Archive - Jul 2013

UPDATE: NBC Reporting 2 Dead, *SF GENERAL HAS '10 TO 12' CRITICALLY INJURED FROM JET CRASH

Just over an hour ago an Asiana plane inbound from Seoul, South Korea, crash landed at San Francisco airport. Given the images below, it is a miracle no one is reported dead (among the 291 passengers and 12 crew). An eyewitness noted:

*AIRLINER TAIL HIT NEAR END OF RUNWAY, EYEWITNESS TELLS CNN,
*AIRLINER SPUN COMPLETELY AROUND ON LANDING, WITNESS TELLS CNN

As far as they know, NBC reports, the pilot made no distress calls prior to landing and Federal officials indicate no indication of terrorism. The San Francisco airport will be holding a press conference shortly.

 Local NBC news is reporting that the plane appeared to power-up as it was landing short and its tail hit the seawall.

Charles Ponzi and Bernie Madoff had to lure marks into their scams. People joined them by choice. The Ponzi scheme operated by governments is mandatory. You are in it whether you want to be or not. You are in it whether you realize it or not. The only issue is to decide is what the best way is to play this Ponzi scheme. Gordon T. Long and John Rubino discuss some of the options...

Following the most recent shift 'away' from a USD-centric world (with the China-Australia direct currency convertibility), it seems the possibility of China's Yuan as the next global reserve currency is getting closer. The Brits, Germans, and now the Swiss (who just signed a free-trade-agreement with China) are all actively vying to become Europe's Yuan trading hub as it seems the long line of developments to internationalize the currency over the past two years. As Bundesbank board member Joachim Nagel noted in a speech entitled "Reniminbi as a potential reserve currency" this week, "the Chinese currency is well on its way to becoming one of the future global reserve currencies." He noted that, although the USD is still the most commonly-used currency for settling trade with China; from virtually zero in 2010, the Yuan is used to settle over 12% of trading transactions now - and is likley to increase further.

Broke nations are bailing out other broke nations with borrowed money.  Round and round we go - where we stop nobody knows.  As of April, 41 different countries had active financial "arrangements" with the IMF. Sometimes they are called "bailouts" and sometimes they are called other things, but in every single case they involve loans.  And most of the time, these loans come with very stringent conditions.  It is a form of "global governance" that most people don't even know about. For decades, the IMF has been able to use money as a way to force developing nations to do what it wants them to do.  But up until fairly recently, this had mostly only been done with poor nations.  But now an increasing number of wealthy nations are turning to the IMF for help... so what happens when the nations that primarily fund the IMF start failing themselves?

As the pro-Morsi Islamist coalition calls for widespread protests on Sunday against the military coup that just occurred in their nation, Al Jazeera is reporting that Mohamed ElBaradei (infamous for his strong stance against the US as UN nuclear watchdog amid the Iran WMD controversy) has accepted the role of interim Prime Minister. Following the last few days violence, where dozens have been killed post-coup, we suspect the Islamist coalition will be even more antagonized by this next step. Of course, realistically, until the US decides which side it wants to commit to, nothing will settle down in the re-couping nation.

Increasing concerns over deflation will limit any QE tapering in the second-half and set the stage for bonds to outperform stocks once again. 

After two decades of serial bubble-blowing, the world’s central bankers have maneuvered themselves into a corner. They created a monster in the form of an unbalanced global economy and a bloated financial system, laden with debt, addicted to cheap money, and in need of constantly rising asset prices. Now the monster is in charge and the central bankers dare not stop feeding it.

Yesterday, infamous whistleblower Edward Snowden, stuck nearly two weeks in the transit zone of Moscow's Sheremetyevo airport, finally got some good news: first Nicaragua, then Venezuela (and moments ago Bolivia) broke the rejection letter trend, and in bombastic and very political fashion, offered him asylum (although as with everything in politics nothing is concluded until he is actually on some Latin American beach). However, a question remains: just where is Snowden right now? After all, following his initial public appearance and video with the Guardian and WaPo, there have been virtually no public sightings of him, despite his current location in one of the most public venues in the world: the Moscow airport.

Benjamin Strong was near the end of a long stint as head of the New York Federal Reserve Bank (he passed away in October 1928), where he enjoyed the same immense power that Ben Bernanke has today. The economy had just begun to recover from a recession in December 1927, and there was much unemployment and spare capacity.... Agriculture was booming during and immediately after World War I, based on thriving exports to Europe. Overinvestment during the boom then gave way to stagnation in the 1920s. Europe was in a bad state in the late 1920s, just as it is now. What’s more, two of the world’s three largest economies are now in Asia, and these economies face similar challenges to those of 1920s Europe. While analogies are never perfect, the parallels with early 1928 are troubling. When the world slipped into depression in the late 1920s and early 1930s, it was on the back of imbalances and debt overhangs that are oddly similar to those that we face today.

Brief discussion of the price action that is lifting the dollar at expense of nearly every other currency.  

Now there's a face only a Keynesian could love...

Citi's FX Technicals group is biased to believe that the low in this correction may have been posted for Gold. Here's why...

"We are open, respectful of the right to asylum, and it is clear that if circumstances permit it, we would receive Snowden with pleasure and give him asylum here in Nicaragua," Nicaragua's Ortega said at a public event. Shortly thereafter, the new Venezuelan president Maduro also jumped on the bandwagon: "I have decided to offer humanitarian asylum to the young American, Edward Snowden, so that in the fatherland of (Simon) Bolivar and (Hugo) Chavez, he can come and live away from the imperial North American persecution."

On June 19, 2013 Ben Bernanke announced that later this year the Federal Reserve would very likely begin to print less money than what they are printing today, in effect resulting in many investors refusing to catch the bouncing ball. This pronouncement was enough to send all financial markets into a tizzy with everything declining, except for the US Dollar. Investors must understand that this is a game changer. Whether the Federal Reserve actually carries through with this plan is open to debate; but, perhaps the most important observation from the “tapering” announcement was the reaction by all financial markets to what was in reality a very small move by the Federal Reserve...

Over two years ago we highlighted just how out-of-touch with reality our central planners are when we exposed Bill Dudley's infamous inflation comments. Now it seems, Argentina is taking over the mission of totalitarian supreme command (or government gone mad). While not publicly admitting they have a problem, despite the price of bread doubling to 20 Pesos in the last year alone, Bloomberg reports the government plans to apply a 1974 law that forces holders (on penalty of fines and prison) of wheat and flour suitable for bread-making to sell it in the domestic market. This entirely un-free-market response to the dreadful reality in the nation comes on the heels of the freezing of prices on 500 goods at Supermarkets back in February and, unbelievably, suggestions that citizens combat higher prices by "baking bread at home." How long can a country plunge into a hyper-inflationary spiral before the people 'coup-like-an-Egyptian'?