Archive - Dec 5, 2010

By now the infamous Minneapolis Fed "change from pre-recession employment" jobs chart (all too often misattributed to other sources) has made popular folkore. Naturally, that's the chart which shows that 36 months after the start of the depression the change from peak employment pre-recession is just in a parallel universe of its own. Yet what few if any have done is to extend and project what this chart may look like in the future. We have on several occasions attempted to predict how the "change from peak employment" chart will appear over the next several years. Below is our most recent attempt at predicting how many more months of recession we have assuming a gradual pick up in the economy (assumptions are presented in the chart). The chart shows that based on conservative economic pick up estimates, the depression starting in December 2007 will have 96 months to run before we reach the precession level in jobs.

Twas the night before Squidmas, when all through Goldman Squid house...

It appears that one way or another, the IMF will provide a lot more American money to the European rescue. Reuters reports that according to the IMF the euro zone should have a bigger rescue fund and the European Central Bank should boost its bond buying to prevent the sovereign debt crisis from derailing economic recovery. "International Monetary Fund chief Dominique Strauss-Kahn
will present the report on the economy of the 16 countries using
the euro at a meeting of euro zone finance ministers and
European Central Bank President Jean-Claude Trichet on Monday." And presumably, and we are speculating here, if the Euro zone can not afford it, the IMF will be more than happy to step in. After all recall that on August 30, the IMF extended the duration of the Flexible Credit Line (FCL), "concurrently removing the borrowing cap on this facility, which previously stood at 1000 percent of a member’s IMF quota, in essence making the FCL a limitless credit facility, to be used to rescue whomever, at the sole discretion of the IMF's overlords." We would think that an infinite amount of money should be enough to rescue even Spain when the time comes. Which begs the question: with everyone expecting muni bonds to be the purchasing target of QE3, will Bernanke again fool everyone and instead opt for direct European bond monetization? After all, the destruction of dollar value is and always has been the Fed's primary imperative, and what better way to achieve this than to collateralize the greenback with Greek bonds?

Wikileaks probably has tens of thousands of mirrors now, in response to the US government's attempt at censorship. You see, Censorship is to the Internet as Contagion is to a Host Body. The Internet (eg. the host body) moves to remove censorship as contagion. See below:

...Just live in Spain. With millions of Option ARM mortgages still coming due in the next two years in the US, the Fed's ongoing push to drop mortgage rates has only made the problem worse, and instead of people refinancing out of adjustable rate mortgages into fixed, with the opportunity cost being so little, if any, the whammy of rising interest rates on home values upon Option ARM expiration will only exacerbate the triple dip in home prices once the ARM cliff hits some time in 2012/2013. Yet it seems that this final recourse to extend and pretend the housing bubble is only now coming (a tad too little too late) to those European countries which are already bankrupt and will do anything and everything to prevent reality from appearing. Behold the BBK Euribor+0.35% 5 Year Option ARM 50 year mortgage with an LTV of up to 100% (but only if you can be enslaved early on: the mortgage is only open for people 18-35). And just in case you can't actually afford Euribor+ 0.35%, that's factored in too: you have the option of not paying for years.

Goldman's Erik Nielsen looks at the immediate European future, is flummoxed by all the end of world calls (bank runs, Ireland rejecting budget, austerity riots everywhere), and sees a future so bright he just has to wear the kind of shades that only a multi-million dollar bonus can buy (especially after Goldman upgrades all banks and its own bonuses by about 10%). After all his colleague Hatzius, despite all the facts and data, just upgraded US GDP. It now appears that just like Moody's 5 years ago, Goldman's excel spreadsheets crash when one input a negative growth assumption. Arguably these are the same spreadsheets that Tim Geithner used to prepare his taxes.

I don’t know if you have noticed what I have, but lately it appears that people are using Copper as a poor mans currency. I started to notice during the crash of 2008, that copper was being sold in a .999 pure bullion. The photo attached is for a single troy oz of “Fine Copper”. The list price for this copper, as is, was 12 dollars. Think about that for a moment.