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Wednesday, February 22, 2012

Oil price hits eight month high on Iran-Israel war fears

Vitol, the world’s largest independent oil trader, gave the stark warning about the risk of a record price spike after unveiling its annual results.

The Swiss-based trading house - which is privately owned - said it had notched up record revenues of $297bn for 2011, putting it far ahead of rivals such as Glencore and Trafigura. Vitol’s sales were up 44pc from $206bn last year on volumes of oil, carbon and gas trade of 457m tonnes, up from 399m tonnes in 2010. The company’s results - which do not include profit numbers - are just $78bn shy of BP’s annual revenues.

Ian Taylor, Vitol chief executive, said the likelihood of an Israeli air strike on Iran had increased and was likely to push oil prices to $150 a barrel.

“I used to think this would never happen but everyone you speak to says the Israelis will have a go at striking at Iranian nuclear sites,” he said.

“The day that happens, you have to believe the Iranians throw a few mines in the Strait of Hormuz and for a few hours at least, or maybe more, I cannot see a scenario where prices would not be at that sort of level [$150 a barrel].”

Suspicions over Iran’s pursuit of nuclear weapons capability have also provoked the US and Europe to ratchet up sanctions and impose tougher financial measures on Tehran. Western diplomats say sanctions aim to cut Iran’s oil revenues. Iran claims its nuclear programme limited to electricity generation - but this has not placated the international community, especially Israel.

The European Union declared it would embargo Iranian oil imports from July 1 - leaving about 500,000 barrels per day which need a new home. But Iran is defiant that it will find other customers to sell its oil to - and retaliated by ordering an immediate halt to oil sales to British and French companies.

Hedge funds and other money managers also jacked up their wagers on advancing oil prices by 14pc, according to the Commodity Futures Trading Commission’s Commitments of Traders report.

For Mr Taylor, the price problem is exasperated in Europe by the decline in the value of the euro versus the dollar, which has risen the cost of dollar-denominated oil sales to EU countries.

“The Iranians now want the price as high as possible as they’ve got less volumes to sell. I reckon they are probably quite close to winning based on the numbers. That was what everybody in the industry always thought would be the likely result,” said Taylor.

“The politicians are all avoiding the subject at the moment but as you know oil is extremely expensive, especially in euros,” he said.

Brent crude traded just above $121 a barrel on Tuesday, up from $107 a barrel at the start of 2012 but below a record high of $147 in 2008. In euros, oil was near a record high of €91.8 a barrel last week, compared with a record €93.46 in July 2008.


IAEA: Iran refuses access to suspect nuke site

Hopes for defusing the Iranian nuclear crisis were thwarted Wednesday when the International Atomic Energy Agency (IAEA) said Iran did not agree to clear up nuclear weapons allegations and refused access to a site during a visit by senior agency officials.

"It is disappointing that Iran did not accept our request to visit Parchin during the first or second meetings," said IAEA Director General Yukiya Amano, referring to a military site where a simulated nuclear warhead was allegedly tested.

"We engaged in a constructive spirit, but no agreement was reached," he said.

His statement came hours before a senior team of IAEA officials was expected to return from Tehran to Vienna after a second round of talks with Iranian nuclear officials that was accompanied by rising tensions between Iran and Israel.

The world's nuclear watchdog said it had made intensive efforts to agree on a document that outlines how Iran would answer outstanding questions about its suspect nuclear activities and give access to documents, officials and locations.
"Unfortunately, agreement was not reached on this document," the IAEA said.

Iranian Foreign Affairs Ministry spokesman Ramin Mehmanparast said Tuesday that the senior IAEA team had not come to inspect sites but to hold talks.

However, a Vienna-based diplomat closely following the issue said the delegation had in fact wanted to visit Parchin, 30 kilometers south-east of Tehran, during two trips late last month and this week in addition to asking for access in the future.

Since 2008, Iran has refused to answer the IAEA's questions about alleged nuclear weapons research and development projects. The IAEA has made clear that these activities appear to cover all key stages of developing and testing components for such arms, judging from its own information gathering and from intelligence material.

Iranian leaders said the intelligence findings were fabricated and it pursues nuclear technology only for electricity and other civilian uses.

Iran on Monday began a military exercise to prepare the defense of its nuclear sites amid growing tensions with Israel. The country has not ruled out the possibility of military strikes to prevent Iran from developing a nuclear bomb.

The United States has been trying to persuade Israel not to attack Iran's nuclear facilities, according to recent media reports.


The bombs hidden in $27 portable radios

The bombers who allegedly planned to attack Israeli targets in Bangkok, Thailand, were armed with professional-grade explosives hidden in $27 portable radios. 

Authorities discovered an Iranian hit squad had at least five of these bombs with them when their plot in Thailand blew up in their faces last week.

A photo shows one of the devices that was recovered from an Iranian safe house. It was packed with ball bearings for maximum damage and had six magnets on the side, meaning it could be stuck to the underside of a car.

The inexpensive Chinese-made radio was also rigged by the Iranians with a standard American hand grenade pin and detonator that, when pulled, would have set the device off in about four and a half seconds, ABC News reported.


Clever cover: Iranian operatives are hiding explosives in the guts of cheap Chinese-made radios like these, according to reports

Botched: Saeid Moradi blew off his own legs when one of the bombs he allegedly threw bounced back to him

It's unclear how the bombs were brought into the country -- whether they were smuggled in covertly or taken in diplomatic satchels.

The plot against the Israelis was foiled a week ago when some of the explosives accidentally detonated at a safe house serving as a base of operations for Saeid Moradi and at least two other Iranian colleagues.

Moradi, bloody, allegedly fled the house with two bombs and tried to hail a taxi to escape the scene. When the cab driver wouldn't stop, he threw on bomb at the car, injuring four people on the street, according to Thai authorities.

He threw a second bomb at police when they arrived, but it bounced off a car and exploded near him -- blowing off his own legs.

Moradi and two other Iranian nationals are in police custody and charged in connection with the botched attack. Officials have named three more, two men and a woman, who they are searching for.

ABC News reports that American and Israeli explosives experts say the bombs are strikingly similar to those used in two other attacks on Israeli targets outside the Middle East.
Alleged bombers

Fleeing: These surveillance photos show the three alleged bombers as they escaped their safehouse. Saeid Moradi, center, fled carrying two of the radio bombs

Disposal: A bomb technician clears the area after an alleged Iranian operative threw two explosive devices last week

A bomb was found stuck to the underside of an Israeli diplomat's car in Tbilisi, Georgia. Within hours, an explosive attached to the car carrying an Israeli diplomat's wife blew up in New Dehli, India. The woman, her driver and two bystanders were injured in the attack.

The bombings are widely believed to be retaliation for explosions, believed to be the work of Israelis, that killed at least five of Iran's top nuclear scientists.

All of this comes at a time of mounting military tension between Iran and Israel. British and US officials have urged Israel not to unilaterally strike the Islamist republic.

However, officials are beginning to worry that Israel might send warplanes to bomb Iranian nuclear sites before the country can complete a reactor -- or worse, an atomic bomb.

Israeli warplanes are suspected of preemptively wiping out nuclear sites in both Iraq and Syria.

Read more: http://www.dailymail.co.uk/news/article-2104609/Iranian-hit-squad-targeting-Israelis-hid-bombs-27-portable-radios.html#ixzz1n8gOmCcT

After Greece deal, Portugal and Ireland may be next

The second bailout of Greece may not be the euro zone’s last sovereign rescue mission. While the world’s attention is focused on Athens, at the other end of the Mediterranean, Portugal is quietly unravelling.

Portugal received a €78-billion ($103-billion) bailout last spring. Since then, its credit rating has been cut to junk, its recession has deepened, its jobless rate has soared and is bonds trade at double-digit crisis levels. Only last week, German Finance Minister Wolfgang Schaeuble promised his Portuguese counterpart Vitor Gaspar that international lenders would be willing to stump up again.

Caught by a camera crew, Mr. Schaeuble said: “If there would be a necessity for an adjustment of the Portugal [program], we would be ready to do that.”

Some economists and strategists think Portugal and Ireland, the third bailed-out euro zone country, are emboldened by the fresh Greek rescue plan and its apparently generous financial terms. Others think they would be foolish to accept more financial assistance, given the extreme bailout conditions placed on Greece.

The Greek package will deliver €130-billion in new loans from the European Union and the International Monetary Fund (raising the total to €240-billion in less than two years). But in an effort to make Greece’s crushing debt load sustainable, the lenders agreed to reduce the loans’ interest rate by 0.5 percentage points over the next five years, and 1.5 percentage points in later years. The trimmed interest cost is expected to save the Greek treasury €1.4-billion and drop the national debt level by 2.8 percentage points by 2020.

On top of the discounted interest rate, Greece is close to completing a debt swap with private investors, mostly banks, that will see them lose 53.5 per cent of the face value of their Greek sovereign bonds, up from 50 per cent in the previous proposal. The effort will cut Greece’s national debt load by €107-billion, equivalent to one-third of the total debt.

The central banks will help too. Until the end of the decade, the national central banks will transfer all income generated by the bonds to Greece. The European Central Bank has agreed to deliver the profits of its €40-billion Greek bond portfolio to member states.

The bailout packages of Portugal and Ireland lack all of these features. “That was the risk of a ‘successful’ Greek deal,” said strategist Marshall Auerback, director of Toronto’s Pinetree Capital. “Portugal and Ireland will ask for a similar deal. Why wouldn’t they?”

While it is not known whether Portugal has asked for equal treatment, Ireland was hunting for concessions even before Greece and the troika – the European Commission, the IMF and the ECB – confirmed Greece’s second bailout after a 14-hour negotiating session that ended early Tuesday morning.

Ireland has been lobbying the ECB to cut the cost to the government of bailing out its banks, whose collapse triggered the Irish rescue.

“If the ECB are prepared to make this kind of concession to Greece, it would encourage me to think that they might be ready to make concessions on the promissory note to Ireland,” Irish Finance Minister Michael Noonan told state broadcaster RTE earlier this month.

The troika, however, has said that Greece’s special treatment – notably the bond “haircut” – is a one-off event that was necessary to keep Greece from defaulting and potentially shredding the 17-country euro zone. Offering the same terms to Portugal and Ireland is not on the table, if only for the sake of the stability of the bond market. But that will not keep them from asking for lower debt and financing costs.

Given what Greece had to promise in return for the bailout and the debt-crunching exercise, Portugal and Ireland might think twice about seeking extra international financial assistance.

Greece has committed to the deepest austerity program since the euro was launched a dozen years ago. The aggressive tax hikes and, soon, spending cuts are deepening the recession, which is about to enter its fifth year. Youth unemployment is approaching 50 per cent. The cutbacks are triggering social chaos. Dozens of buildings in Athens were torched in the Feb. 12 anti-austerity riots. Economist Jennifer McKeown of London’s Capital Economics said in a note published Tuesday that “with the recession thwarting debt reduction efforts and public outrage growing, we still see Greece leaving the euro zone before the year is out.”

Greece has essentially lost all economic and financial sovereignty. In exchange for the new bailout, the troika demanded the right for “enhanced and permanent presence on the ground in Greece” to monitor Greece’s budget and austerity programs. It also insisted that Athens pass legislation that would guarantee that debt servicing would get priority over other government spending.

Mr. Schaeuble, the German Finance Minister, went so far as to ask Greece to postpone its spring election as a condition for further assistance. His fear, apparently, is that any new government would dilute the tough austerity and reform measures.

Mr. Auerback said the shock austerity and sovereignty-killing treatment delivered by the troika to Greece has a hidden agenda, which is to encourage the weak countries to fix their own problems “so that there’s no risk that they will follow down the route of asking for debt relief.”

The Globe Mail

World’s First Lab-Engineered Burger Just Months Away

A team of privately funded Dutch researchers have reached a benchmark in the science of bioengineering. Using only stem cells, they’ve managed to grow a strip of muscle tissue in a Petri dish with the aim of eventually developing techniques for the mass production of eco-friendly lab-engineered meat.

By October of this year, Dr. Mark post of Maastricht University hopes to have world-renowned chef Heston Blumenthal of England’s famous Fat Duck restaurant cook-up the world’s first lab-engineered hamburger for an as yet unannounced celebrity taste-tester.

At a total production cost of roughly $320,000, it promises to be the most expensive hamburger ever created.

The research has been sponsored by a single anonymous donor who hopes that the project will pave the way for a more environmentally sustainable approach to meat production, one that cuts down on the enormous resources required in raising cattle while simultaneously the greenhouse gas emissions that result from it.

A fact seldom mentioned in the discussion on global warming is the significant role played by the world’s livestock population in releasing methane gas into the atmosphere—a greenhouse gas that’s some 20 times more harmful to than the carbon dioxide released from burning fossil fuels.

And with the inhabitants of up-and-coming countries like China quickly developing a taste for the luxuries enjoyed by their western counterparts, many fear that meat will become an increasingly expensive item available to an ever smaller percentage of the population.

“Meat demand is going to double in the next 40 years and right now we are using 70% of all our agricultural capacity to grow meat through livestock,” explained Dr. Post in a recent news conference.

“You can easily calculate that we need alternatives. If you don’t do anything meat will become a luxury food and be very, very expensive.”

Post explained that his team focused their research specifically on growing artificial beef because cattle require more resources per pound of meat than almost any other commercially raised livestock.

“Cows and pigs have an efficiency rate of about 15%, which is pretty inefficient. Chickens are more efficient and fish even more,” he explained to Ian Sample of The Guardian newspaper.

“If we can raise the efficiency from 15% to 50% it would be a tremendous leap forward.”

At the moment, the lab production of beef is still a long and grueling process. Using their current technique, Post’s team individually grew small sheets of muscle tissue, each 1.2 inches long, 0.6 inches wide and 0.02 inches thick. To make just a single burger, the team will have to combine some 3,000 of these sheets together with a few hundred sheets of similarly grown fatty tissue.

Moreover, Post concedes that they’re not yet sure how the meat will taste.

Still, like early computers that required entire rooms full of machines just to make simple computations, this method of meat production is still in its earliest phase. With the speed at which technology develops today, Post believes it entirely plausible that a few more years of research could make their current techniques thousands of times more efficient.

“I’d estimate that we could see mass production in another 10 to 20 years,” he told Sample.

At the annual meeting of the American Association for the Advancement of Science in Vancouver last week, Post noted that the significance of their burger would be largely symbolic, a “proof of concept.” What it shows, he told an audience of his fellow scientists, is that “with in-vitro methods, out of stem cells we can make a product that looks like and feels and hopefully tastes like meat.”

In addition to the environmentally friendly features of Petri-dish meat (which will, by the way, require some brilliant marketing to sell), it also has the potential to provide significant health advantages. Because the production of the meat is closely controlled at each stage, the scientists speculate that it would be relatively easy to develop meat with additional, targeted health benefits, such as lower levels of saturated fats and higher levels of heart-healthy polyunsaturated fatty acids.

Red Orbit

As US Debt To GDP Passes 101%, The Global Debt Ponzi Enters Its Final Stages

Today, without much fanfare, US debt to GDP hit 101% with the latest issuance of $32 billion in 2 Year Bonds. If the moment when this ratio went from double to triple digits is still fresh in readers minds, is because it is: total debt hit and surpassed the most recently revised Q4 GDP on January 30, or just three weeks ago. Said otherwise, it has taken the US 21 days to add a full percentage point to this most critical of debt sustainability ratios: but fear not, with just under $1 trillion in new debt issuance on deck in the next 9 months, we will be at 110% in no time. Still, this trend made us curious to see who has been buying (and selling) US debt over the past year. The results are somewhat surprising. As the chart below, which highlights some of the biggest and most notable holders of US paper, shows, in the period December 31, 2010 to December 31, 2011, there have been two very distinct shifts: those who are going all in on the ponzi, and those who are gradually shifting away from the greenback, and just as quietly, and without much fanfare of their own, reinvesting their trade surplus in something distinctly other than US paper. The latter two: China and Russia, as we have noted in the past. Yet these are more than offset by... well, we'll let the readers look at the chart below based on TIC data and figure out it.

That the Fed is now actively monetizing US debt is beyond dispute (although some semantic holdouts remain - we are quite happy for them). Alas, with China, which has traditionally been the biggest buyer of US paper, no longer buying Treasurys, we are confident that the Fed will have no choice but to be dragged kicking and screaming once again into the fray, especially since traditional buyers of paper, even when allowing for exponential repo market leveraging (and someone please look at what is going on in the BoNY, State Street sponsored $15 trillion quicksand of repo'ed securities, which is the biggest black hole in the shadow banking system and will be the next pillar of the ponzi system to collapse) will be unable to keep up with US issuance. Especially since Primary Dealers already saw their Treasury holding rise to an all time high in the past week, and are loaded to the gills with US paper. So who is buying? Why Japan and the UK.

Japan and the UK? Hmm, if these two names sound oddly familiar, allow us to refresh one's memory. Behold the pristine leverage condition of both these two countries, in all its glory.

Hint: look at the far left.

So somehow the world's two most indebted countries (recall that Japan is about to in total pass 1 quadrillion debt) are out there and buying up the biggest amount of US debt (after the Fed of course)? Sorry, but while we are amusing by this attempt by the global ponzi regime to keep itself alive (even as Russia and China prudently step aside from the mauling that is sure to follow), whereby the most indebted nations keep buying each other's debt in the most transparent and potentially deadly shell game in history, we are also confident this is unsustainable. Which means the Fed will have no choice but to step in. And since when it comes to the capital markets, the ride up is over since we have now crossed the point where incremental profits are drowned by incremental input costs (thank you $106 WTI), the Fed now has just one mandate: to keep the US fiscal machine well-greased by buying up US debt at zero (and beginning in May negative) rates, through wanton monetization. 2012 may prove to be quite eventful after all.

Zero Hedge

Tehran steps into US and Israel with a threat of pre-emptive strike

Iran’s Armed Forces Gen. Mohammad Hejazi issued a new threat Tuesday, Feb. 21: “Our strategy now is that if we feel our enemies want to endanger Iran’s national interests… we will act without waiting for their actions.”
DEBKAfile’s military sources report that an Iranian preemptive attack on Israel has been in the air for some weeks. It became realistic because the dragging out of the argument between Washington and Jerusalem over a military strike and the two government’s indecisiveness gave Tehran a golden opportunity to further its interests.

It bestowed on Iran the gift of entering into talks on its nuclear program with the six world powers (P5 plus 1) free of a military threat and therefore in a superior bargaining position. For openers, Tehran has already pocketed the Obama administration’s promise of permission to continue to enrich uranium up to 5 percent in any quantity and will be more than ready to lay down more demands.
Gen. Hejazi’s threat of a preemptive strike against Israel also serves the Islamic regime in its run-up to a general election on March 3. It aims to show the Iranian voter and Middle East public that Iran has successfully turned US and Israeli aggression against Iran against them and demonstrated they are no more than paper tigers incapable of carrying through on their rhetoric. The military initiative therefore stays in Iran’s hands.

In Tehran, the standard Israeli cliché of “We don’t’ advise anyone to test our resolve” has worn thin.

By letting two Iranian warships bearing arms for Assad pass Israel’s coast on its way to Tartus without interference, Israel encouraged Tehran to assume that, in the last reckoning, it will abstain from a unilateral strike to eradicate Iran’s nuclear facilities without Washington’s blessing.

The Netanyahu government’s resolve is expected to melt away under the bulldozer assault of one American emissary after another touching down at Ben-Gurion airport to corner them into backing down.

Once Israel lets its hands be tied, Tehran calculates, it will become progressively harder to break them loose, so that if Tehran does carry out a limited “preemptive” missile attack on the Jewish state, Jerusalem will again bow to Washington and let itself be coerced into not responding.

Thursday, Feb. 23, US National Director of Intelligence James Clapper arrives in Israel to tackle its military and intelligence chiefs on the question, after US National Defense Director Tom Donilon spent three days in fruitless discussions with government leaders Prime Minister Binyamin Netanyahu and Defense Minister Ehud Barak. Gen. Martin Dempsey, Chairman of the US Chiefs of Staff tried his hand at persuasion earlier this month. This cycle of pressure will peak with Netanyahu’s White House talks with President Obama on March 5.

The Iranians felt confident enough to safely deny requests from the team of IAEA inspectors who arrived in Tehran Monday for access suspect nuclear locations and meetings with scientists employed in their nuclear program.

Gen. Hejazi’s words were backed up by a four-day air defense exercise, dubbed Sarallah (God’s Revenge), in the south of the country. The Islamic Republic also took another initiative by cutting off oil exports to Britain and France and so turning the tables on the European Union’s oil embargo on Tehran.


Wy there are no Jobs in America

Now Portugal

It looks like Greece will get its debt restructuring, which presumably delays its collapse by a few months. So now the spotlight shifts to the other functionally bankrupt eurozone countries which have no choice but to demand the same deal.

Portugal, by general consensus, is next in line. It hasn’t blatantly lied about its problems the way Greece has. And it hasn’t accumulated quite as much debt as Greece, though at 105% of GDP its government is still deep in the danger zone.

But for the past decade it has run truly massive trade deficits. In order to pay down its debt it will need to generate trade surpluses going forward, but without the ability to devalue its currency to make exports cheaper, that’s not likely.

So as with Greece, austerity leads to depression:

Bailed-out Portugal’s recession seen worsening

(AP) LISBON, Portugal — Portugal’s recession will deepen this year under the weight of austerity measures meant to reduce public debt, the bailed-out country’s central bank predicted Tuesday.

Portugal is trying to free itself from a huge debt burden that forced it to ask for a euro78 billion ($100 billion) financial rescue package last year to avoid bankruptcy.

But the Portuguese economy, one of the frailest among the 17 countries that use the euro as its currency, is buckling under the austerity cuts and fueling investor fears about the bloc’s chances of recovery from its two-year-old sovereign debt crisis.

The central bank said in a report it expects the economy to contract 3.1 percent this year. Last October, it forecast a 2.2 percent contraction in 2012.

As in bailed-out Greece, the government faces a dilemma as it tries to cut spending while at the same time fostering the growth it needs to settle its debts.

The jobless rate has climbed to a record 13.2 percent, and trade unions have staged strikes and protests against tax hikes and pay and welfare cuts.

Finance Minister Vitor Gaspar told lawmakers Tuesday he planned no new austerity measures this year. He said any funding shortfall would be made up through the sale of state property and gambling concessions.

Portugal went into a double-dip recession last year, contracting 1.6 percent, the central bank said. The economy will be “virtually stagnant” in 2013, it said.

The debt crisis has caused Portuguese living standards to drop, with the central bank estimating that disposable income would decline 11 percent between 2011 and 2013 — the duration of the bailout agreement.

Depression, in turn, leads to chaos:

Lisbon Protests: More Than 100,000 Rally Against Austerity In Portugal

LISBON, Feb 11 (Reuters) – More than 100,000 people packed Lisbon’s vast Palace Square on Saturday in the largest rally against austerity and economic hardships since the country resorted to an EU/IMF bailout last May, and organizers vowed to step up protests and labour action.

The mass rally occurred just four days before Portugal’s international lenders were due to start the quarterly evaluation of the bailout implementation on Wednesday in the finance ministry building which overlooks the square by the river Tagus. They come amid concerns Portugal may need more bailout funds, if not a debt restructuring like Greece.

“We take this opportunity here to make our own evaluation on behalf of those who suffer daily,” Armenio Carlos, head of the country’s largest union, CGTP, told supporters as the crowd chanted: “IMF doesn’t call the shots here!”

“We have to step up the struggle,” he said. Carlos promised the next wave of rallies across Portugal as soon as on Feb. 29.

“The country needs to remove the rope from around its neck,” he said, saying that Portugal should try to renegotiate its debt rather than impose more austerity, an argument he has made consistently.

The peaceful rally under the banners of the 750,000-strong CGTP, which last month refused to sign a pact with the government on labour market reform, showed that social strife is running strong and likely to grow even though other unions agreed to the reforms demanded by the bailout terms.

The dynamic of austerity leading to depression leading to regime change will continue until Germany just gives up and bails out the whole eurozone periphery.

Dollar Collapse

Top Banks in EU Rush for Safety

LONDON—Top European banks, responding to new regulations and wary of lending, are stashing increasingly large sums of money at central banks around the world in a collective flight to safety.

The eight giant European banks that have disclosed their annual results in recent weeks reported holding a total of about $816 billion in cash and deposits at central banks as of Dec. 31, according to calculations by The Wall Street Journal. That is up 50% from a year earlier, when the same banks were holding roughly $543 billion.


8 Reasons Why The Greek Debt Deal May Not Stop A Chaotic Greek Debt Default

The global financial system is not a game of checkers.  It is a game of chess.  All over the world today, news headlines are proclaiming that this new Greek debt deal has completely eliminated the possibility of a chaotic Greek debt default.  Unfortunately, that is simply not the case.  Rather, the truth is that this new deal actually "sets the table" for a Greek debt default.  When I was studying and working in the legal arena, I learned that sometimes you make an agreement so that you can get the other side to break it.  That may sound very strange to the average person on the street, but this is how the game is played at the highest levels.  It is all about strategy.  And in this case, the new debt deal imposes such strict conditions on Greece that it is almost inevitable that Greece will fail to meet some of them.  When Greece does fail, Germany and the other northern European nations may try to claim that they "did everything that they could" but that Greece just did not "live up to its obligations".  So does this mean that we will definitely see a chaotic Greek debt default?  No.  What this does mean is that the chess pieces are being moved into position for one.
The following are 8 reasons why the Greek debt deal may not stop a chaotic Greek debt default....
#1 Greece Is Being Set Up To Fail
The terms of this new debt deal impose some incredibly harsh austerity measures on Greece and from now on the Greek government will be subject to "permanent monitoring" by EU officials.
In other words, they will be under a microscope.
Any violation of the terms of the debt deal could be used as a pretext to bring down the hammer and cut off bailout funds.  Potentially, this could even happen just a few weeks from now.
It has become obvious that there are many politicians in Europe that would very much like to kick Greece out of the euro.  In a recent column, the International Business Editor of The Telegraph summed up the situation this way....
It is clear that Berlin, Helsinki, and the Hague have taken the decision to eject Greece from the euro whatever the country now does. Even if Greece complies to the letter with the impossible terms of the EU-IMF Troika, it will not make any difference. A fresh pretext will be found.
#2 The Next Greek Election Could Bring An End To The Bailout Deal Overnight
The next national Greek elections are scheduled for April.  Political parties opposed to the bailout have been surging in recent polls.  It is becoming increasingly likely that the next Greek government will abandon this new deal entirely.
The following is what hedge fund manager Dennis Gartman told CNBC about what is likely to happen after the next elections....
"A new government is going to come to power following elections that shall take place sometime this spring, and if anyone anywhere believes that the next Greek government shall do anything other than abrogate all the agreements made with the ‘troika,’ then we have a bridge we’d like to sell them at a very high price"
With each passing day anger and frustration inside Greece continue to rise, and those that are currently holding power in Greece are becoming very unpopular.
One current member of Greek Parliament recently talked about what he thinks will happen in the aftermath of the next election....
"If we achieve a Left-dominated government, we will politely tell the Troika to leave the country, and we may need to discuss an orderly return to the Drachma"
#3 This Bailout Deal Is Going To Make Economic Conditions In Greece Even Worse
In a previous article, I listed some of the new austerity measures that are being imposed on Greece by this new agreement....
The EU and the IMF are demanding that Greece fire 15,000 more government workers immediately and a total of 150,000 government workers by 2015.
The EU and the IMF are demanding that wages for government workers be cut by another 20 percent.
The EU and the IMF are demanding that the minimum wage be slashed by more than 20 percent.
The EU and the IMF are also demanding significant reductions in unemployment benefits and pension benefits.
The austerity measures that have already been implemented over the past few years have already pushed Greece into an economic depression.
These new austerity measures will deepen that depression.
At the moment, the Greek national debt is sitting at about 160 percent of GDP.
We are being told that these new austerity measures will reduce that ratio to 120 percent by 2020, but already there are many in the financial world that are calling such a goal "comical".
Even with this new deal, the Greek national debt is still completely and total unsustainable.  A "confidential report" produced by analysts from the European Central Bank, the European Commission, and the International Monetary Fundsays the following about what this new debt deal is likely to accomplish....
There are notable risks. Given the high prospective level and share of senior debt, the prospects for Greece to be able to return to the market in the years following the end of the new program are uncertain and require more analysis. Prolonged financial support on appropriate terms by the official sector may be necessary. Moreover, there is a fundamental tension between the program objectives of reducing debt and improving competitiveness, in that the internal devaluation needed to restore Greece competitiveness will inevitably lead to a higher debt to GDP ratio in the near term. In this context, a scenario of particular concern involves internal devaluation through deeper recession (due to continued delays with structural reforms and with fiscal policy and privatization implementation). This would result in a much higher debt trajectory, leaving debt as high as 160 percent of GDP in 2020. Given the risks, the Greek program may thus remain accident-prone, with questions about sustainability hanging over it.
The GDP of Greece fell by 6.8 percent during 2011.
2012 was already expected to be even worse, and all of these new austerity measures certainly are not going to help things.
And every time the Greek economy contracts that makes a chaotic debt default even more likely.
#4 The Greek Parliament Must Still Vote On This Bailout Deal
It is anticipated that the Greek Parliament will vote on this new agreement on Wednesday.
It is expected to pass.
But when it comes to Greece these days, there are no guarantees.
#5 The Greek Constitution Must Still Be Modified
Under the terms of this new agreement, Greece is being required to change its constitution.
The following is how an article in The Economist describes this requirement....
Over the next two months Greece has promised to adopt legislation “ensuring that priority is granted to debt-servicing payments”, with a view to enshrining this in the constitution “as soon as possible”. These arrangements may not amount to the budget  “commissar” once threatened by some creditors, but the effect may be pretty much the same.
So will this actually get done?
We will see.
Forcing a sovereign country to modify its constitution is a very serious thing.  If I was a Greek citizen, I would be highly insulted by this.
#6 Several European Parliaments Still Need To Approve This Deal
The German Parliament still must approve this new agreement.  This is also the case for the Netherlands and Finland as well.
Many politicians in all three nations have been highly critical of the Greek bailouts.
It is expected that all of these parliaments will approve this deal, but you just never know.
#7 Private Investors Still Have To Agree To This New Deal
Private investors are being asked to take a massive "haircut" on Greek debt.  The following is how the size of the "haircut" was described by a USA Today article....
Banks, pension funds and other private investors are being asked to forgive some €107 billion ($142 billion) of the total €206 billion ($273 billion) in devalued Greek government bonds they hold.
There is absolutely no guarantee that a solid majority of private investors will agree to this.
In the end, probably the only thing that is guaranteed is that litigation regarding this "haircut" is likely to stretch on for many years to come.
#8 The Global Financial Community Still Expects Greece To Default
Almost all of the analysts that were projecting a chaotic Greek debt default are still projecting one today.  Yes, many of them believe that "the can has been kicked down the road" for a few months, but most of them are still convinced that a default by Greece is inevitable.
The following comes from a Bloomberg article that was released after the Greek debt deal was announced....
“The danger of Greece saving itself into economic depression and having to default and exit the common currency zone remains substantial,” said Christian Schulz, an economist at Berenberg Bank in London. Jennifer McKeown of Capital Economics Ltd. repeated her forecast that Greece will quit the euro by the end of the year.
The odds that this agreement will survive for very long are not great.
It will be nearly impossible for Greece to meet all of the conditions being imposed upon it by this new deal.  All of the politicians in northern Europe that are just itching to cut off aid to Greece will soon have the excuse that they need for doing so.
And the Greek people could decide to bring all of this to an end very quickly.  If they elect a new government in April that does not support this bailout agreement, the game will be over.
So don't be fooled by all the headlines.
A chaotic Greek debt default has not been averted.
The truth is that a chaotic Greek debt default is now closer than ever.
Economic Collapse

Bob Chapman: No descent banker....

Second Greek Bailout a charade?

Former Islamic Insider Offers Warning

Last week I quoted from a book by Reza Kahlili, A Time to Betray. This week I had a chance to speak with Mr. Kahlili by phone, and ask him about the Iran crisis. As a former CIA operative who worked inside the Iranian Revolutionary Guard, he understands the strengths and weaknesses of the Islamic Republic. He knows the Islamist mindset, and the errors that plague U.S. policy.

I asked Mr. Kahlili whether he thought a preemptive strike against Iran was a good idea. “The question is complex,” he answered. “You should never have allowed Iran to become what it is today. You have missed opportunity after opportunity.”

Readers may remember that in 2009 the Islamic regime was ready to fall, with protests growing stronger by the day. This was a perfect moment to act, noted Kahlili, but the Western world did nothing to support the Iranian people against their oppressors. “Intelligence showed the [Islamic] leaders were ready to flee,” Kahlili said. “The security forces could not contain the protests. The Revolutionary Guard was demoralized. From the West, however, there was silence. You see how it was – a losing game for Iranian dissidents and backers of the West.”

Always the West has attempted to find “moderates” within the Iranian regime. Always, the U.S. has attempted to negotiate and conciliate. Always, the Americans have been duped, refusing to see that the Islamists are enemies of the West. The Islamists, in fact, cannot help themselves. They cannot stop or question the principles that drive them forward. Every success is proof of God’s blessing. “The clerics grow up with the vision that the only way for justice is for infidels to die,” Kahlili explained.

But isn’t Islam the “religion of peace,” as President Bush claimed?

Kahlili laughed, “Religion of peace? If they exploded one nuclear bomb on the Saudi oil fields, it would shut down all production because the oil would have been [radioactively] contaminated. Given our dependence on oil, the resulting calamity would be one of the worst in all history.” This result, explained Khalili, would make the whole world grieve. But the clerics would rejoice. War and disaster are nothing to them. If an unbeliever dies, praise be to Allah the blessed and merciful. If a believer dies it is also an occasion for self-satisfaction.

American policy-makers have failed to understand Iran. They imagine that economic sanctions will bring the Islamic Republic to the negotiating table. According to Kahlili, inflicting economic pain on fanatical Islamists will not work. “For them it is not the economy that matters. It is the ideology that matters.” And what is their ideology? “The Grand Ayatollah talked about what the Koran says,” noted Kahlili. “They [the Muslim clerics] will take over the management of the world. It clearly says this [in the sacred writings], that a man will come.”

That man, explained Kahlili, is the Mahdi (or twelfth Imam).

I asked Kahlili what he thought of the claim that the Ayatollah Ali Khamenei and President Mahmoud Ahmadinejad were personally in touch with the Mahdi. “These people meditate,” said Kahlili. “Khamenei prays and then he ‘ascends to the sky.’ During this elevation of spirit, he communicates with the Mahdi. I was there in Iran, and once you read the Koran in the middle of the night, you will have that same experience and believe you are right.”

Kahlili says that the most important teachings in the Koran are about killing and martyrdom, jihad and conquest. According to Kahlili, “The Koran promises that the Mahdi will wipe out those who don’t believe in Allah. The Islam of normal people centers on how gracious the Prophet Mohammed was; but those who actually go by the Koran know it is about slaughter, and it is written in very clear language.”

The leadership of the Islamic Republic is likely to miscalculate, Kahlili warned. They believe that God has promised them victory. “These people have a very narrow worldview,” he added. “The Ayatollah believes there should be blood until the end of the world, or God willnot be satisfied. You see, the center of the Islamic ideology is justice. When the Mahdi comes, he will kill all infidels. This is their justice.”

An Islamic prophecy says that dark clouds will cover the earth and kill a third of mankind while famine will kill another third. Then the Mahdi will come to smite the unbelievers and forcibly convert the entire world. According to Kahlili, such prophecies encourage Islamists to believe that nuclear war will bring ultimate salvation. What greater incentive could there be for unleashing global destruction?

“Basically,” says Kahlili, “in light of all this, we have a decision to make. Can we accept a nuclear-armed Iran or not? Whatever America decides, I believe the Israelis will not accept a nuclear-armed Iran.”

It is only logical to expect that the Israelis will attack the Islamic Republic’s nuclear sites. As these words are being written, the Israelis are preparing to activate special missile defense systems around Tel Aviv. Quite naturally, the Israelis are preparing for the inevitable. The Islamic Republic and its allies have thousands of rockets aimed at Israel. When Israel launches against the Iranian nuclear facilities, the Islamists are bound to retaliate. This could be a war with devastating consequences for the region – and for the world.

There is some good news, according to Kahlili. The Islamic Republic is hated by the Iranian people. If the Revolutionary Guard bases are suppressed by air strikes, a popular insurrection could occur. “Only regime change, only helping the Iranian people, will avert disaster,” said Kahlili. He explained that the Iranian people have turned against the regime and its ideology. He further suggested that few Mosques would be left in the country after the fall of the Islamic regime. “Many are secretly converting to Christianity,” he added.

According to Kahlili there is real danger of war in the Middle East this year. What would such a war mean for the world? There is the possibility of an oil shortage, with financial dislocations to follow. Beyond the economic consequences, Russia and China appear to support Iran. Retired Russian military officers are publicly suggesting that Russia will fight on Iran’s side if war breaks out. Some Chinese military officers have said much the same thing. As if in response to all this, President Barack Obama has announced his intention to cut back the U.S. nuclear arsenal by 80 percent.

Perhaps it is no accident we are in such a difficult position today. Reza Kahlili is not alone in suggesting that the West has used bad judgment and shown poor leadership regarding Iran. To survive intact, our civilization must do better. We have deluded ourselves long enough. We have refused to accept that our enemies are enemies, that they intend our destruction. The hour is late, and time is running out.

Financial Sense