In the summer of 1956, Egyptian president Gamal Abdel Nasser nationalized the Suez Canal, sparking a worldwide crisis. Britain was a major stakeholder in the canal, and almost immediately, the British government put together a small coalition consisting of the UK, France, and Israel to regain Western control. Their subsequent military action, however, greatly displeased the US government. And Uncle Sam quickly asserted its new role as the world’s superpower. But to anyone paying attention, this status has waned. Asia is rising. Major centers of wealth and power have grown around the world. US finances are desolate. And its currency is now widely reviled by foreign governments. But US politicians have completely ignored this trend over the last decade. They spend and act as if US global dominance is an endless river. With Syria, though, the US may have finally reached its Suez moment.
Moments ago the Treasury reported its deficit for the month of August, which was $148 billion, slightly less than the $150 billion expected. More importantly, it was over 22% less than the deficit from August 2012 when it was $191 billion. And that, in a nutshell, is the main reason why the Fed has no choice but to taper. What the chart below shows is the cumulative deficit of the US for fiscal 2012 and 2013. What becomes immediately obvious is that with the total deficit Year to Date of $755.3 billion running 35% below the $1,165 billion from a year ago, the Fed has far less room to monetize gross issuance.
As Angela Merkel prepares for her third term - in whatever odd coalition that lurches from the election - the following four charts may surprise many that believe in the core European nations' dominance uber alles. As Bloomberg's Niraj Shah notes, Merkel may find rebalancing the German economy, as its reliance on exports increases, harder than ever. The low levels of growth, high trade balances, excepotionally low consumption and homeownership, and growing "shadow" economy all point to a European core that is far from the beacon of stability so many assume it to be.
We are sure this conversation went very well... and now the press conference (and Q&A hopefully)...
*U.S. `GRATEFUL' FOR RUSSIA PUTTING PLAN FORWARD, KERRY SAYS
*`WE DO BELIEVE THERE IS A WAY TO GET THIS DONE,' KERRY SAYS
*U.S. HAS PUT TOGETHER ITS OWN PROPOSALS, KERRY SAYS
While Spain is the European nation making all the headlines with regard its housing market collapse, Italy has quietly been experiencing its own decline. As Bloomberg notes, however, Italy shows no sign of stopping as falling prices may not be enough to stem a decline in Italian home purchases as the country's biggest group of buyers - those aged 30 to 40 - is set to shrink until the end of the decade. As the chart below indicates, housing transactions have followed the growth and contraction of this important 'buyers group' as it has plunged by more than 1 million people since 2005 (and is set to drop to only 8.3 million by 2020) and prices are set to follow. Of course, officials proclaim that prices have dropped enough to trigger a rise in purchases (for the first time since 2006); but, this runs counter to the more-than-decade-long demographic trend. But apart from that, Europe is recovering...
As if the "developed" world did not have enough things to worry about, moments ago VOA's Steve Herman reported that the radioactive problem in Japan, the country hosting the 2020 summer olympics, continues to deteriorate uncontrollably, and citing Jiji, said that Tepco revealed tritium levels in the Fukushima groundwater have just surged to a new high.
While hardly the spectacular 10 Year reopening from yesterday, today's 30 Years reopening of the RC4 Cusip concluded the weekly issuance with solid demand for today's $13 billion in long-end paper. Printing at a yield of 3.820%, the auction priced through the 1pm When Issued of 3.83%. Perhaps a reason for this is that the yield, like yesterday, was the highest since July 2011, and while the 2.40 Bid To Cover was below the TTM average of 2.51, it was a notable improvement from the deplorable 2.11 in August. The internals saw the Directs stepping up, just like yesterday, and taking down 20.6%, above the 13.8% average, leaving 37.7% for Indirects and 41.7% for Dealers - hardly notable.
USDJPY has been sliding (JPY strength) the last few days even as US equites have pushed higher. Carry-fueled exuberance has been replaced by short-squeeze and VIX (hedge) unwinds as ammo but yesterday saw VIX converge and shorts underperformance at extremes. The performance so far this moring has been weak for stocks. Very low volume is rising as we fade lower and retrace the entire late-day ramp idiocy of yesterday. USDJPY at 99.00 seems the line in the sand and with WTI pushing higher (back above $109) as Syria grows louder and more emboldened is not helping.
In the wake of President Barack Obama's change of tack from a strike on Syria, the threat of war has not dissolved (and is growing louder with Syria's seeming rebuffs this morning). The idea that this imbroglio will somehow disappear is certainly one that Obama is considering. But the Russians will not want that to happen. They do not want to let Obama off the hook and their view is that he will not act. Against this backdrop, they can appear to be the nemesis of the United States, its equal in power and its superior in cunning and diplomacy. This is the game to watch. It is not ending but still very much evolving.
Ex-ECB insider Lorenzo Bini-Smaghi has once again proved that conspiracy 'theory' in the new normal is the same a conspiracy 'fact'. As The Telegraph's Ambrose Evans-Pritchard notes, Bini-Smaghi's new book details Silvio Berlusconi seriously floated plans to pull Italy out of the euro in October/November 2011, precipitating his immediate removal from office and decapitation by EMU policy gendarmes. Specifically, he discussed (threatened?) Italian withdrawal from the euro in private meetings with other EMU governments, presumably with Chancellor Angela Merkel and France's Nicolas Sarkozy. Bini-0Smaghi's tell-all goes further, noting that Merkel continued to think that Greece could be thrown out of the euro safely as late as the early autumn of 2012. It appears - just as we have always believed - that all is not well under the surface in Europe and that Dragji is in charge.
Assad Lays Down His Conditions: "US Must Stop Aiding Terrorists", Israel Disposing Of WMDs; Accuses Saudi, Qatar And TurkeySubmitted by Tyler Durden on 09/12/2013 - 10:13
It was only a matter of time before Syria's Assad, emboldened by Obama's recent backtracking and confident he has all the leverage and momentum, started laying down his own conditions. And here they are, as per RIA and Interfax citing an interview with Assad to air in its entirety later today on Rossia 24 TV:
- ASSAD CALLS FOR ISRAEL TO DISPOSE OF WMD (!)
- ASSAD: 'REBELS MAY USE CHEMICAL WEAPONS AGAINST ISRAEL AS PROVOCATION'
- ASSAD SAYS CHEMCIAL ARMS DEAL DEPENDS ON US STOPPING AID TO TERRORISTS
- ASSAD ACCUSES TURKEY, SAUDI ARABIA, QATAR OF SUPPORTING TERRORISTS IN SYRIA
- ASSAD: 'REBELS MAY USE CHEMICAL WEAPONS AGAINST ISRAEL AS PROVOCATION - ASSAD'
- ASSAD SAYS WILL COMPLETE DEAL ONLY IF US STOPS "POLICY OF THREATS"
- ASSAD SAYS IMPLEMENTATION OF DEAL MAY TAKE A MONTH OR MORE
If at all. And now, his bluff called, we go back to Barack Obama penning his Pravda Op-Ed.
With everyone focused on the 5th anniversary of the Lehman failure, we are taking a quick look at how the world's developed (G7) nations have fared since 2008, and just what the cost to restore "stability" has been. In a nutshell: the G7 have added around $18tn of consolidated debt to a record $140 trillion, relative to only $1tn of nominal GDP activity and nearly $5tn of G7 central bank balance sheet expansion (Fed+BoJ+BoE+ECB). In other words, over the past five years in the developed world, it took $18 dollars of debt (of which 28% was provided by central banks) to generate $1 of growth. For all talk of "deleveraging" G7 consolidated debt has been at a record high 440% for the past four years. So in the G7, which is a good proxy for the developed world, debt continues to increase whilst nominal growth remains extremely low thus ensuring that the deleveraging process has yet to start. As Deutsche Bank states, "at best we’re stabilising the ratio at or around record highs."
With US equity markets on a 7-day roll and excited TV anchors proclaiming the worst over and new all-time highs must signal recovery as they 'celebrate' five years on from Lehman, the following two charts of the state of real America should open a few eyes to just how blinded American has become to the truth (unless you live it). A stunning 20.0% of Americans were found to have struggled to afford food in the last year - surging in recent months to its highest since the peak of the crisis in 2008 - as American's ability to consistently afford food has not recovered to pre-recession levels. Furthermore, Americans access to basic needs (13 factors including housing, healthcare, and food) hovers near record lows - dramatically lower than pre-recession levels. The Gallup polls point to a very different image of American than Dow 15,000 - and is set to get worse as the food stamp program is set to be cut in November.