the Chicago, Minneapolis, and Boston Fed.  So the end of QE became a "taper" and what I think was to be the first rise in Dec 2013.  Was all inspired by claims.  And in particular claims over the July auto refit week as 2012 was the first year many of the auto and auto parts plants did not shut down as auto sales started their surge towards 16MM annual sales rate.

While tech and finance will end  the USA biz cycle - the biz cycle recovery is accomplished by autos and housing.  This makes the July refit period of great importance in a recovery.

The claims data carried on after the 2012 refit surge, and as BLS calibrated the monthly surveys to the claims data, we had the early fall UER  surge through 7% in UER that left Jack Welch sputtering (he was right, the data was being manipulated, just he had the sign wrong, it should have dropped all the way towards 6% then.

The babble of the power play, to wrestle the Fed from economic data carried on, deeply entrenched by the time of Bernanke retirement.  I believe the BLS was coordinating with this group at the Fed  to put a drag in improving the monthly data.  BLS also had a huge problem as they capped UER at 10% when it should have gone on towards 12% or even 13%, so there were about 2 MM Labor Force reduction made in 2009 to 2010 that was being carried like a bad trade in the drawer.  Pity that, as I think that was the main reason the Democrats lost Congress to the GOP midterm as the economy was already in solid shape but depicted by the Fed and others as still in dire shape.  Greece Crisis I was also covering the huge US econ improvement as well as a completely contrived US budget crisis. Obama was now full throttle in one of the most sincere austerity movement of any POTUS prior and considering how little time had passed since the worst solvency crisis in a century, was a bizarre policy.  This is still Obama's economic policy, just he is lightening up on the brakes.

So the end was with Bernanke stifled, Obama's austerity, Greece, the fogging of the monthly data by the BLS for whatever reason, and new GOP dominance of Congress, the massively improving status of the US econ and the labor market was missed.

This became even more apparent in 2014 as the 1stQ weather hit immediately threw cold water on the bulls and then the roar of 2nd Q with obvious significant inflation showing the Phillips Curve is still with us and is axiomatic.   But then oil was crushed and the last phase of the "currency war" kicked in, especially German influence to drop the Euro towards parity with the dollar so they can take their mercantalist pillaging of Greece et al (there wasnt anymore to be had for Germany anyway as unemployment rose to high 20% in those countries), and the BLS kept the bad trade in the drawer, though they did manage to get 1MM or so of the "error" back into the labor force. This meant that after what appeared to be a flash in 2nd Q 2014, the view was the market returned to the secular stagnation weak labor market meme that was essential to keeping your macro job and for the Fed to maintain power.  The Fed with the import price pressure and PPI pressure on CPI and PCE was able to keep the disinflation, low inflation thesis alive.  This in turn kept Congress at bay and allowed the Fed to keep their extraordinary powers that were not even seen by most as they are now expressed in "macro-prudential" policy.  So Yellen was able to deflect Congressional challenges for the Fed to maintain their massive new found power, which are most dangerously poised in  FRAT, HR 5018, which is to force the Fed to return to their own defined "Taylor Rule.  Later, in this year, John Taylor noted that the bill is always in the forefront of Yellen's mind when dealing with Congress.

So all through 2014, but for the "hiccup in 2nd Q"  the weird political mixture that requires a bearish view on the USA econ, especially labor, was able to be maintained.

Then into 2015, a repeat of the 1st Q weather occurred, this time with the GDP of Boston being wiped out of all data for months, allowed this bearish momentum to continue.

Until now, now the obviousness of the claims data is showing how ludicrous the bear US econ story is, not just today - but if you had paid attention to the evolving claims data has been the case since 2012, as described above.  This has not been the only data showing the extremely strong US econ since 2012.  Auto sales, consumer credit, retail sales, tax receipts and now housing were also going at full throttle.

But the clearest depiction is  from claims data.  I have gone on quite a bit on the utility of claims data, just look at prior posts on this blog from 2012 onward.  The latest post was last week. This is perhaps the best time in the year where claims data has most utility as it is the 2 weeks where autos and other manufacturers close down operations, lay off workers and do refits.  This is the part of the US economy which has the most "Keynesian Multiple".   I use only non seasonal data, as the worst of the crisis hit took place in Jan and July 2009 and Jan 2010.  This was registered as mostly large "seasonals" which either was a deliberate attempt to keep claims data aligned with the capped at 10% UER.  So the seasonal data, if you are seeking trends, is just about useless.

The more important data is in the continuing claims, but it is lagged one week behind initial claims so this AM it was for Week 28, while initial claims is at the end of the refit week Week 29.  What initial claims shows it that there was almost no auto refit shutdowns this year, and what bears watching is if continuing claims close in on 2.1 MM and drop insured UER to 1.5%.  But as you can see, similar auto strength is shown in 2012 to 2014 shut downs as well.  The dichotomy between claims data and the monthly survey based employment is so egregious that this will force the Fed to give up on looking to employment as a factor to keep ZIRP.  ZIRP should have ended when I think Bernanke wanted to in 2013, certainly it should have ended by 2014.  Claims data is crystal on that.  The size of how high Fed Funds will go in the first quarter after the end of ZIRP is indicative of how far out of whack monthly survey data is from claims data.  When monthly data re-calibrates to claims, the UER will be in the low 4% area.  The Fed Funds then will certainly "pop" well over 1% very quickly, if not over 2%, once this correction is applied.  That is why claims data is not only of great utility, but essential at this point.

Claims Data During Auto Refit (Week 28)

The claims data released this morning were extraordinary.

The very strong fully recovered labor market is still evident (and has been so for over  a year now), but this week, the 28th in the year, is the week that auto refits take place and auto and auto parts layoff their workforce for 2 weeks.  But the non seasonally adjusted, here mapped out in colors, with the year in the x and the week in the y shows, shows - by scanning down the week 28 row since 1992 - that this auto refit is basically not occurring.   This is shown by the dark brown color versus all other boxes being lighter brown or white (I cap the data at 400,000 or lower which provides a more nuanced color gradient.

This shows a very healthy labor market as well as strong durable goods sales (autos), and increase in durable goods inventories (again autos).  This should add .2 to ,3 to 3rd Q GDP and shows momentum from 2nd Q GDP which suggests it may be a surprise on the upside and then readjusted upwards.  3rd Q GDP may very well top 3%.

 Continuing Claims, those who have started drawing state unemployment insurance and are continuing claims shows the continued very strong robust labor status, but the continuing claims is lagged by one week to the initial claims which are concurrent.  So next weeks continuing claims will be of interest to see if they match the above view on initial claims.

The above claims data coordinates well with the JOLTS data, but is completely out of whack with monthly employment data.  Since claims data is an all encompassing census and not a sample based survey like the monthly employment, it is reasonable to consider claims data as more useful and to not see useful accuracy in the monthly data.  This is why the BLS outlines that they will adjust and calibrate the monthly data to the accurate claims data, for whatever reason the BLS is not doing so in this business cycle while they have done so in every business cycle prior.

The True Nature of the Greek Crisis – How it will All End; Germany is Closing in on Their Own Default

If you recall my thesis in 2011, I sketched Europe as a constitutional crisis  and not related to finance, though most then  saw Europe  as a financial problem contained in units of the separate EZ states.  They still do – everyone still does.

But I was right , and as usual for my forecasts, since they  are usually dependent on a political read rather than a micro-economic  read,  I have had  better foresight.  But  I also have a lack of timing as I am not very  involved with the noise of the markets.  By noise I mean the quarter to quarter swings.   I have found the important market moves occur on a seven to ten year cycle based on  a  political cycle (two terms for POTUS time usually).

So with the same qualified  foresight I showed  in 2011,  I wish to present my current view on Europe.

I am confident I have “nailed” the current situation.

Basically, I hold the same view as I had in 2010.  Europe is still a constitutional crisis and has little if nothing to do with Greek debt. 

Greece is immediately very important, but as most have quickly deduced it is “only” a problem as the entire Greek debt is  a bit under 3% of the Euro area.  So Greece is only a tactical situation now for most, with focus on the terms of the deal.  Greece ha d no choice but to surrender as Germany was ready to plunge the country into some Lutheran hell of original sin, backed by the other moralist Finland.  This not good for the Greeks, they will be beaten into submission and become a debt colony of Germany.  But is quickly being priced as a small factor for US and world markets in general.  At the time of this writing the SP500 was traded up 70 points to 2107, a large move, since Weds lows last week.

The more useful long term analysis would be at first curiosity as to why Germany was so adamant and so belligerent for what is really a small problem.  How they deployed the extra-EU Treaties institution to do the job – the Eurogroup – so as to avoid conflict with  and control France and Italy.  Why did Germany find itself at odds with France.  Why the debate was contained for 5  months in the Eurogroup with what Yanis Varoufakis called a plot. - so that in the end Greece faced a pre-planned outcome imposed upon them.  The above hyper link to Varoufakis interview  is a must read.  When reading Varoufakis it should be noted that he has the historical read of a Marxist – ie brilliant. [ It is always best to use a Marxist to tell you where you are and how you got there, but then drop him and replace him with a Kissinger or a Fukuyama or a Keegan for forward for policy planning then a Nixon for implementation.]

Via  answering  the above questions the true nature of the European crisis  becomes clear.

Germany is facing, and  will experience, if nothing is done, default. 

Germany has built its own demise in typical Germanic fashion, only it was via  trade locked into the de facto gold standard of the Euro (for all those in the EZ) ,  and not armies that have built the " Fourth Reich" rise and will  assure the fall of Germany in the end. 

Trade economics are relatively straight forward, one of the first economics defined as far back as Hobson and Ricardo.   Trade economics uses a  ledger, a Pacioli double entry accounting approach.  In  international trade if one nation sells something  to another,  the seller needs to settle “money on the barrel”.  If the two trading counterparty nations are in balance, with no chronic competitive imbalance in the terms of trade, then the trade processing ends, and after short term trade financing is paid down, both countries current account is unchanged.  All common sense and easily described by Ricardo. 

But if one country enters into trade with another that has  chronic competitive advantages in terms of  trade, usually because of large constant better  factors of production like labor costs and more often than not a “rigged” currency,  there are no comparative advantages. The country with the chronic competitive advantage not only sets the price, sells the good with one-way trading, but also finances the trade.  If the rigged currency levels can  be maintained, as well as the advantages in a lower cost of labor, with large  constant savings rate,  it is inevitable that the exporting country not only exports the  trade goods, but will inevitably finance the trade flow via debt from their larger savings rate,  and has ever increasing positive current account as well as a chronic trade surplus for the exporter and chronic trade deficit for the importer as well as mounting current account deficit financed by ever accumulating debt balance to the exporter.  Hobson described this centuries ago and provided its name: “mercantilism”.

The mercantalist colonial empire requires hard power, or some means of coercion and enforcement to keep the importer in thrall. Or the debt simply defaults sooner or later.

If the mercantalist does  not have the ability to enforce or coerce the importer into line, then what is a benefit and empowerment turns into a cancer and will force an overturn of the mercantilist in a sudden cusp movement – a very bad week for the exporter. 

A good rule of thumb is that without enforcement and ability to maintain a  long term colonialization of the importer, the accumulated trade surplus in the accumulated current account will be lost  or be devalued an amount  approximately  equal to whatever was the trade advantage.  Then  as the importer balks, and refuses servicing and repayment of debt, or simply cannot do so as the only rebalancing available is the raising of competiveness via  mass unemployment, weakens the economy such that the debt cannot be serviced .  Or the importer finds better terms away.  Giving the precedent that this cycle almost always occurs, it would be better for the exporter to look forward and manage the debtor, always keeping the importer in good health, and certainly never let the importer get to the point where there is nothing to lose and such that they  revolt and default. This is accomplished by equalization payments, or transfer payments or mass rebalancing like the Marshall Plan of which the largest recipient was Germany itself.

It is not clear if Germany knows they are in this situation with Greece, they may indeed believe in the clap-trap of Schaeuble.  What made Germany’s mercantilist status is not readily apparent and by being so may even have fooled Germany.  That Germany believes Greece arrived at their current status by choice.   Even the great Paul Krugman who one his Nobel Prize in trade economics, misses that the Greek debt crisis is a classic mercantalist trade imbalance problem. 

Germany, Krugman and others  may  not even  be aware of the  German  policy and factors for intra-EZ trade for the last 15 years, as it was cloaked under  the Euro. 

German  labor reforms so as to reunite with  East Germany, the cheapening of the DM value by absorbing the Ost Mark at clearly off  the market rates for conversion into DM, and then the entry into the Euro at a very cheap 2 DM per Euro conversion – all these factors set up German to pillage almost all their EZ partners  trade account. 

Germany insisted on no transfer or equalization payments, and had Karlsruhe enshrine that into the German Constitution.  These German terms of trade, and the inability of any EZ  trade deficit partner to rebalance to Germany but for unemployment, and then Germany – up until 2010 – is the cause of the crisis.  In the USA if one state has such  adverse pressure, folks pack up the Budget one-way rental truck and move to the other area in the USA which is doing better, as well as about 20% of the USA budget going to equalization and transfer payments.  In Europe there is no mass internal migration and there is now no currency, and until 2010 one could add to the debt from Germany to finance the next years trade imbalance, so massive imbalances have built with Germany since the Euro was launched and especially since Greece joined the Euro.  The impact on the comparative GDP per capita: 

And the rampage and damage that Germany is imposing on the EZ in comparative unemployment rate:

Given that the only way rebalance is to force unemployment, this ends in a perverse cycle as the country gets weaker  and  unlikely to repay the debt owed.

The level of German trade surplus growth is massive, and until recently most of that on exports to fellow EZ members.  The Germans, by insisting that there are no transfer or equalization payments, and the confederate nature of the Deutsche Bundesbanke  and to a lesser degree the Bank of France and the Bank of England, have the internal payment system of Europe to “firewall” the credit of each of the EZ country’s central bank .  As debits and payments are made in the interbank system, they move to the member country’s central bank and then to the ECB balance sheet for the credit or debit of the respective country’s central bank account. The US has a similar system between the regional Federal Reserve Bank, but the accounts don’t mount as imbalances develop between the region s, but are cleared each day.  In the EZ system they are not cleared but accumulate.  The system is called TARGET2.  By monitoring the TARGET2 accumulated balances at the ECB for each EZ country, an explicit and dynamic picture of the massive intra-EZ trade imbalances are obvious.

The changes in TARGET2 balances over the years compared to the change in the current account balances, showing the TARGET2 accumulation and change is from trade.  Germany is the obvious standout and the accumulated surplus is more or less offset by the changes in the other member EZ deficits:

The levels of the TARGET2 accounts then is a quick robust way to track they accumulated debt financing for the trade, as all deficit trade balance countries must finance by borrowing. 

The deficit levels, or accumulated payments owed to Germany and to a lesser degree Luxembourg (tax shelters for Dutch, German and French companies for the most part) , when considered as an accurate measurement of the growing trade balance in the EZ becomes telling.  First, Greece is a very small part of this “debt”, so why the vigorous hammering by Germany and the attempt to remove Greece from the Euro.   It is because Greece isn’t the problem Germany faces.  The real problem is if all the trade deficit financing becomes one problem – if Italy is packaged in with Spain.  But especially Spain, as Spain and Italy have not accepted the first bailout as Greece did in 2012, and their debt balances are not with a sovereign Germany alongside IMF financing, but are still with German financial institutions either directly or through Spanish and Italian banks.  Then if the unemployment adjustments Germany has imposed upon Spain and to a lesser degree Italy are added with the now radicalized Greek unemployment a mass of people appear on the scene that cannot be segmented into individual countries and overpowered as Germany is doing now.  So Germany is smashing Greece now so as to attempt to prevent that aggregation of trade debt financing. 

All of this could have been avoided if the Jean Monnet plan for the evolution towards a “United States of Europe” had occurred, instead of being interrupted post-Kohl.  It is cloudy as to why, but it seems all roads lead to Schroeder and the reunification of Germany has swung focus of Germany away from the EU and towards East Germany, but for the annoying Poles.  Germany is creeping towards association with Russia, whatever the reason.

When I presented this  to DC folks in 2011, was the only one of my group who saw that the crisis from 2010 onwards was solely constitutional.  All of my group dismissed my thoughts and went onwards into credit, flows, debt and financing.  What surprised me at the time, and I did not understand the importance, was the  staff we presented to all agreed with my views with an almost casual “off course”, all saw it as a political and constitutional problem.  Then they asked our group our views on when unemployment adjustment would cause civil strife and violence.  All of the NYers were surprised at the question and of course had no expertise in answering, so we dropped that question and drove on.  I know realize that was the main point, that we were there not so much to present new information, but to confirm existing  views.  That the unsaid view of the USA was to not encourage or insist on a constitutional remedy to Europe, but to monitor where the boundary was for mas civil unrest and only step in at that point.  That is suited the USA to keep Europe a weak confederacy under a short term grasping Germany.  But, since I had not realized the above until recently, I can assume that the audience was not watching the Hobson-Ricardo nature if the building trade deficit financing but were accepting the moralistic character view of the Greeks making these choices and self imposing their own problem, along with the rest of the periphery. 

But the ability to ride that edge and manage Europe towards a somewhat chaotic force muddling through are over, unless the USA desires the default of not Greece, but of Germany and possibly France as well.  NATO stuff.

It is useful to very briefly reconsider the Ricardo-Hobson nature of the current crisis.  It is not due to specific national traits to work and savings of tax scoff law, it is the Pacioli immutable reality that in a closed system like that the EZ became, without any adjustments of that imbalance available, the country with high savings ,low cost of labor and high productivity will “invest” in low saving if not deficit countries.  If the cost of the trade goods continues to be inefficient, the trade balances will result with the high saving exporter ever increasing  the debt financing.  They will keep doing this until the unemployment rate, in a democracy, results in an economy that can never repay the debt and will refuse to service it.  The adjustment via unemployment is insufficient to rebalance so the debt is violently repriced to finish the rebalancing required via default.

Looking at the TARGET2  balances, and considering past sovereign default, 60% of the TARGET2 level will be how much Germany will face in default – about 400 billion.  On a per GDP level, this is about double what the USA experienced in the 2008 mortgage default solvency crisis.

Germany will be ruined if nothing is done.

Greece is not the problem.  The problem will be  and is now Germany.

What can be done also provides prescience.

When a sovereign goes into default they either become excluded from the globalized financial system or they have a restructuring from the IMF or the US hegemon.  The amount of 400 billion for only Germany alongside with the equal amount  required for the rest of the EZ (remember the books will balance) is beyond the IMF.  And this will happen  quickly, especially if Germany keeps fighting this outcome.  And the USA will not provide a bond swap for that amount either, as the 700 billion ARRA 09 funding is still being dealt with along with the cost of security as ISIL and other problems flair.   When this happens Putin will likely take full advantage of the situation and will encourage many areas “hot spots” as well as continue with their own goals in the Ukraine and well as Latvia.  Russia will sue this situation to come and “aid” Germany, as well as Greece.  It would challenge the continuation of NATO.

What Germany will do, if this unfolds, will seek close cooperation of all the EZ and build the entity which they could swap their debt with and remedy the crisis.  The only entity to do that would be a “United States of Europe” where a Eurobond is swapped for all the defaulting sovereign debt.  That financing and bond issuance would require a federal financial structure from taxation to setting policy to paying all commonwealth enterprise.  As Hamilton did with the US retirement of the colonies debt with newly issued US Treasurys in 1789, it will launch the United States apparatus.   Unless all of the EZ wished to grant a dictatorial  authority to Germany to run this new country and manage debt and taxation, all the usual federal democratic apparatus will appear.  This would be easy to make as all of the EZ would be facing the problems Greece is facing now, and quickly the corporatist German hegemony partnership can be swapped into a federal structure.  The ECJ would be activated, as would the population defined European parliament.  The Euro Commission becomes the departmental bureaucracy which would be under an executive that is directly elected that replaces the Euro Council.  To avoid the problems of a confederacy rather than a federation, the Euro Council would either convert to an upper chamber based upon state, and the first ministers return home as governors.

This is what will happen and is the only way I can see Europe, and especially Germany being ruined.  The question as to whether or not the occupation of Europe by the USA ends or begins a wind down, but NATO would continue as Germany is turned away from Russia and back to being one amongst equals in Europe, and a European common force quickly becomes a full equal to the USA.  Which is the end results which I think motivated the Agency forward looking planners wished to forestall. 

I am constantly increasing the regard I have for Jean Monnet as the above is perhaps the only way the United States of Europe is created.  I will go further, I think this will create and finish the Jean Monnet plan, reviving it from the ashes of the Schroeder and  German re-unification destruction of the Monnet plan.  I think it is now time the USA swing back to supporting and encouraging the creation of the United States of Europe.  Once this is achieved all the debt crisis in Europe will disappear as quickly as the debt crisis in the newly created United States of America with Hamilton’s “Assumption of the Debt” in 1789.

Then over a suitable time the USA must withdraw from Europe, allow a European ‘Monroe Doctrine” develop,  and accept from time to time a United States of Europe will have serious differences with the United States.  But that outcome, even with the risk of a bipolar world as the United States of Europe would be every bit the equal in power to the USA, would be a more secure world for the United States in the long run, stop Putin’s vain-glorious nostalgia, and balance the load to contain China.  In the long wrong a united federal republic in Europe would lead to a secure and stable world for democracy and would be well down to the road of the “end of history”.  Fukuyama was right. 

What Greece Must Do Immediately

...so as to make today a great day for all of Europe.

Immediately, Greece must shift the focus from so called, and insultingly called, “Grexit” to defining the forum and the authority of the forum to discuss the Greece debt.   The debt is by common sense never to be paid back and is in fact a fiction, it is a trade imbalance and then an emergency intervention as the world entered into the ‘Great Recession”.  Much of it if not most will be forgiven – call it by any name one wishes.  But the forum to date is clearly inadequate for the negotiating of this so called debt.  A forum must be found or designed that has legitimate authority to define review and then deliberate and then end this crisis.

Greece upon itself is similar  to Rhode Island  in the 1780s for the USA, especially the first Secretary of the Treasury, Alexander Hamilton.  It was almost  an island like Cyprus,  of smugglers, tax avoiders, and bankruptcy schemes.  But Rhode Island went down in the end being integral in empowering Hamilton and showing the nation the need for centralized treasury and more importantly centralized federal oversight and policing (creating the US Coast Guard , for one).  So Rhode Island characters were in the end more useful to the nation than the most stalwart rich North Carolina planter.  And it should not be lost, that to build the USA, the first step was Hamilton forgot all the state debt and aggregated it into US Treasury debt.

Greece must swing the focus on federalism, yes they have serious problems, and those problems overwhelm the existing civic power of Greece.  A EZ federal tax authority is required.  Greece debt must be swapped, just as Argentinian and other countries debt was wrapped around US Treasury corpus in the late 1980s by another Secretary of the Treasury, James Brady.  And then duties Greece now has for policing the common border of the EZ, especially against the most serious problem of refugees, must be delegated to a all EZ naval and para-military force.  The same with Greece obligation to NATO.  In short, it is impossible for Greece to do its duty to the EU and to NATO without federal institutions where it is only a small part of just as Arkansas implicit share of the US Navy or the IRS.

Greece must force the discussion to rejuvenation and repair of the system which was and is still completely flawed, and to assume an equitable duty in that repair and then ongoing capability.

To do so that requires a European federal republic, while Europe seems strangely complicit in allowing Germany  assume the title of running the entire European Treasury, I think they will realize the advantage in that  when the Greek remedy and then ongoing prosperity requires a para-military if not military capability and Europe wide policing, starting with taxation.

Europe has been avoiding this requirement, burying their heads in sand and letting the USA provide the  hard power, so that they can carry on eating at either the corporatist or German trough like pigs.  Even those countries most damaged by German intra-EZ mercantilism, support Germany “super votes” and allow them to run the EC – I guess because it provides sinecures (board membership on GAZPPROM) and fine meals Comme Chez Soi in Brussels.  Or their leading industries get to go along like volunteer  financial shock troops alongside German business as they loot and conquer.

But a popular and indisputable direct democracy, not just of the Marxist Syriza, but a super majority of all Greeks, has shown the falsehood to all of this by voting as a united people OXI.

Greece must now swing hard to defining the platform, even ignoring the debt itself for the time being.

Greece must do the following:

      1) Organize a pan-EZ block of all people with the same problem of German intra-EZ mercantilism but with no mechanism to re-balance the results of mercantilism – no power to force terms, no transfer payments, and most importantly no currency to devalue to regain competitive terms a la Ricardo.  The only re-balancing provided to regain competitive export ability, which Germany insists upon, is mass shock unemployment .   Formal alliance with Podemos, is required and Rojay must go.  It is not out fo the question to split the EC super votes and bring Hollande in the alliance as well as Renzi – if not that go to the traditional left of Italy and France.

       2)  Immediately sue the ECB, the IMF and Germany for various cases – there will be no scarcity in finding cases that will be certified – to be tried in the ECJ.  The ECJ is federalists as in there is not weights for justices given to Germany and England and France and even Spain or Italy.  It will take and must take by the Treaties a pan-EZ view where every country has the same weight.  Europe needs a balance of powers and an arbitrator for defining the following, the ECJ muct be activated.

   3) Greece must insist that a counterparty to the ECB be defined and is the peer of the ECJ and the ECB – a pan-EZ “treasury”, a “Resolution Trust Corporation “ (RTC) like structure that solves the imbalance debt crisis with the same mandate as that granted the US savings and loan crisis RTC.  It would be federalist and have a board that is not super weighted as per GDP but federalist.  And – most importantly – it would issue debt that would be used to the Brady Bond like schemes.  Just as Monnet’s European Coal and Steel later became the EU, this RTC would become the Department of Treasury for the emerging EZ federal republic.

    4) Greece should refuse to negotiate at all until the above is created, but then once the above is created to recognize their authority and accept their dictum.   This surrender of Greece sovereign power to the Euro RTC would be precedent then to show the power  of the EZ federal institutions.   This corporatist and trade bloc power structure of the currently  confederate union must be broken.  Those institutions which support the maintain of this power – most importantly the Karlsruhe, mist be subsumed in trans-EZ matters to the ECJ and the Euro RTC.

      5) An “edge” must be created.  A trans-Europe anti-austerity directorate must be well funded and then set loose across Europe.  If Germany does not back down if the above are not forthcoming, French taxi drivers protesting against Uber will be made to look like light weights.  A “résistance”  must be created.

    6) I think all the above are not only required, but can be accomplished with Greek leadership.  Greece must do all the above.  I think the majority of Europe, those who would be the direct representational voters if they were allowed democracy,  are behind Greece.

    7) To allow all this to take place in the end , the USA must get off of Europe's back.  The USA must risk the emergence of a hard power country, the republic of the EZ - already every bit the match in aggregate to the USA economic power.  The USA must evacuate Europe and end the post WW II occupation.