We already knew that the US crossed the debt ceiling on New Year's day. It is, however, one thing to read a Geithner press release, it is another to see America's ridiculous debt it in action. So here it is, courtesy of TreasuryDirect, in all its debt ceiling glory: $16,432,730,050,569.12, with the debt subject to the ceiling at the limit of $16.394 trillion.
And with that we can close the books on the first quarter of Fiscal 2013, in which US public debt grew by $366 billion, some $122 billion per month on average.
In broad strokes, this is the official playbook for political leaders in the Western world. Facilitating this is the ongoing monetary easing by the global Central Banks who have collectively pumped $10 trillion into the system since the Great Crisis began. In simple terms, Central Banks provide the glue to hold the system together while politicians meet and negotiate without ever really solving anything.
Peer-to-Peer Lending and Crowd-Funding Have the Power to Change Finance
Back To The Future: Cruise Line Industry Skirted Fundamental Analysis For A 100% Gain, But Can A Miracle Happen Twice?Submitted by Reggie Middleton on 01/02/2013 13:55 -0400
In May Of 2010, I published a series of reader contributions on the cruise line industry as well some proprietary research on a particular company in said industry - Royal Caribbean Cruise Lines. The consistent, globally synchronized flood of money totally distorted market pricing and risk in public equities - thus often distorted practically applicability of hard core fundamental and forensic research.
Shinzo Abe's re-election on the basis of his monetary policy aggression plans have sent the JPY reeling (as he hoped for) and the NKY soaring - but it is his more aggressive perspective on patriotism that could lead to far greater problems. As the Chinese Academy of Social Sciences recently noted,all eyes are fixed on Abe as "Japan’s nationalization of the Diaoyu Islands destroyed the framework for keeping a balance, which means ‘shelving a conflict'," a Chinese diplomatic source said, adding that "China has no political methods to return the situation to the (pre-nationalization) state. Therefore, there are no other ways except for looking for a new framework." As a precondition for establishing the framework, an executive of the think tank said, "Prime Minister Shinzo Abe should not take actions that heighten the tensions further. It is the same as a game of go. If Japan escalates the conflict, China will be prepared to respond to the move." As a result, Japan-China relations will enter into a highly volatile period, ruining any hope of a resurgence in Japan's real economy, and more worryingly, the think-tank concludes, China's conflict with Japan is inevitable.
Econophile's take on the 7 most important economic events of 2012 and why they will impact 2013 and beyond. This is not what the MSM will tell you.
“Postponed” is the official stamp across the world. This is the operative word of governmental policy. Whether Europe or America, whether capitalist or socialist government; this is the credo, the banner, the flag waving in the wind for dealing with economic problems. Throw more money at it and barrels of it, have the central banks print and defer any pain much less any tough decisions. We live in a state of postponement, defer and delay which cancels the consequences of the moment but places more severe consequences, greater pain and tougher choices but moments out into our future. Make no mistake; the world has become a more dangerous place either haunted by the specter of rampant inflation or haunted by valuations of debt and currencies that could turn the financial markets into a swirl of dislocation where a plunge into a freezing sea of disarray awaits as capital goes to gold, senior debt regardless of yields and nations deemed to be safe havens.
EURUSD remains bid on every dip but has been more choppy this week as the world realizes the implications of desperate repatriation (see failed ECB sterilization). Spanish stocks bucked the trend this week and are down 2% - more than double the losses of the rest of Europe's stocks. European sovereign bonds are bleeding gently higher in yield and spread (Spain/Italy +10bps or so). Just as we saw in the US, it appears today's under-the-surface anxiety (that very few in the mainstream comprehend) has led to a bid for protection as Europe's VIX has jumped 2.5 vols to 20.75% - its highest in 6 weeks.
The relatively calm foreign exchange market and equity market in Asia ended abruptly in Europe. It is difficult to find the culprit, other than position squaring in thin markets, but the euro has come off a cent, dragging the franc. The MSCI Asia Pacific Index gained more than 0.5%, while European bourses are broadly lower, with the Dow Jones Stoxcx 600 off 0.3% near midday in London, led by utilities and financials. Fixed income markets are subdued. Italy's bond auction was adequately received, especially holiday conditions. There have been a few developments to note. First Japan's data was disappointing and this can only bolster the new government's attempt to stimulate the economy both monetarily and fiscally. Worker cash earnings fell a whopping 1.1% in November, nearly three times larger than the consensus. This may have been a factor behind the poor retail sales, which were flat. The consensus had expected a 0.4% increase. Weak incomes and domestic demand may have, in turn, weighed on output. In November, industrial production fell 1.7%, more than three times the decline expected.
Been a while since we had some amusement out of the Bazooko Circus known as Europe, which for the past month has gone completely dormant, not because "it is fixed" but because, just like in Japan where the JPY has plunged on expectations of an action by the BOJ, so Europe has continued to benefit from the threat of the latest and greatest proposed ECB intervention: the OMT, which on one hand keeps the vigilantes in check, but on the other delays any painful reforms even as the underlying Spanish economy continues to deteriorate without any real structural reforms: something which a surge in rates would promptly precipitate (and once expectations turn to reality, it's all over: just see the recent QE3 and QE4 attempts by the Fed). So speaking of Spain, today's recap sentence of the day goes to Reuters' Julien Toyer with the following: "Spanish lender Bankia will wipe out 350,000 shareholders, many of them small savers with little knowledge of financial markets, after it emerged it had a negative value of 4.2 billion euros." Now if only the Spanish wipe out ended with Bankia's shareholders...
As a start, identify the trends.
Perhaps one of the most startling and telling charts of the New Normal, one which few talk about, is the soaring difference between bank loans - traditionally the source of growth for banks, at least in their Old Normal business model which did not envision all of them becoming glorified, Too Big To Fail hedge funds, ala the Goldman Sachs "Bank Holding Company" model; and deposits - traditionally the source of capital banks use to fund said loans. Historically, and logically, the relationship between the two time series has been virtually one to one. However, ever since the advent of actively managed Central Planning by the Fed, as a result of which Ben Bernanke dumped nearly $2 trillion in excess deposits on banks to facilitate their risk taking even more, the traditional correlation between loans and deposits has broken down. It is time to once again start talking about this chart as for the first time ever the difference between deposits and loans has hit a record $2 trillion! But that's just the beginning - the rabbit hole goes so much deeper...
Over the last few years, and at an increasing pace as of more recently, unions have become more and more confident of their ability to effect change and taken much more aggressive activist positions against the capitalist oppressors. The most recent examples range from California cities to Twinkies-maker Hostess Brands, and each time the stance from the unions appears to have been far more aggressive (and M.A.D. prone) than in the past. The question is why? Perhaps, as we tweeted following Hostess' liquidation:
Will the broke PBGC step in and fund Hostess' 18,000 workers suddenly vaporized pensions?
— zerohedge (@zerohedge) November 16, 2012
...It is the confidence of an all-powerful government at their back with the US Pension Benefit Guarantee Corporation, which is the backstop for private sector plans, providing cover. The problem is, as UBS explains, the PBGC has a huge deficit and is cashflow negative. This leads us to the uncomfortable expectation of further USD government support (bailout) or a more direct monetization by the Fed. PBGC could be impacted severely if a few large firms terminate their pensions. In this case, UBS expects PBGC to sell equities and buy long duration fixed income.
The fiscal cliff dominates the mainstream news, but it is more like a bump on the pathway to the real cliff. In essence, the path has turned down and we're picking up momentum, gaining speed as we head for the cliff. The real cliff is the gap between what has been promised and what can plausibly be collected in tax revenues: $86 trillion but one recent estimate, over $120 trillion by other guestimates. Understood in this way, we can see that raising taxes by $200 billion or cutting expenditures by $200 billion is not going to keep us from hurtling off the real fiscal cliff in a few years. The fiscal cliff is only one edge we're racing toward; there are others.
China Proposes Full Name Registration For Every User To Make Its Internet "Healthier, More Cultured And Safer"Submitted by Tyler Durden on 12/26/2012 09:55 -0400
With various "gun control" proposals flying fast and furious (precisely the reactionary kneejerk reaction Ron Paul warned would happen), some of which as brilliant as RFIDing every gun in existence, supposedly including the tens of millions of illegal and unregistered ones, it is perhaps appropriate to see how another authoritarian government - China - deals with its own equivalent of the touchy Second Amendment, its "First", or the right to free speech in a society which for decades has had none, and where the internet makes free speech regulation impossible (very much any gun control in a nation in which there is one gun for every person is impossible). China's solution, according to Reuters, the requirement of a real name registration for internet access for every person, "extending a policy already in force with microblogs in a bid to curb what officials call rumors and vulgarity...A law being discussed this week would mean people would have to present their government-issued identity cards when signing contracts for fixed line and mobile internet access, state-run newspapers said."