Archive - Feb 2015 - Story

The cracks in the foundation, walls, and ceiling of the European Union are beginning to widen. During an interview with Italian State TV RAI3, Greek Finance Minister Yanis Varoufakis hinted at Greece's "New Deal for Europe" strategy (to be financed by the EIB) but it was the glimpse behind the curtain of EU solidarity that was most shocking as he explained, "Greeks don't have a monopoly on the truth. What we can do, for the rest of Europe, and for Italy in particular, is to open a small door to the truth," adding rather stunningly, that Italy "stands in solidarity with [Greece] but cannot tell the truth as they fear of possible consequences on behalf of Germany."

"Greece will leave the Eurozone. I don't see that it helps Greece to be in the Euro, and I certainly don't see that it helps the rest of the Eurozone. It's just a matter of time before everyone recognizes that parting is the best strategy.... The problem is that there there is no way that I can conceive of the euro of continuing."

One of the bigger problems facing the new, upstart Greek government, which has set before itself the lofty goal of overturning 6 years of oppressive European policies and countless generations of Greek cronyism, corruption and tax-evasion is not so much the concern about deposit outflows and bank runs - even though it most certainly will be in the next few days unless the Tsipras government finds some resolution to the dramatic standoff with Merkel and the ECB - but something far more trivial: running out of money.

...but it's different this time.

This is a chart that truly screams "Recovery!" In fact, it is quite clear that things are far better now than they have ever been before. If your life seems to be at odds with the obvious economic reality, you are clearly not working hard enough (or perhaps not at all).

Less than a day after the head of the SNB hinted at the possibility of capital control, the head of the largest Swiss cantonal bank, and the fourth largest Swiss Bank, the Zurich Cantonal Bank or ZCB, came out and explicitly said what so many fear (and which warning they would ascribe to as the case may be "yellow journalism"), namely that "lowering Swiss National Bank’s already negative interest rate further or implementing capital controls would be "dramatic" but "certainly possible."

It took a while, but three months after we wrote "How The Petrodollar Quietly Died, And Nobody Noticed", someone finally noticed.

Chinese imports collapsed 19.9% YoY in January, missing expectations of a modest 3.2% drop by the most since Lehman. This is the biggest YoY drop since May 2009 and worst January since the peak of the financial crisis. Exports tumbled 3.3% YoY (missing expectations of 5.9% surge) for the worst January since 2009. Combined this led to a $60.03 billion trade surplus in January - the largest ever. But apart from these massive imbalances, everything is awesome in the global economy (oh apart from The Baltic Dry at record lows, Iron Ore near record lows, oil prices crashed, and the other engine of the world economy - USA USA USA - imploding).

Having recently exposed the mainstream media's lack of objectivity in "slanted and distorted" interviews, Rand Paul has turned his focus to another staple of the status quo - his father's arch-nemesis, The Fed. As WSJ reports, Sen. Rand Paul unleashed a blistering attack on the Federal Reserve in Iowa on Fridasy evening, calling for an audit of the institution’s books and blaming it for fueling income inequality. "Once upon a time, your dollar was as good as gold," he explained, adding "then for many decades, they said your dollar was backed by the full faith and credit of government." Do you know what it’s backed by now? "Used car loans, bad home loans, distressed assets and derivatives."

"A recent outbreak of measles has concerned citizens questioning how we can protect the lives of innocent children from neglectful, or even downright abusive, parents. Some have argued that vaccination should be mandatory, since an unvaccinated child presents a danger to himself and others. After all, what is government for if not to protect life and minimize danger?"

The dream of life in the vassal state formerly known as America is fading fast. As The Bureau of Labor & Statistics (BLS) reported yesterday, there has never been a lower percentage of American men in the workforce. What is even more stunning - given the daily avalanche of "buy-and-hold" for a "safe-retirement" holding hands with your loved on as you stroll the beach at sunset - the percent of Americans aged 65 years or older has lamost doubled in the last 30 years and is near its highest since the mid '60s. But stocks are near record highs and the Dow is positive by 1 point for 2015... so suck it up America - "you have to believe to receive."

"To say Greece simply cannot repay isn’t the end of the story. As Europe moves towards a more rational debt policy with Greece, there is an enormous economic cost, not to mention social and perhaps political, to any delay. I worry about the terrifyingly low level of sophistication among policymakers and the economists who advise them when it comes to understanding balance sheet dynamics and debt restructuring. Greece’s debt overhang imposes rising financial distress costs and increasingly deep distortions in the institutional structure of the economy over time, and the longer it takes to resolve, the greater the cost."

The world is going to be about $2.37 trillion smaller in 2015 than most expected at the start of the year as a consequence of the USD strengthening. This is not insignificant, as it represents 3.2% of last year’s estimated global GDP. For perspective, that would be as if an economy of the size between Brazil’s and the UK’s would have just disappeared.

Recent US economic data has been disappointing. While perhaps statistical noise, more weak signs continue to mount. In looking back over the last ten years, we've never seen such a big divergence in the directions of US macro data surprises and the US equity market...

When it comes to the state of the US economy, it is all about surveys. On Friday we got the BLS' establishment and household surveys, both massively revised and seasonally-adjusted, meant to estimate the state of the US job market. Supposedly they were "unambiguously good." Here, on the other hand, is Evercore ISI with its Company and State Tax Receipt surveys. The verdict, looking at what is happening at both the corporate and state level, and especially the energy-producing tax receipt level which just fell off a cliff, is that "the US Economy is not taking off."