E Coli bacteria has now killed 22 persons. In Hamburg, epicenter of the outbreak, hospitals are receiving more patients with E Coli symptoms. Since Russia banned imports of vegetables from EU, some other countries will surely follow. Let’s hope this doesn’t evolve into bigger problems, although, the world economy still thinks all extraordinary events, such as earthquakes, riots, droughts, tornados etc all just are positives, as we have to rebuild (with more debt) all that is gone. From the Guardian;

German health authorities claim that locally grown beansprouts have been identified as the likely cause of an outbreak of E coli that has killed 22 people and infected 1,700 people across Europe.

Gert Hahne, a spokesman for the agriculture ministry in Lower Saxony, said an alert would be sent out immediately warning people to stop eating the sprouts, which are often used in mixed salads. It was also announced that the death toll from the outbreak had increased to 22.

German hospitals have been struggling to cope with the flood of E colivictims, said Daniel Bahr, the health minister. Hospitals in the northern city of Hamburg, where the outbreak began three weeks ago, have been discharging patients with less serious illnesses to handle the surge of people stricken by a rare, highly toxic strain of the bacteria.

“We’re facing a tense situation with patient care,” Bahr told the Bild am Sonntag newspaper. He said hospitals outside Hamburg could be used to make up for “insufficient capacity” in Germany‘s second-largest city.

Scientists suspect the source of the contamination may have been poor hygiene either at a farm, in transit, or in a shop or food outlet. Many of those infected have developed haemolytic uraemic syndrome, a potentially deadly complication attacking the kidneys.

On Saturday, a microbiologist said officials had identified a restaurant in the northern port city of Lübeck as a possible place where the bug had been passed to humans. At least 17 people infected with E coli had eaten there.

Debt map from The Economist. Although the map is not totally fair, Norway is indebted, but has big fortunes (looks somewhat silly), it still gives a good interactive grasp of the total debt in the world.

Click link for full access.

index.html

This week has been a bizarro trading week with regards to Greece bail out, on/off on a real time basis. The Dow has now been in it’s biggest loosing streak since 2004, and we expect this to be the start of a greater correction.

Thetrader has written extensively about the Greek Drama. It seems finally, Greece will get some money to survive, but as we argue, the country needs further bail outs, if they do not restructure and fix the economy. Greece and other PIIGS just can’t cope with the Euro. They are simply not competitive enough. Bail outs are not curing the patient, it simply prolongs the inevitable restructure. Of course, the banks have been saved, with the cost transferred to the tax payer. This is not new, but further Austerity will end up in massive protests where the people will force the government to give up. The Arab Spring will most likely spread to other countries, where we see a very bad economic situation. We are very concerned with how Spain will cope with it’s economy. From hmmm; “Is it Safe”

Yesterday, the pantomime in Europe continued apace as the first headline hit the tape:

ATHENS-SENIOR EUROZONE OFFICIALS AGREE IN PRINCIPLE ON NEW 3-YR ADJUSTMENT PLAN FOR GREECE-SOURCE — Reuters

So, it appeared, ‘it’ WAS safe (the ‘it’ in this case being, of course, Greece). A new three-year plan had been tentatively agreed upon which would successfully kick the can down the road and avoid the pain of a default/restructuring/reprofiling/rejuvenation/revitalization (delete according to taste).

The Euro leapt on the wonderful news that the tax payers of the world’s greatest flawed experiment would be on the hook for tens of billions more while the banks which were most exposed to the po- tential ramifications of a Greek default/restructuring/reprofiling/rejuvenation/revitalization (delete according to taste) would once again be spared any further pain.

“Is it safe?”

Of course, as things stand, the ECB has now succumbed to Stockholm Syndrome as it has managed to fill its coffers to bursting point with Greek bonds pledged as collateral by those same banks, increasing the vested interest it has in prolonging the game with every tap on its window.

But wait. What’s this? A short while later, another headline lit up the wires:

EU COMMISSION DENIES AGREEMENT ON NEW GREEK AID PLAN – Bloomberg

So, the new, new bailout hadn’t been agreed after all it would seem. The Euro dived as the follow-on headlines rolled by:

*DJ Greece Agrees To Quicker Privatization Efforts –Reuters

*DJ Greece Agrees To Deeper Austerity Measures –Reuters

What was needed were some calming words from someone on whom the public could count to not only tell the truth, but to be reassuringly correct in his assertions.

If only such a man were….. hold on. Up there, in the sky. Is it a bird? Is it a plane? No…. it’s even better than that. It’s the CEO of a major Wall Street investment bank:

*DIMON SAYS GREECE DEBT CRISIS WILL NOT ‘TAKE DOWN’ EUROPE

“Is what safe?”

But the thing is, it’s not about Greece anymore – and it hasn’t been for a while now if we’re honest. All the huffing and puffing that has surrounded the ‘Rumble in the Crumble’ is basically irrelevant. Greece will default. It’s just a matter of whether it will default sooner or later. It’s a matter of whether the powers-that-be are able kick the can sufficiently far down the road to ensure the long-promised recovery has kicked into high gear when the default is finally allowed to take place.

Curiously enough, the genesis of the word ‘crisis’ is the Greek word ‘krisis’ which is the name for the turning point in a disease and here we are, desperately looking for the turning point in the financial disease that nobody saw coming and desperately looking towards Greece for the first signs of any change in the collective fortunes of the world.

So let’s take a look at how that recovery’s coming along, shall we?

This week’s full “Things that make you go hmmm”

hmmm4june

As we commented in the previous article, Castilla La Mancha region of Spain is Bankrupt. With 2 billion Euros of unpaid bills, the region needs a bail out. The problem of many provinces in Spain, is the high corruption. Last year the local government in Marbella was prosecuted of stealing hundreds of million of euros, and that is a small town….Expect more unpaid bills and corrupt politicians emerging from Spain, a country too big ignoring in Euro. From El Pais;

The PP leader said that this month other officials charged by the payroll but no money for months, but has sent a message of peace because the PP, he added, will find the mechanisms to pay thereafter, and cited, for example, privatization of public television.

Noted that the first data to get to know, although the secrecy of government functions is total and not given any documentation of the real economic situation in the region, the Board “does not have a euro” and pay “or electricity or the phone or suppliers. “

He also said that “there will audit all sites, and has been emphatic in saying,” we will review everything. “

Remember Spain, the country that was seized by protesters some weeks ago. Well, nothing is solved at all, and the new winner of the local elections, promises some real Austerity, if he wins next year’s national election. Look for more protests, and a Greece situation developing in Spain shortly. El Pais reports;

Just two days after Mariano Rajoy called on elected officials in the Popular Party to cut back on public spending, the opposition leader suggested on Friday that if he wins next year’s prime ministerial race, there could be drastic cuts in social services.

Speaking in Sitges, where he took part in a question-and-answer forum with a group of businessmen, Rajoy said that public spending must be scaled back while at the same time he advocated changes to the Constitution that would prevent governments from racking up deficits.

Prior to addressing the Círculo de Economía forum, US economist Joseph Stigliz, who won the Nobel Prize in 2001, argued that excessive cuts in public spending could lead to economic stagnation similar to that seen in Greece. But Rajoy was firm in his convictions.

“We will have a welfare state that we can afford,” he said. “An African nation may want to have a large welfare state but cannot. If we reactivate the economy and create jobs, then more taxes will be paid and we will have a welfare state. And we will have one to fit our means. As I said before, I would like to maintain public health and pensions ? that is the red line. But I think that coming up with a global package mixed with an austerity plan will be good.”

In Castilla-La Mancha, PP officials say there is no money to pay the regions 70,000 public servants from next month, because the situation is one of “total bankruptcy.” Regional party secretary general Vicente Tirado said the government owes some 2 billion euros to suppliers and accused outgoing Socialist premier José María Barreda of being “irresponsible.”

Here we go, Germans deciding on Greece population and it’s future.

The newspaper said in an advance excerpt released ahead of publication on Sunday that the plan calls for investors who hold Greek bonds due to mature in 2012 to 2014 to voluntarily exchange those for new sovereign debt instruments with an extended maturity of seven years.

The Finance Ministry did not comment on the report.

Welt am Sonntag quoted from an unofficial paper from the Finance Ministry saying it is in principle possible to structure a conversion of debt in such a way to avoid default.

According to the plan, creditors could be motivated to join in a voluntary exchange with the help of a so-called “collective action clause” that would be introduced into existing bond contracts in the event not enough investors were prepared to take part.

At the same time, the ministry’s plan says that investors who swap their old bonds into new bonds would get preferential treatment in the future if another rescheduling is needed.

There are concerns in financial markets that Greece will eventually be forced into a coercive restructuring of its debt, which stood at nearly 330 billion euros ($476.1 billion) — or close to 150 percent of GDP — at the end of last year.

A harsh restructuring that would force losses on private creditors has been ruled out for now, butGermany and allies like Finland and the Netherlands are insisting on some sort of symbolic participation from the private sector.

Sources have told Reuters for the past two weeks that investors who hold Greek bonds due to mature in 2012 and 2013 could be encouraged to roll over that debt under a scheme similar to the “Vienna Initiative” used in early 2009 to safeguard banking systems in central and eastern Europe.

It has until now been unclear what incentives governments could offer to convince investors to buy new Greek bonds, but in similar cases in the past, they have been promised higher coupons, preferred creditor status or collateral as inducements. (Kathimerini)

We have been arguing for Greece to restructure, exit the Euro, and fix the Economy. Yes, very hard short term, but at least you are free, and end up with a sound Economy, if you do the restructure process well. Greece is now in the hand of the Bail outers, the Troika, dictating what Greece and it’s people should do. Yes, the banks have “saved” the many billions in exposure by the bail out. The poeple of Greece have been hit with Austerity, lower wages, higher taxes etc. The banks together with the Troika are now in full control of Greece. They dictate every detail of the coming bail out, and the ones that will follow. When you get a bail out, like Greece, the country lost its freedom. The Class War is now run by the Financial Oligarchs. Look out for more protests. Below insight from Hudson;

“But if a country is still not delivering, I think all would agree that the second stage has to be different. Would it go too far if we envisaged, at this second stage, giving euro area authorities a much deeper and authoritative say in the formation of the country’s economic policies if these go harmfully astray? A direct influence, well over and above the reinforced surveillance that is presently envisaged? Jean-Claude Trichet, President of the ECB on receiving the Charlemagne prize for European unity (Aachen, 2 June 2011)

Soon after the Socialist Party won Greece’s national elections in autumn 2009, it became apparent that the government’s finances were in a shambles. In May 2010, French President Nicolas Sarkozy took the lead in rounding up €120bn ($180 billion) from European governments to subsidize Greece’s unprogressive tax system that had led its government into debt – which Wall Street banks had helped conceal with Enron-style accounting.

The tax system operated as a siphon collecting revenue to pay the German and French banks that were buying government bonds (at rising interest risk premiums). The bankers are now moving to make this role formal, an official condition for rolling over Greek bonds as they come due, and extend maturities on the short-term financial string that Greece is now operating under. Existing bondholders are to reap a windfall if this plan succeeds. Moody’s lowered Greece’s credit rating to junk status on June 1 (to Caa1, down from B1, which was already pretty low), estimating a 50/50 likelihood of default. The downgrade serves to tighten the screws yet further on the Greek government. Regardless of what European officials do, Moody’s noted, “The increased likelihood that Greece’s supporters (the IMF, ECB and the EU Commission, together known as the “Troika”) will, at some point in the future, require the participation of private creditors in a debt restructuring as a precondition for funding support.”[1]

The conditionality for the new “reformed” loan package is that Greece must initiate a class war by raising its taxes, lowering its social spending – and even private-sector pensions – and sell off public land, tourist sites, islands, ports, water and sewer facilities. This will raise the cost of living and doing business, eroding the nation’s already limited export competitiveness. The bankers sanctimoniously depict this as a “rescue” of Greek finances.

What really were rescued a year ago, in May 2010, were the French banks that held €31 billion of Greek bonds, German banks with €23 billion, and other foreign investors. The problem was how to get the Greeks to go along. Newly elected Prime Minister George Papandreou’s Socialists seemed able to deliver their constituency along similar lines to what neoliberal Social Democrat and Labor parties throughout Europe had followed – privatizing basic infrastructure and pledging future revenue to pay the bankers.

http://michael-hudson.com/2011/06/eu-class-war-declared/

Watch Mr Bull’s argument about Dow 20k imminent. As our readers know, we are slightly bearish, but we present you the Dow 20k theory. One of the arguments, companies will buy back stock. That’s great, if all the companies in the world just bought back stock, we could reach Dow 100k soon. We recommend buying all calls on Dow, if target is 20k in a year. Then all options definitely are totally mispriced.

http://video.cnbc.com/gallery/?video=3000025675

In the edwards campaign when he enough of the doom and gloom already, our next guest is boldly predicting that the dowwill go to 20,000. he says it could happen in the next 12 do 18 months. that is james altersure, managing director and author.brains behind the recent article next stop, dow 20,000. we read it and called him. he decided to come on the program. 20,000 on the dow, make your case. it’s kind of david letterman style, top ten list. exactly. i want to take a little break from all the doom and gloom pessimism. people act like every economic report should crash the market or boom the market qe2 has not even begun to have an effect on the economy. just because the printing press is printing, doesn’t mean it’s affecting the economy one second later. it typically takes 6 to 18 months for the economy to have any effect from the stimulus. next, we’re still — obama’s basically done nothing to the economy. he’s extended bush’s tax cuts, we’ll see what happens with health care, he’s backed off on wall street. the actual stimulus isn’t just 600 billion, but when you use those stimulus dollars to buy adoughnut and then the doughnut guy buys a newspaper and thenewspaper guy buys some furnituring there’s a multiplier effect.600 billion could be up to $3 trillion in stimulus on the economy.that’s a significant – except a few hundred billion of that went to transfer payments. okay, i’ll deal with that. again, 3 trillion is an enormous effect on gdp. finally, companies are sitting on 2 trillion in cash, the greatest amount of cash in history. this is is the only recession where companies quarter over quarter increase their cash every single quarter of this recession. they never went down a quarter. what are they doing with this cash?they’re spending it. stock buy backs are the highest levels in history. they’re announcing — the stock market is supply and zee manned. if you remove the supply of shares from the market, what happens, in any market in the world, price goes up. that’s what’s going to happen here much we have some more, butlet’s. no, keep going quickly. temp workers are being hired, that means full time workers are coming next. corporate profits are at their highest point ever, people say it’s going to come down. the reality is, right now, they’re at the highest ever. major stocks all trading around 10 to 13 times forward earnings. let’s not forget innovation. we all have ipads, every year there’s new biotech drugs, everything. google has cars driving around on the highways without drivers. it’s an innovative economy, and it’s going to stay that way. that’s what i’m going to bet on. i agree with all ten except for numbers 1, 3, 4, 9 and 10. let’s do cnbc fight club right now. you’re taller than me, i’ll take you on. scott is with us phil orlando is with us. phil, i want to start with you. he makes very good points. i don’t agree with all of them. could the dow hit 20,000 in a year and a half? i directionally agree withjames, he’s made some excellent arguments there. i would focus on two of his points monetary policy works with a lag, it takes about six to nine months for one half of the effect of monetary policy to begin working. about 12 to 18 months for thefull effect to be felt. if the feds started injecting liquidity, it will be the third and fourth quarters of this year where we’ll start to see that stimulus. and the full boom in 2012. i’m worried for bubbleproportions at the end of 2012. i don’t think we need qe 2. i know equityies are not necessarily your primary focus, that’s bonds. if they’re right, what would that mean for the bond mark ed. if you don’t think they’re right, tell me why. let me support james’argument for a minute. if you look at the fed model which takes where 10-year treasuries are trading and it correlates to price earnings ratios. the price earnings ratio should be about 22 times, we have lots of room for of room for multiple expansion of current earnings, i could see supporting james’ argument thatwe could have a massive rally in treasuries in stocks. as for the fixed income markets, brian, the history of the fed is that after the end of recessions, they have not raised short-term rates until about three years after the end of the downturn. so we are still a good 12 to 14 months away from seeing is any serious moves on the part of the fed. and given that overnight rates are locked in here around zero percent, the normal relationship between the ten-year note and fed funds ranges between 2.5 percentage points and 4 percentage points. which i think we – when the market tends to go up, when interest rates start to rise, raising interest rates aren’t a bad thing for the stock market. it means the economy is growing, and the fed is starting to get worried about potential bubbles. right, but my point here is not that you’re not correct. you’re 100% correct, it’s gist that we are a long way off from seeing a material rise in interest rates, which is just going to continue to support corporate earnings and support the multiple, and i thinkstocks will go higher just because the multiple will expand. we talked this week whetherthere’s too much hyperbollistic behavior in this market. we’re either doomed or we’re going to boom. there’s no middle ground. is the worst behind us? is it only going to get better day by day for the next few years? please say yes. the longer term answer to that is yes. the near term answer is that undeniably we’re in an economic soft batch, but we think the catalyst for the soft patch are very much trans tory. the earthquake in japan, theweather issues, the spike in commodity prices, we think thatthose issues are going to fade over the course of the thirdquarter and we’re going to enjoy a strong rally through the endof this year and into calendar 2012 for many of the reasons that james identified. phil, scott and james, i love the discussion, it was nothing but positive. very good stuff, guys, we appreciate your time tonight. thank you. have a great weekend. coming up, john edwards, stunning fall continues.

Greece moves closer to a second bail out. That has to be great, or? Everybody knows, Greece doesn’t have cash in a months time. Deal, no deal, doesn’t really matter. Trying to solve the economic problems of Greece should be the no 1 priority. Greece receiving 12 billion Euros (most likely) will only contrribute to the 17 billion interest rates the country needs to pay annually. The question is, what will Greece do next year and next year? They can’t get bailed out every year, nor do they have the luxury of printing money. Greece must restructure/reprofile it’s debt, the sooner the better. Kathimerini reports;

Following talks in Luxembourg with visiting Prime Minister George Papandreou, Juncker said the two men had been “in total agreement” as regards Greece’s fiscal targets, structural reforms and an ambitious privatization drive aimed at raising 50 billion euros by 2015.

But he made it clear that further financial support would be dependant on the Greek private sector sharing some of the burden of economic recovery. “I expect the Eurogroup to agree to additional finance being provided to Greece under strict conditionality,” Juncker told reporters. “This conditionality will include private sector involvement on a voluntary basis.”

Juncker also noted “with satisfaction” that the Greek government had agreed to the creation of an independent agency to oversee the privatization drive.

Calling Juncker “a friend of Greece,” Papandreou said, “Greece will continue to work hard, and Greece is committed to fully honor its obligations.”

Earlier in the day, officials of the European Union, European Central Bank and International Monetary Fund – who have been reviewing the progress of the government’s economic reforms – issued a statement saying that the review had been successful and that the fifth tranche of emergency loans, valued at 12 billion euros, would “most likely” be released in early July.

It added that envoys had agreed with government officials on “a set of economic and financial policies” and called for their “strict implementation,” referring also to the government’s midterm fiscal program, which aims to raise some 6.4 billion euros through tax increases and cuts to the public sector.

Great the Deal is done with Troica. Greel protesters have taken control of the Finance Ministry. WHover thinks the Troica will save Greece, is very wrong. For some figures, read out previous articles. Further austerity will just cause new protests, and we won’t be surprised if the government gets thrown out. Arab Spring ver 2.0. Turkish weekly reports;

Protesters in Athens have blockaded the Greek Finance Ministry, the scene of the government’s negotiations with international lenders on its latest financial rescue.

About 200 protesters from the communist-affiliated PAME union blocked the entrance to the ministry at dawn Friday. They hung a five-story-tall banner calling for a general strike to protest the government’s newest austerity plan aimed at cutting spending and trimming Greece’s burgeoning debt.

Greece has been negotiating with officials from the European Union, the International Monetary Fund and the European Central Bank to receive a $17 billion segment of last year’s $159 billion bailout. Greek newspapers report an announcement on the outcome of the talks will be made later Friday.

But Greece is also seeking new funding in order to pay its bills. In exchange, the international lenders are pressing Athens to impose more austerity measures and speed up the sale of government-owned assets to help cut Athens’ debt.

As Greece has struggled to rein in its spending, investors have charged the government increasingly higher interest rates on its loans. Numerous financial experts say the government could default on its debts.

Credit-rating companies have repeatedly cut Greece’s credit standing. On Friday, Moody’s Investors Service downgraded the ratings for eight Greek banks following a cut earlier in the week in the country’s rating.