Archive - Jun 26, 2014

It was a little over a year ago, just as the Cyprus deposit confiscation aka "bail in" was taking place, when we asked, rhetorically, if "Spain is preparing for its own deposit levy" when an announcement by Spain's Finance Minister, Montoro, hinted at the imminent arrival of just that.  Of course, back in March 2013 imposing such a tax would immediately bring up images of parallel bank runs in Cyprus and visions of confiscated deposits, culminating in an immediate collapse of the otherwise already insolvent Spanish banking system. In other words, the timing picked by Montoro to reveal what was coming couldn't have been worse. Now, however, things are different. So different, that as Bloomberg reported moments ago, Spain is set to create a tax on bank deposits. Coming to an insolvent country near you.... everywhere.

Banks and other lenders issued 3.7 million credit cards to so-called subprime borrowers during the first quarter, a 39% jump. "Even though [those borrowers] could be considered subprime, they're still creditworthy," is the deja-vu all over again message from the Financial Services Roundtable, who proudly crow, they are "starting to see an environment where issuers are feeling more comfortable to extend credit." How great is that? What could go wrong? One credit union exec notes, "lenders in general have really saturated the higher-credit-quality market, so it is only natural that as they look for growth opportunities, they expand downward," and sure enough, as one new borrower exclaimed, "my credit score is probably terrible," adding "I was surprised they'd give so much." Exceptional America is back...

"In economics, [the mainstream] rely on experts who don't know what they are talking about," explains Professor Steve Keen in this brief but compelling documentary discussing 'when the herd turns'. "Herd behavior is a fundamental aspect of capitalism," Keen chides, but it is left our of conventional economic theory "because they don't believe it;" instead having faith that investors are all "rational individuals" (e.g. willing to pay 112x for OpenTable), which he notes, means "[economists] can't foresee any crisis in the future." The reality is - "we do have herd behavior" and people will follow the herd off a cliff unless they are aware its going to happen. "Contrary to herd wisdom, financial crisis are not unpredictable black swans..."

While Piketty's book was divisive, the reviews of Hillary Clinton's new book "Hard Choices" are downright one-sided - and terrible. That likely explains why, as AP reports, sales have crashed 44% after an already disappointing first week. "Hard Choices" sold just 48,000 copies in its 2nd week; and following the same dismal path as Greenspan, Cramer, and Geithner; has been discounted 40% on Amazon already.

Hot on the heels of Eric Holder's domestic terrorism task force creation, Lindsay Graham's recent diatribe of the "inevitability" of another terror attack (on the US) by Syria or Iraq, adding that "according to our own Director of National Intelligence, FBI Director, the next 9/11 is coming from here," it seems the ultimate scaremonger has decided it is his turn to stir the pot. Appearing on Hugh Hewitt's radio show, Dick Cheney explained that he "doubted" whether the US would "get through this decade" without another "massive attack on the homeland." But it's what he said after that makes Obama's NYC nukes concerns pale in comparison...

The number of SWAT team raids in the United States every year is now more than 25 times higher than it was back in 1980.  As America has conducted wars overseas in recent years, our police forces have become increasingly militarized as well.  And without a doubt, many of our cities have become much more dangerous places. Once upon a time, police in America were helpful and friendly and the public generally trusted them.  But now our police forces are being transformed into military-style units that often act like they are in the middle of Iraq or Afghanistan.  The following are 10 facts about the SWATification of America that everyone should know…

While New Zealand's stock market is the 3rd smallest among AsiaPac exchanges, it is not immune from the "glitches" even the largest exchanges have become used to in the new normal era of 'liquidity providers'. For the 2nd time this month, equities trading in New Zealand (the entire market) is halted after a "technical fault" at the operator of the exchange. As one trader noted understatedly, "there seems to be a reasonably regular occurrence of issues, which is a bit of concern."

Something very dramatic happened overnight when, in a little noticed statement, Gazprom's CFO Andrey Kruglov uttered the magic words:

• GAZPROM READY TO SETTLE CHINA CONTRACTS IN YUAN OR RUBLES: CFO

In other words just as the US may or may not be preparing to export crude - a step which would weaken the dollar's reserve status as traditional US oil trading partners will need to find other import customers who pay in non-USD currencies - the world's two other superpowers are preparing to respond.

UPDATE: USDJPY has tumbled to 5 week lows and NKY has retraced all post-Fed gains

Japan is in trouble. Normally the news that a piece of macro data had utterly and completely collapsed would be greeted by thge BFTD mentality as bad news reinforces the printing-press of central planners' put guarenteeing future wealth for all... but not this time. Household spending collapsed 8.0% in May (echoing the plunge following the last tax hike in 1997) - more than double expectations and almost as bad as the month of the tsunami. Great news? That's the problem... the great limiter of central bank largesse is looming as Japanese CPI spiked to 3.7% - its highest in 24 years! (and Core CPI at 3.4% - its highest since 1982) This implicitly hobbles the BoJ from further exuberance and already JPY strength (and NKY weakness) are showing.

While Janet Yellen is bust ignoring "noisy" inflation and dismissing low volatility as indicative of any complacency, Goldman is a little more concerned. The decline in economic and asset market volatility this year from already low levels in 2013 has been striking, which as Markus Brunnermeier states, means "the whole system is more prone to a financial crisis when measured volatility is low, which tends to lead to a build-up of risk in the background – the so-called 'volatility paradox'."

Children display beautiful and at times brutal honesty

Anyone saying "the Fedeal Reserve Act is bad" in Germany is, according to Lars Maehrholz, looked upon by the mainstream as being a Nazi. The organizer of the widespread "End The Fed" rallies that we discussed previously, explained that he is not only under attack by the main stream media and political system in Germany but also physical threats that resulted in a car he was in getting fire bombed by an anonymous perp.

With all eyes firmly focused on yesterday's disastrous GDP report (and ultimately dismissing it as 'weather' and one-off exogenous factors), we thought Bloomberg Brief's Rich Yamarone's analysis of a lesser-known (yet just as key) indicator of the state of US economic health was intriguing. As he notes, according to the latest data from the Bureau of Economic analysis, there has never been a time in history that year-over-year gross domestic income has been at its current pace (2.6 percent) without the U.S. economy ultimately falling into recession. That’s more than 50 years of history, which is about as good as one could ever hope for in an economic indicator.

How in the world does the government expect us to trust the economic numbers that they give us anymore? For a long time, many have suspected that they were being manipulated, and as you will see below it appears we now have proof that this is indeed the case.

The end game of three decades of excess is upon us, and we can't deny the weight of the debt imbalances that are currently in play. The medicine that the current administration is prescribing is a treatment for the common cold; in this case a normal business cycle recession. The problem is that the patient is suffering from a "debt cancer," and until the proper treatment is prescribed and implemented; the patient will most likely continue to suffer.