Phoenix Capital Research's blog
When Your Entire System is Backed Only By Credibility, Corruption Scandals Can Bring the Whole System DownSubmitted by Phoenix Capital Research on 02/09/2013 14:21 -0400
Corruption only works as long as the benefits of being “on the take” outweigh the consequences of getting caught. As soon as the consequences become real (namely someone gets in major trouble), then everyone starts to talk. This process has now begun in Spain.
The fact that Evans, a man who has called for nothing but more stimulus for more than two years, is now stating point blank that the Fed may end QE before it reaches its target for unemployment is a major warning sign. Do not ignore it.
Sacre Bleu! France Collapses Right as Spain, Italy and Greece Become Embroiled in Corruption ScandalsSubmitted by Phoenix Capital Research on 02/06/2013 21:14 -0400
Thus, we find that Europe’s primary political market props (EU leaders including ECB head Mario Draghi) are coming unraveled at the precise time that EU banks are showing warning signs and the most important EU economies are heading sharply south.
An equivalent amount for the US would be if it were discovered that members of Congress fled the US last year taking $300 BILLION them. Bear in mind, if you added up the total net worth of every politician in Washington you wouldn’t come even close to $300 billion.
Worldwide, politicians are not exactly famous for honesty. However, Europe is a very special case… where just about everyone is lying on just about everything involving the economy and banking system.
Collectively, the world’s Central Banks have pumped over $10 trillion into the financial system since 2007. This money printing has resulted in a massive expansion of Central Bank balance sheets, spread inflation into the system, and done nothing to address the key solvency issues that lead up to the great crisis.
German Chancellor Angela Merkel has walked a tightrope over the last few years of keeping the EU together without infuriating the German populace to the point of having to abandon ship.
The NY Fed is the single most powerful entity in charge of the Fed’s daily operations. How can any investor believe that the Fed can manage the system and restore trust when the NY Fed granted MF Global primary dealer status a mere nine months before the latter went bankrupt?
As we noted in yesterday’s article, the Fed is already splintering on the benefits of QE. For the US to print such an ugly GDP number right after QE 3 and QE 4 were announced doesn’t bode well for more aggressive policy from the Fed. But then again, we are talking about the Fed here, so they could very easily claim that the bad GDP print is because QE 3 and QE 4 are not big enough.
The Fed is growing increasingly splintered as an organization. The media hasn’t really picked up on this issue yet. But once they do things could become quite problematic for the Fed... and the financial system.
How long will the other Central Banks tolerate this before they initiate a currency war? Both Germany and China have fired warning shots at the Fed. And we all know that just beneath the veneer of goodwill, tensions are building between the primary players of the global financial system.
Underneath the veneer of goodwill and the occasional necessary coordinated intervention, tensions are rising between Central Banks. When the US debases the US Dollar it pushes the Euro higher. This hurts German exports which in turn angers the Bundesbank.
Things are so corrupt in China, that as soon as the new Government stated it would crack down on corruption, a fire sale of luxury properties began as corrupt officials sought to dump their illegal holdings.
The groupthink for investors today is predicting three major outcomes for 2013. Unfortunately, they will likely all prove to be popular delusions.
US politicians have opted to begin mimicking their EU counterparts when it comes to dealing with our debt issues. What could go wrong?