The Italian parliament is currently voting whether to make the first, massively watered down, faux-austerity program into law. As reported earlier, this vote is widely expected to pass as it has practically zero measures left in it that are actually austere. It will, therefore, be followed up by another vote in a month in which Italy will be forced by the ECB to repeat the same spectacle all over again. Then again... And again. In the meantime, we fully expect robots to add at least 5-10 ES points on the non-news that is the inevitable favorable result.
tyrants, of all-out forcible insurrection in the name of freedom and change. From a celestial perspective, however, ‘revolution’ denotes one complete orbit of a planetary body around its center, as in the earth’s revolution around the sun. In other words, after a revolution, you end up right back where you started. Same word, two completely different meanings– on one hand you have change, and on the other you have more of the same. This is exactly what has happened after Egypt’s revolution this year....When you think about it, this is how things usually work out in politics. How many people have campaigned on the ‘change’ platform, only to end up following the same path as the last guy? As the saying goes, ‘the more things change, the more they stay the same.’ Egypt is due to hold parliamentary elections in a few months’ time. It’s questionable whether Tantawi will give up his supreme, unchecked power… but whatever happens, one thing is clear: a new power elite will emerge in Egypt that helps itself to wealth and privilege at the expense of everyone else. This is the great weakness in any political system: ‘government’ is based on the idea that some individual or organization is awarded power than no human being should possess– the power to kill, to declare war, to steal, to defraud, to counterfeit.
In a move that will surprise exactly nobody, the Senate Budget Committee ranking member Jeff Sessions has signaled that "Republicans would oppose the jobs plan President Obama is expected to announce Thursday, saying it would only put the United States further in debt at a time when the debt is already weighing on the economy." So while nobody even knows yet just what the full presidential proposal to create "millions of jobs" looks like in its entirety, we do already know it will almost certainly not happen courtesy of a republican controlled congress. As a reminder, the US is currently supposed to be laboring under a regime of austerity (more in its latest, and vastly watered down Italian iteration than real cost cutting but still) and thus it will be rather complicated for the GOP to explain why the party is cutting with one hand and spending more with the other. As such, any hopes for a quick and decisive passage of laws to build more bridges to nowhere are about to be dashed. From The Hill: "There’s no doubt in my mind that the debt that we’ve now incurred is already weakening our economy,” Sessions said on the Senate floor. “It comes to a point that you can’t keep borrowing in a futile attempt to stimulate the economy when the increased debt itself is weakening the economy.” Cue Keynesians of all shapes and sizes kicking and screaming how more stimulus this time will be different and how one last Heroin injection is really all it takes.
I've been asked to comment on the work of a few noted deflationists who are calling for a top in commodity prices here. Their argument is pretty clear cut: Because inflation is a function of available money plus credit (their definition), and because credit has fallen, deflation is what comes next. When looking about for things to deflate in price, commodities are an obvious candidate for attention because they have risen so much over the past decade. In this view, three things have to be true: i) Demand for commodities has to fall below supply. After all, as long as demand exceeds supply, prices will typically rise. ii) Money, including credit that would normally be used to buy commodities, has to shrink. That's the definition of deflation that we're analyzing here. iii) People's preference for money has to be greater than their preference for 'things,' with commodities being very obvious 'things.' That is, faith in money has to be there or people will prefer to store their wealth elsewhere. These are all just versions of the old supply/demand argument for commodity prices, except that our consideration also includes the important element of the Austrian economic view of demand for money.
European reformist think tank, Open Europe, which has so far been spot on in its very skeptical assessment of the drunken, meandering rumble that various European authorities have engaged in over the past two years to mask that the EUR is predicated by a failed and discredited model, has released its comprehensive assessment of today's German Constitutional Court ruling. For anyone even remotely close to trading the EUR pairs, or their derivatives: stocks and bonds, this is a must read. In a nutshell: "Giving the Bundestag’s Budget Committee the final say over the use of the bailout fund is welcome from a democratic point of view, but will add another element of uncertainty to the eurozone crisis. However, so far the Budget Committee has consistently taken the government line on the bailout, albeit reluctantly, and it remains to be seen whether it dares to exercise its new power. The calls for the whole Bundestag to have a greater say in the dispersion of financial aid are, therefore, likely to continue.... the wording used by the Court also seems to suggest that joint debt in the eurozone could be constitutionally allowed if it involved a stronger German say over other member states’ fiscal policies. This could set Europe up for a major clash of national democracies in future, should Eurobonds be deemed necessary to hold the Single Currency together in the long term. Controversially, the Court did not give an opinion on the legality of the ECB’s bond purchase programme – despite the potential implications this programme has on price stability and the ECB’s independence. This unsettling question is likely to resurface in future." Expect this court to feature far more prominently in the months to come.
As Chazz Evans just noted, QE3 can not come soon enough, and it can certainly not be big enough. Wall Street, bonuses entirely contingent on this fiction becoming fact, is therefore more than happy to shape Fed opinion, and confirm that QE3 is now priced in to such a degree that a disappointment will raise the terrifying specter of bloodthirsty, demonic hyperdeflation once again. Below, via Bloomberg, is a summary of what the various Wall Street "strategists" also known as groputhink lemmings, because none of these said Op Twist was coming as recently as a month ago, think is coming out of the Fed as soon as 2 weeks from today...
Today's first Fed speech is out, this one by Chicago Fed dove, Chuck Evans who was recently interviewed by Russian speaking, guitar playing, arch-Keynesian Steve Liesman and dropped the first QE3 bomb a week ago, in which he basically says what he said before, namely that "very significant amounts" of added accommodation are needed. In other words: more of the same, and this time it will be different. After all 12 Fed presidents and 1 chairman can't all be insane all the time.
Yesterday we reported that following the SEC's long overdue porn-laced sabbatical, the "regulator" has launched a massive fact-finding and enforcement-information gathering mission to not only curb those vile HFT frontrunners, but is also seeking to cut off momentum accentuating strategies such a ETFs, aka synthetic stock CDOs, at the knee. This is great, there is only one problem: the SEC has no clue what an ETF is. But all that is about to be remedied. As the attached job search notice indicates, the regulator will generously spend between $126,661 and $198,333 of taxpayer money to finally get someone who actually knows something about basket creation, gamma, convexity, and the 3:30pm daily ETF-induced market ramp. The preamble: "Do you want to perform challenging work in a collegial environment, while enjoying quality of life and a competitive compensation package? Invest in your career at the U.S. Securities and Exchange Commission (SEC)!" Note: not one mention of non stop midget porn: truly a politically correct development. And since the position is for a senior special counsel, you can bet, lots and lots of money, that the SEC is about to start suing everyone in the ETF space. Starting with such Wall Street visionaries as Larry Fink... who also happens to run Wall Street. We just can't wait.
The PIIGS Fleecing Of Europe Continues Even As Italy Promises To Implement Another "Austerity" Package ImminentlySubmitted by Tyler Durden on 09/07/2011 - 10:31
The first Italian austerity package has not even properly failed yet (despite labor union protests to the contrary which for some odd reason believe that it has some chance of passing), and already Italy is preparing for a new round of "austerity" to appease those naive fools from the ECB so they buy Italy's otherwise bidless bonds for a few more weeks. From Bloomberg: "Italy may need a new budget- adjustment plan next month because a 54 billion-euro ($76 billion) austerity package to be voted on today won’t convince the European Central Bank to continue buying the nation’s bonds, the chairman of the Senate Finance Committee said. “How long can the ECB continue to buy Italian Treasury bonds?” Mario Baldassarri said in an interview in Rome today. “We may need another adjustment in three, four weeks which will be the real answer to the European Commission and to markets.” Because this time, unlike a month ago, it will be different. Berlusconi promises. As a reminder, Italy will vote on the current massively watered-down plan which is anything but austere later today, in a vote largely expected to pass. Said passage, however will do nothing to please Trichet, who will continue to remind Italy just who calls the shots now (oddly enough the ECB thinks that would be them... which explains the loving relationship between the Central Bank and a electorally challenged Angela Merkel). None of this changes the underlying dynamic which has become all too clear: the PIIGS have called Europe's bluff, and Europe blinked. Going forward expect much barking from the ECB and Luxembourg, warning the periphery to get its house in order... and absolutely no bite. Because everyone by now realizes that the balance of power is entirely on the insolvent countries' side. Europe can threaten to kick out a country, but as UBS demonstrated on Monday, the consequences of such a move, which would end the euro, would be up to and including that Keynesian wet dream: war.
In her response to the Financial Stability Board's recommendations and timelines for the resolution of systemically important financial institutions (SIFIs), BBA's (yes those of LI(E)BOR) Chief Executive Angela Knight worries that the steps do not go far enough. More critically, her concerns stem from the proposals leaving too much scope for self-interest as opposed to systemic stability as a whole (whocouldanode that defection might potentially be the preferred/optimum strategy in the now brothers-in-arms European game theory neighborhood).
Morgan Stanley is currently holding a call in which the firm's strategists, led by Adam Parker and Greg Peters, will be presenting their latest investment case for global equities. Sure enough, coming from Morgan Stanley the call will have a decidedly bullish tone to it, but maybe, just maybe, the firm will finally realize that as the 30 year "Great Moderation" winds down and reverts to its mean, there are other, less favorable outcomes on the horizon. Then again, this being Morgan Stanley, we doubt it. Regardless, the 52 page accompanying presentation is attached, and those who wish to dial in should just drop a line to their favorite Morgan Stanley snake oil salesman.
An already ubercynical Art Cashin chimes in on Obama's much anticipated, and very controversial (recall the latest Boehner flap on the issue) speech tomorrow and comes out sounding even more jaded than usual. In a word: don't expect any imminent rise in Obama's already record low popularity rating as a result of this speech, which if recent history is an indication, will likely generate even further class animosity within US society, now well on its way to confirming some of the more violent teleological theories postulated by Karl Marx.
...Taking a step back, we are looking at potential Nations defaulting, plus augmenting further austerity measures to try and reduce debt (which will stifle any growth for years to come), the spiral of banks coming close to nationalisation across the developed world, consumer deleveraging, rising unemployment, falling house prices and a rising loss of faith with government along with discontent and civil unrest. Why on earth would you sell gold when the outlets for safe havens are being radically reduced since the SNB move and the threat from Japan to intervene? Plus the fact that currencies offer less in the form of stores of value also. A massive shift from currency investment to precious metals could take place. Currency wars will exacerbate this and whilst the SNB move is from a small nation, what happens if one of the big boys like Japan join in? Carnage basically and trade wars and border issues will ignite and G20 could implode. Just what the world is ill-prepared for but it looks like it is brewing. Civil unrest and regime changes around the world will add to the soup.