Beijing's Tepid Efforts To Slow The Credit Boom Are Springing Giant Leaks

China is a case of bastardized socialism on credit steroids. At the turn of century it had $1 trillion of credit market debt outstanding—-a figure which has now soared to $25 trillion. The plain fact is that no economic system can remain stable and sustainable after undergoing a 25X debt expansion in a mere 14 years.

Nerd Prom Summary: Highlights From This Year's Obama Roast

For 364 days of the year, the theater that the press and the administration are on the opposite sides of the table, continues without a glitch. However, one day a year, during the annual White House Correspondents' Association dinner, the facade falls and Obama, together with his fawning press corps, have a night of laughs in an Oscar-inspired night of self-congratularoty excess. Which, just like every other night in Washington, is at the taxpayers' expense. Here are the highlights from last night's festivities.

Elliott's Paul Singer On The 3 Things You Have To Believe To Be A Euro Bull

Could it really be that peripheral countries’ interest rates are plunging and borrowing costs have converged to pre-crisis levels, Greece is issuing debt, and the euro crisis is over forever, but Mario “Whatever-It-Takes” Draghi is musing about starting QE now? Have policymakers lost touch with reality to such a startling degree that they now reach for the QE bottle like it is some 1850s cure-all nostrum, regardless of what is wrong with the patient? All we can imagine is the good doctor, handle bar moustache and full regalia, sitting behind his desk: “You have the vapors? Take this QE, you’ll feel better. Ma’am, you have a little hysteria? QE is just the thing! Sir, this QE will cure that headache! Son, you need some inflation, so QE is just right for you.” There is nothing – we repeat, nothing – that is being done at present to enable Europe to perform better economically, to encourage its unemployed to get off the dole, or to empower its peripheral countries to deal with their underperformance on a sustainable basis.

Bank Torched To The Ground As Ukraine Expands Military Operation In East

A day after over 40 anti-government protesters died brutally in Ukraine's Black Sea town of Odessa, and Kiev resumed its "anti-terrorist" military offensive in Slavyansk and Krematorsk in what now even Ukraine officials admit is essentially a civil war, Ukraine has escalate its operation against pro-autonomy activists in the city of Mariupol, southeastern Ukraine, as well as the town of Konstantinovka, according to local self-defense activists. But for now, perhaps the most dramatic footage of the night, is this clip from Mariupol, where a branch office of PrivatBank has just burned down to the ground. At this point US bankers are slaying various animals to their assorted idols hoping nobody in the US is watching this clip and getting any ideas.

Guest Post: Even A Money-Losing Pizza Chain Can Do An IPO

Just when it seemed like investors might have lost some of their appetite for initial public offerings of companies that lose money . . . yeah, right. Papa Murphy's Holdings Inc. priced its IPO today at $11 a share. The stock closed up a nickel. We've grown accustomed to seeing IPOs by profitless technology companies. But this is a pizza chain that had net losses of $606,000 in 2011, $2.1 million in 2012 and $2.6 million in 2013. Now it has a stock-market value of about $187 million, or about 2.3 times its revenue last year... "I can somewhat understand the appeal of speculating on some unproven Internet company that loses money but promises to change the world. But a 33-year-old pizza chain? Come on."

These Are The 15 US Companies With The Most Offshore Profits

This is the list of the top 15 US companies that have the bulk of accumulated offshore profits, amounting to roughly $1 trillion in cash, which is never subjet to US taxation, and which financial engineers try to generate the highest shareholder returns on.

What Have We Learned From The Banking Crisis? (Spoiler Alert: Nothing Good)

"The crisis doesn't destroy wealth, it merely evidences the extent to which wealth has already been destroyed by stupid investments made in the boom." This is critically important, as banking (or financial) crisis do not start the day the market collapses but years before, and as Punk Economics' David McWilliams explains, this is usually driven by banks (central or otherwise) beginning to lend recklessly using other people's money to ramp up asset values. So, with that in mind, what have we learned from the 2008 banking crisis? (spoiler alert - nothing good).

 

Guest Post: Karl Marx Makes a Comeback

A perfect sign of the times is the unexpected success of a 700-page economics text called Capital in the 21st Century by French college professor Thomas Piketty reigniting the popularity of Marx's view of the world. Marx’s critique of the modern world was right-on, and the first half of his scenario is playing out just as he predicted; unfortunately, he went on to predict that the revolt of the 99% would result in a “dictatorship of the proletariat” in which workers of the world abolished private property and ran things so wisely that government would just fade away... This is of course crazy, and when it was tried in the 20th century it failed with catastrophic consequences for the Soviet Union, China, and a long list of smaller but no less tragic countries. The result: brutal dictatorships and the eventual dismissal of the Marxist ideas on which those societies are founded. Now the challenge is devising a monetary/financial reset that brings the 99% back into the game without producing a stagnant dictatorship. It will help if we understand why it’s happening.

All "Rules-based" Economists Agree: Fed Policy Is Too Easy

This week's data marked a crucial turning point in US monetary policy. For all those "rules-following" economists out there with their various adaptions of the infamous Taylor Rule (a model that stipulates how much the central bank should change the nominal interest rate in response to changes in inflation, output, or other economic conditions), this week marked the point at which ALL models suggest that Fed interest rate policy is simply too easy. This explains why the Fed has shifted to a qualitative forward guidance (reminding us of porn - we'll know when to tighten when we see it) as Rick Santelli so eloquently the fact that the Fed claims to be data-dependent "is a twilight zone" and as John Taylor himself notes, the Fed's QE policy "has not worked with few if any signs of success," and now, even as they taper, their rate policy is far too easy. Simply put, they're making it up as they go along (and it's never been more obvious).

Switzerland’s Role In The Gold Market

When one thinks of Switzerland, banking comes to mind easily but gold doesn’t as much. But, "it is said that the Swiss only love money... this is not true. They also love gold." A full two-thirds of the world’s gold goes through Switzerland and, in an average year, it refines grossly 70% of the world’s gold. Six of the gold refiners on the LBMA Good Delivery list make for 90% of global volume, and four of those are in Switzerland. Up until 1992, the Swiss franc’s 40% backing by gold was written in the country’s Constitution. When Switzerland became a member of the IMF it had to abandon this backing by gold. Today, Swiss citizens have asked for a referendum to be called in order to get back to that backing. As Gilles Labarthe wrote, "Switzerland is for gold what Bordeaux is to wine."

Obama Administration Launches Plan To Make An "Internet ID" A Reality

It appears the status quo may be finally making its moves to getting control over the heretofore free and open internet. As we and many others have noted previously, the internet is one of the most powerful tools humanity has ever devised. It frees information in a way that was simply unimaginable decades ago and empowers each of us to be as informed or uninformed as we desire. Just last week, we mused, that in so-called “first world” countries like the U.S. the illusion of freedom must be maintained even as civil liberties are eroded. Thus censorship must be administered surreptitiously and slowly. The following plan to implement an “Internet ID” will initially only be rolled out as a pilot program in two states (Michigan and Pennsylvania), and will only deal with government services. That said, we can see where all of this is ultimately headed, and the program, called the National Strategy for Trusted Identities in Cyberspace, should be monitored closely going forward.

Things That Make You Go Hmmm... Like Is Japan Totally F##ked?

We have detailed the straitjacket into which the Japanese have been strapped for the past two decades numerous times in the last few years (in great detail here)  but as Grant Williams leaned back in his most comfortable chair after reading an article about proposed changes to the GPIF (Government Pension Investment Fund), Japan’s public pension fund; the thought popped into his mind - "Japan really is totally f##ked." What led him to that well-thought-out and eruditely expressed conclusion? Read on...