Archive - Feb 21, 2011 - Story

In continuing our interactive maps visualizing assorted episodes of violence around the world, tonight's edition focuses on that executed by Gaddafi loyalists against protesters over the past week. We will spare readers some of the more violent pictures we have seen of the resulting carnage as they truly are gruesome.

And just in case the stock market needed a little more risk off impetus...

Just because it is appropriate that the two guys who came up with the "Crash JPM, Buy Silver" meme should get some exposure tonight. In this edition of Press TV's On the Edge with Max Keiser, Max, as usual, highlights the bad conditions the US economy is in. He says the fall of the dollar is imminent and ties the latest events in the Middle East to the US economic policies. His guest, Zero Hedge regular Michael Krieger, believes that the unrest will spill over to the US as the world economy is "co-centric." He further elaborates on the competition between the US and the giant China which is taking over the rest of the world and is expected to turn the next superpower. Enjoy the show.

There was a time, long ago, when the dollar was a flight to safety instrument. Those days are gone. DXY barely budging as the overnight session begins, while silver has already put $34 in the dust. Last: $34.26 and parabolic.

Last Friday we reported that the soon to be quite pervasive spectacle of running to the bank only to find there is no money available, had spread to Korea. At that time only two banks were involved, although we speculated that "while the bank run at Busan was driven by capital inadequacy it may promptly spread to the entire banking system." Less than 3 days later, it has done just that. China Post reports that: "South Korea suspended operations at
four more savings banks on Saturday after runs developed as customers
rushed to get at their money despite official assurances the financial
sector was secure." Gee whiz, looks like last week's promises that everything was contained were, gasp, lies? " The Financial Services Commission (FSC) said Saturday it was suspending three affiliates of Busan Savings Bank — Jungang Busan Savings Bank, Busan II Savings Bank and Jeonju Savings Bank — as well as Bohae Bank for six months each. “Considering recent waves of deposit withdrawals, available liquidity, remaining deposits and capacity to borrow, the FSC concluded that they might face a situation where they are unable to pay customers,” the FSC said." And in an almost verbatim transposition of our own Telepromptermarionette-in-Chief's admonition in March 2009 that "profit and earnings" ratios were now cheap or some other such garbage, the head of the Financial Services Commission Kim Seok-dong (not related to Bang Dae-Ho) "vowed to make a personal deposit of 20 million won ($17,864) in Woolee
to convince depositors that the bank was financially sound." And if that doesn't work Korea can always rent Brian Sack out for a few days each week: truth be told, the US can easily cut down on the amount of weekly POMOs now that WTI is about to pass $100 (and Brent $110).

According to Al Arabiya, Libya's Muammar Gaddafi will deliver an address on TV imminently. Hopefully it will be better received than Mubarak's last speech.

As Zero Hedge advised in early January when the severity of the Maghreb revolution was made all too clear to anyone not willing to stick their head in the CNBC sand, oil could well be the buy of a lifetime ahead of a downward spiral of unprecedented geopolitical proportions. Sure enough, today alone, WTI (April) has surged from $90 yesterday to over $98 in electronic trading (see below). Either this is some computer gone haywire in the closed session, or when America wakes up tomorrow we may be on the verge of another flash crash. As for Brent, it passed $108.50. As a reminder, and people forget this all too readily, each dollar jump in crude wipes out $100 billion in US GDP. That means that at face value, today's move in the commodity complex, may have taken out as much as 5% of annualized GDP when fully processed through the economy!

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 21/02/11

With the recent surge in geopolitical volatility (which nobody could have foreseen of course), it is easy to forget that the US economy is still deep in the abyss of a transfer process that sees trillions in capital needed to be funded by the government and plug holes in the private sector. This is not news and anyone who has followed Richard Koo over the past two years is fully aware of this: all of this is fully recreated in his latest presentation reproduced below. What is interesting is the addition of exhibit 23, which notes something very important: namely reality. Koo observes, very keenly, that "sustaining fiscal stimulus in democracy during peacetime is difficult" (of course, in authoritarian regimes nobody cares about stimulus until inflation surges to the point where the bulk of the population, which knows it has no other recourse, sees no other option than to revolt). Which leads to the question: so what? If fiscal stimulus is difficult (and virtually impossible after trillions have already been spent with little/no effect) in peacetime, does this mean that democracies are forced to turn to war as the only possible recourse (it worked with the Great Depression)? Or, alternatively, continue relying on the Fed for monetary stimulus, which however as we have all too vividly seen, is the bluntest instrument available, and tends to lead to the very same regime destabilizing revolutions that one may say are pursued by the abovementioned "democracies." The natural outcome is that instead of building up resentment against the political system, the population personifies the chairman of the Federal Reserve with the Devil, thereby deflecting anger from an impotent cadre of politicos. Yet regardless of the nuances, the bottom line is that without continued trillions of debt-funded injections in some form, the economy stagnates, and becomes another Japan case study.

Just as the military is now the defacto (and indefinite) ruler in Egypt following what was a revolution-cum-coup, it appears that Libya is poised to repeat in the same footsteps. One thing to note is the increasingly shorter halflife of Maghrebian revolutions: Tunisia took more than a month, Egypt took 18 days, Libya is in its 6th day, and all signs point to a rapidly approaching endgame in which the military will end up with control. Hopefully they know the dynamics of oil cartel game theory behavior. In the meantime, here is Stratfor's latest geopolitical outlook on Libya following earlier reports that the airforce has started firing on military installations (and civilians) to prevent them from falling into protesters' hands.

While I respect the idea that confidence and psychology affect consumerism, the reality is that a 23% unemployment figure is a depressionary red flag. This tells us that the “Great Recession” has neither ended, nor was it “just” a recession. I know it is hard to dispute the National Bureau of Economic Research (NBER) - after all they were only 9 months late in noticing and calling the greatest economic downturn in history. The fact remains: We are in a depression and failing to address the structural unemployment problems will make matters worse not better. The first step to fixing a problem is of course admitting that we have one. We’ve squandered valuable time and in doing so we’ve greatly exacerbated the situation. Globalization was an absolute unmitigated, disastrous failure. The only thing it did was temporally boost stocks and allow some CEOs to make 400 times what their wage-earners made. While the economy appeared to be doing well - it was bubble driven credit binging - not organic spending that was fueling it.

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 21/02/11

The first very shy tick above $34 in the last 31 years is in the history books. Will soon be followed by many more. And only $16 more to go to all time nominal highs... and ~$160 to real ones. What is truly hilarious vis-a-vis claims that the dollar is a reserve currency is that in the period in which gold has risen by 2.9%, and silver, 12.3%, the DXY has dropped by 1.45%. It would be quite amusing if Schumer's push to unpeg the CNY came true, only for the US to realize that its currency is now completely irrelevant.

It may not be 12k RPM.... but it beats nothing.

Announcement that Muamar has slipped into a coma to hit within 3-6 hours. As a reminder, Libya had 143.8 tonnes of gold.