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Guest Post: Unleashing the Future: Advancing Prosperity Through Debt Forgiveness (Part 4)

Simply put, “productivity” is giving to the future, instead of taking from the future. Parasitism is the opposite: Borrowing from the future to fund present desires without credible connection to future healthy growth. Successful productivity requires the development of beneficial new approaches to value creation and the rigorous identification and confrontation of approaches that destroy value and that destroy the environmental, financial, social, and personal fabric of human endeavor. Debt forgiveness is initially brought into play to address the latter requirement, but cannot be viable over the long haul without affirmative new ways to create and exchange value. Given that we have the collective integrity, self-preservation instinct, human will, and the sense of necessity to confront our broken system, let’s first establish philosophical and practical corollaries to guide debt forgiveness as “giving to the future instead of taking from it”:



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MBIA Surge Accelerates As Short Squeeze Gains Traction

As regular readers know, back in September 15 we speculated that MBIA could be the next Volkswagen-type short squeeze courtesy of a rising short interest and huge Institutional shareholder base (amounting to 96% of the float for the top 30 accounts) not to mention the possibility for a BAC settlement that could be as large as the company's current market cap. The recent BTIG upgrade only confirmed that view. As a result the spike now continues, and the stock has returned 30% since our initial observation. If indeed this is caught in a short squeeze loop, the final return could well be in the triple digits, especially since the short interest is now the highest since May 2010!



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The Australian Reports Of Second Explosion In Iranian City Of Isfahan

While this story has not been caught by any of the major wires, The Australian's Jerusalem correspondent Sheera Frankel reports something quite disturbing: "All eyes on Israel after second Iranian blast. CLOUDS of smoke billowed above the city of Isfahan - evidence that the latest strike against Iran's alleged nuclear weapons program had hit its target." We will report more if this story is confirmed by any other news agencies because if true it means that at this point things behind the scenes are no longer happening in the shadows.



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Joe Biden Advisor Jon Corzine Forced To Testify On Alleged MF Global Commingling And Client Account Theft

Couldn't happen to a nicer advisor to Joe Biden

  • JOHN CORZINE SUBPOENAED BY HOUSE COMMITTEE
  • HOUSE AGRICULTURE VOTES TO ISSUE SUBPOENA IN WASHINGTON TODAY

Don't forget to get your popcorn out for next Thursday:

  • HOUSE AGRICULTURE COMMITTEE SETS DEC. 8 HEARING ON MF GLOBAL


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US Needs To Generate 263,700 Jobs Monthly To Return To Pre-Depression Employment By End Of Obama Second Term

We will simply copy and paste, with the appropriate adjustments, the form text we put up after each and every NFP report calculating the number of people that have to be added by the end of a hypothetical second Obama term. Using the November boilerplate: "Every few months we rerun an analysis of how many jobs the US economy has to generate to return to the unemployment rate as of December 2007 when the Great Financial Crisis started, by the end of Obama's potential second term in November 2016. This calculation takes into account the historical change in Payroll and includes the 90,000/month natural growth to the labor force, and extrapolates into the future. And every time we rerun this calculation, the number of jobs that has to be created to get back to baseline increases: First it was 245,500 in April, then 250,000 in June, then 254,000 in July then 261,200 in October [and finally 262,500 in November] . As of today, following the just announced "beat" of meager NFP expectations, this number has has just risen to an all time high 262,500 263,700. This means that unless that number of jobs is created each month for the next 5 years, America will have a higher unemployment rate in October 2016 than it did in December 2007. How realistic is it that the US economy can create 15.8 million jobs in the next 61 60 months? We leave that answer up to the US electorate."



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Did LME 'Flash Crash' Forewarn NFP Debacle

Long before the magnificent NFP headline data mesmerized USD buyers and flushed commodities down the pan, Copper at the LME saw a 'Flash Crash' and was forced to cancel all trades for the 646amET timestamp. Considering the post-'flash' action, it seems yet again a flash crash gives us a glimpse of reality.



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Key Charts From The NFP Report: Records In Jobless Duration And People Who Want A Job As Civilian Labor Force Plunges

Here are the four most important data points and charts from today's job report: the civilian labor force declined from 154,198 to 153,883, a 315K decline despite the civilian non-institutional population increased (as expected) from 240,269 to 240,441: always the easiest way to push down the unemployment rate. Percentage wise this was a drop from 64.2% to 64.0%: the lowest since back in 1983. Naturally, this would mean that the people not part of the labor force rose, and indeed they did by 487,000 to a record 86,558 from 86,071. This also means that more people are looking for a job: and indeed, the number of "Persons who want a job now" rose by 192K to a record 6.595 million. And lastly, confirming the behind the scenes disaster of the US jobless picture, the average duration of unemployment rose to a new record 40.9 weeks from 39.4 weeks previously. And that is your "improving" jobless picture in a nutshell.



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NFP Prints At 120K, Below Expectations Of 125K, Unemployment Rate Drops To 8.6%

NFP Prints At 120K, Below Expectations Of 125K, Unemployment Rate Drops To 8.6% on Expectations of 9.0%. And for those wondering how it is possible to have such a major drop in the unemployment rate, here it is: Labor Force Participation down from 64.2% to 64.0% as ever more people leave the work force once again.



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Bank of Korea Increases Gold Reserves by Massive Nearly $1 Billion or 39% in November Alone

The Bank of Korea’s continued diversification of its foreign exchange reserves is a bullish factor which may have led to the price gains today. The central bank of South Korea announced that it had purchased 15 metric tonnes of gold in November to raise its reserve of bullion in an effort to diversify its portfolio of its foreign reserve investment and reduce risks caused by market volatilities. According to the Bank of Korea (BOK), it made a purchase of 15 tons of gold last month to increase the nation’s gold reserves to 54.4 tons worth $2.17 billion as of the end of November. It boosted the size of its gold reserves by US$850mn in November, up a massive 39% from the previous month. Its total gold reserves are now worth US$2.17bn.



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Tomorrow, and Tomorrow, and Tomorrow

As Macbeth said, It is a tale told by an idiot, full of sound and fury signifying nothing. Fading the "Grand Plan" rally worked very well.  There was a couple days of pain and then generally the market followed a nice path lower.  Last week the market had felt oversold and was looking for a reason to rally.  I thought that Monday was overdone, and that Wednesday was extremely overdone, but I started cutting shorts yesterday, and am now getting long. Everyone seems to understand that the "globally coordinated rate cut" plan was not a big deal in of itself, yet the market didn't give up any of the gains.  Even some of the perma bulls downplayed the move.  I think the move was meant to be more pre-emptive than a strong show of future support, but Ben is not dumb, and he has seen the outsized impact such a simple move had. Cracks will appear in this rally, and we will ultimately figure out the problem with the current attempts to fix Europe, but right now it is too vague to fight, positioning has been too extreme, and Bernanke and Draghi have to see the opportunity to push things forward while the market is behaving positively.



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Daily US Opening News And Market Re-Cap: December 2

  • Liquidity remains thin as market participants await release of the Nonfarm Payrolls data from the US. Early market talk has been for a number as high as +200k
  • The Eurozone 10-year government bond yield spreads remained generally tighter across the board, with the exception of the French/German spread
  • Eurodollar and Euribor futures traded under pressure during the European session on continued bank funding fears
  • According to reports, EU finance chiefs gave go-ahead for work on central bank loans, and ECB lending via IMF is seen in the EUR 100-200bln range


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So Much For The Bailout - European Funding Situation Worst Since March, As ECB Deposits And Emergency Loans Soar

When we observed yesterday that the ECB's deposit facility usage has passed €300 billion for the first time in over a year, we took it with a grain of salt: after all the data may have been compiled before the announcement of a global liquidity intervention by the Fed and central banks. Specifically, we said "Needless to say tomorrow's deposit facility update will be critical because unless there is a major drop in usage, it will confirm that in addition to a USD-funding shortage which should have been ameliorated even if very briefly, other EUR-based risks are being observed by Europe's banks, who better than anyone know what the interbank system risks are, and the Fed's USD liquidity injection will have failed to achieve anything except to ramp risk higher for a day or two." Today we got the update for the two key ECB liquidity lines for the day after the bailout. And things are actually much worse than even we expected. While the cash flight continued, indicating that absolutely nothing was fixed from the banks' perspective, and the ECB deposit facility rising to a multi-year high €314 billion or €10 billion higher overnight, another key factor was the ECB's Marginal Lending Facility - the last ditch "discount window" equivalent - which saw its usage explode from €4.6 billion to €8.6 billion overnight, or the highest since March. It appears that in addition to a dollar funding crisis, there is a broad EUR liquidity crisis as well, with the bulk of the banks continuing to pull cash from the domestic interbank market (even if USD funding issues are resolved briefly), forcing the weakest links to resolve ever more to the ECB to recycle the very same cash that other banking peers dump with it. Naturally, this means that the funding situation as seen from the lens of the key market participants - Europe's banks - just deteriorated materially after the so-called bailout. It also explains why this morning we are getting a repeat rumor (soon to be denied) that the ECB has proposed to loan €270 billion to the IMF, as nothing has been fixed and the authorities are well aware.



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Today's Events: Only NFP And Expectations For Another 4 Sigma Beat

The only thing that matters is the November Employment Report and a few comments from Fed officials.



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Frontrunning: December 2

  • Merkel Says Joint Euro Bonds Unthinkable as EU Faces Marathon (Bloomberg)
  • Draghi hints at eurozone aid plan (FT)
  • Europe prepares oil imports embargo on Iran (FT)
  • RIMM cuits guidance.... again (Marketwire)
  • Sarkozy Says Euro Zone Risks a Breakup Without Further Fiscal Convergence (Bloomberg)
  • King warns of ‘spiral’ into systemic crisis (FT)
  • JPMorgan Follows UBS Cutting Carbon Jobs (Bloomberg)
  • Merkel fights for euro she says is stronger than D-mark (Reuters)
  • Hilsenrath: Fed Officials Don’t See Central Bank Cutting Discount Rate (WSJ)


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