Archive - Aug 19, 2012

Tyler Durden's picture

Guest Post: Be Optimistic (And Wrong) About The Chinese Economy





When China started tightening policy to fight inflation, almost no one thought that it would slow the economy to what China is in right now. When China started imposing ever more aggressive real estate prices curb, some people believed that that it would not make home prices drop (because there are many people in China, and urbanisation, etc), and even less believed that it would slow the economy to what China is in right now. When China started to slow down more than most thought, almost no one thought that it could be a big problem, while some thought that the slowdown was “engineered” to fight inflation.  Because it was an intentional slowdown, not many people believed that it could get much worse. Digging deeper, we have not found much good reasoning behind those who insist on the uber-optimistic case, and most bullish arguments can be boiled down: "This is China.  China is different.  Don’t ask, just buy."

 

Tyler Durden's picture

In The Aftermath Of The Greek Blue Light Precedent: Belize Demands Half Off On Its Debt... Or Else





"Greece set a precedent for 'Here's what you're going to get, take it or leave it'" is how the WSJ summarizes an analyst's 'shocked' thoughts on the growing game of 'call my bluff' being played among beggars being choosers. Belize is surprise surprise running out of money to pay its debts and is insisting that creditors forgive 45% of what they are owed - OR allow it to delay any debt payments for 15 years (yes, seriously, read that again) - leaving a default on the country's $543.8mm almost inevitable. Three things stand out to us: 1) the nation's government shunned bondholders by simply posting a note on its website that it would be 'skipping a payment' as opposed to telling creditors directly; 2) none other than 'Long GGBs are the slam-dunk trade-of-the-year' Greylock Capital are "mystified" that yet another trade has gone pear-shaped adding that they are "sure every country could benefit from not paying their debt but this isn't the way to do it!"; and 3) this would be one of the worst restructuring terms ever as the "Greek effect" could inspire other countries to pursue restructurings on more favorable terms - especially given that: "Even if you don't need a restructuring you can force one upon bondholders because it's so hard to recover money from a sovereign who won't pay,"

 

Tyler Durden's picture

The Growing Threat Of Soybean-Inspired Social Unrest In China





Two weeks ago we explained why the drought-inspired soaring price of Soybeans  - specifically from the US - would notably influence global central-planners' actions - and more specifically the Chinese (given its high impact on food price inflation). Food prices remain elevated and the PBoC is undertaking Reverse Repos - the exact opposite of an RRR-driven easing program so many expected. However, there is a further, deeper, and more troubling consequence than 'simple' inflationary arguments - that of social unrest. The Chinese devote more than 20% of their income to food (three times more than Americans - according to the USDA) and their newly affluent soybean-oil inspired tastes are being dramatically impacted by these rising prices; "Inflation has a long history of sparking discontent, so obviously it's on the forefront of the Chinese leadership's mind."

 

Tyler Durden's picture

German Court Reverses Anti-'Nazi-Era' Military Restrictions





Late on Friday, the BBC reported that the German military will in future be able to use its weapons on German streets in an extreme situation. This ruling, we hope purely a technicality - but clearly warranting some concern as to 'why now?' - by Germany's Constitutional Court, reverses some of the severe restriction on military deployments that were set down in the German constitution after Nazi-era abuses. After WWII, the new constitution ruled that soldiers could not be deployed with guns at the ready on German soil - the court has now changed that (it seems on the basis of terrorist concerns - as opposed to widespread bank runs, populist revolts at bailout-back-downs, or Hollande/Monti/Draghi sending over some boys).

 

testosteronepit's picture

A Cacophony Of Discord, Defaults, And Visions Of Impossibility





“Breakup of the Eurozone”: a concept that is taking on a life of its own

 

Tyler Durden's picture

Guest Post: Global Japan & the Problems With A Debt Jubilee





The deleveraging trap is a catch-22; while debt remains excessive, economic activity remains subdued, and while economic activity remains subdued, generating more production than consumption to pay down debt is extremely difficult. As we have seen in Japan — where the total debt load remains above where it was 1991 — fundamentals can remain depressed for years or even generations. Certainly, the modern debt jubilee isn’t going to cure the culture that led to the excessive debt. Certainly, it won’t wash away the vampiristic TBTF megabanks who caused the GFC and live today on bailouts and ZIRP. Certainly, it won’t fix our broken political or financial systems where whistleblowers like Assange are locked away and fraudsters like Corzine roam free to start hedge funds. And certainly it won’t wash away the huge mountain of derivatives or shadow intermediation that interconnect the economy in a way that amplifies small shocks into greater crises.

 

Tyler Durden's picture

Chart Of The Day: Americans At Or Below 125% Of The Poverty Level





From AP: "the number of Americans with incomes at or below 125 percent of the federal poverty level - the income limit for qualifying for legal aid - is expected to reach an all-time high of 66 million this year. A family of four earning 125 percent of the federal poverty level makes about $28,800 a year, government figures show." And visually...

 

Tyler Durden's picture

Guest Post: Former Marine Arrested For Patriotic Posts On Facebook





The bottom line is, the 1st Amendment is NOT conditional.  ALL speech must be protected, no matter who you are, or where you happen to be speaking.  Just because our current criminal government decides 1st Amendment protections do not apply to Facebook does not mean they have the authority to make such distinctions.  In fact, the Constitution explicitly outlines how they are restricted from making such distinctions.  If a government entity, ANY government entity, attempts to violate Constitutional restrictions, it must be removed by any means necessary. Take note that the FBI used the accusation of "terrorist threats" by Brandon Raub as an excuse for the arrest even though there is no indication that any actual threats were present on his Facebook page..

 

Tyler Durden's picture

Total Karma Recall: Fisker Pulls All Cars Due To Fire Risk





Last week we reported on the searing woes plaguing the Karma "supercar" of green automaker Fisker, following the most recent episode of automotive spontaneous self-immolation. In fact, things for the company that has so far received $529 million in federal subsidies are so bad that also last week Fisker announced its third CEO hire in the past year (when in a supremely ironic move it hired the former head of the Chevy Volt program Tony Posawatz). As of last night things just went from bad to even worse, following the inevitable next step: a total recall of all Karmas currently on the road. Oh well: nothing that burning, quite literally, severeal hundred more million in taxpayer funding won't solve.

 

Tyler Durden's picture

The Modern Debt Jubilee





The modern “debt jubilee” is characterised as “quantitative easing for the public”. It has been boiled down to a procedure where the central bank does not create new money by buying the sovereign debt of the government. Instead, it takes an arbitrary number, writes a check for that number, and deposits it in the bank account of every individual in the nation. Debtors must use the newly-created money to pay down or pay off debt. Those who are not in debt can use it as a free windfall to spend or “invest” as they see fit. This, it is said, is the only way left to restart economic “growth” and finally get the spectre of unending financial crisis out of the headlines. It is the latest of a long string of “print to cover” remedies.

 

Tyler Durden's picture

54-Year-Old Italian Dies After Self-Immolating In Front Of Parliament





First Tunisia, then Greece, now Italy (the same Italy where the economy is "picking up" where yields are "stable", and where much "progress" is being made). From Reuters: "A 54-year-old man died on Sunday after setting himself on fire outside the Italian parliament last week to highlight his struggle with unemployment, police said. Angelo di Carlo suffered 85 percent burns after the incident in front of the lower house of parliament - the Chamber of Deputies - in central Rome during the early hours of August 11, Italian media reported. Police on duty nearby put out the flames with fire extinguishers and took him to hospital. The widower was facing economic difficulties after losing his job and had struggled for years before that with temporary work contracts that offered little protection or benefits, according to media reports...Di Carlo's death is the latest in a wave of highly publicized suicides linked to financial woes in recent months which have highlighted the human cost of the country's economic crisis."

 

Tyler Durden's picture

ECB's Latest Deja Vu Bluff: Rate Caps On Sovereign Bonds





Just as Germany was warming its "Nein, Nein, Nein" machine, now that Merkel is solidly back from vacation and has caught up with all the desperation emails in the inbox, as reported yesterday, the ECB, in a furious attempt to preempt the unwind of every innuendo, speculation, "unsourced rumor", and everything else the ex-Goldman controlled printer of European currency (which however now and always is powerless without German support) has done in the past month to keep sovereign rates low, has just resorted to yet another deja vu preemption tactic: rate caps on sovereign bonds. Spiegel reports the based on unsourced data, "The European Central Bank (ECB) is considering to establish in its future bond purchases interest rate levels for each country. Thus, it would buy sovereign debt of the crisis countries whenever interest rates exceed a certain spread to German Bunds... At its next meeting in early September, the Governing Council will decide whether the interest rate target is actually installed." Which of course it won't for one simple reason: the same reason the ECB has done lots of talking in the past 3 months, and implemented absolutely nothing: the Bundesbank's Jens Weidmann, and the fact that as Danske (see below) and everyone else already explained when this idea was floated unsuccessfully the first few times, it would require an infinite balance sheet, something the ECB does not have, especially not when Germans are 'consulted.'

 

ilene's picture

Time for a Shock Doctrine Crisis





"Only a crisis, real or perceived produces real change."

 
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