Australia

The 2015 World Press Freedom Index highlights the worldwide drastic decline in freedom of information in 2014. The rise in overall violations of freedom of information was evident in all continents, but for America - the bastion of press freedom in the land of the free and "the most transparenet administration ever" - fell once again... to 49th!!

If you thought the utter insanity of the new-normal's central-planner-driven "bad news is great news" inflate-a-thon was reserved for The Fed, think again... This week Australia has had the dubious honour of seeing a huge 'surprise' surge in its unemployment rate to a 13-year high at 6.4% (from 6.1%) - which was largely ignored by the cognoscenti as anomalous data, but really just shows the utter farce that seasonal adjustments have become on government data. Tonight something else happened... the Australian stock market has soared 11% in the last 2 weeks to its highest sincee May 2008. Welcome to the farcical world of modern finance...

So far it has been an overnight session which clearly forgot to take its lithium, with futures first tumbling after CNBC's "leak" that a Greek deal had been reached was refuted, only to surge subsequently on both the Riskbank's foray into NIRP and QE which crushed the Swedish currency and sent its stocks to recorder highs, and more importantly, on the latest ceasefire out of Minsk which has pushed Russian and European assets substantially higher. While only the most naive believe that any palpable end to Ukraine hostilities will emerge as a result of today's delay, expect for Greek headlines to return with a vengeance as today it is Tsipras' turn to speak at a summit of the 28 European Union leaders set to begin momentarily.

With Russia allegedly moving its military presence deeper into NATO territory in Europe (with a Cyrpiot base), Bloomberg reports that in response to the regions' growing strategic importance, the US plans to open naval base in Australia (risking further "inflamed tensions" with China) in the midst of a “pivot-to-Asia” that will see 60% of its naval forces deployed in the region by 2020. The latest move, Admiral Greenert confirms, "we’re doing a study together with the Australia Defence Force to see what might be feasible for naval cooperation in and around Australia, which might include basing ships," as the Indian Ocean and South China Seas are becoming "geostrategic hot spots."

• Greek defense minister says Greece has Plan B if EU rigid on deal (Reuters)
• Germany rejects Greek claim for World War Two reparations (Reuters)
• Greece to Seek $11.3 Billion in Financing to Avoid Funding Crunch (BBG)
• Lazard Sees $113 Billion Greek Debt Cut as ‘Reasonable’ (BBG)
• U.S. Navy Considers Setting Up Ship Base in Australia (BBG)
• Dalio’s Bridgewater Fund Said to Rise 8.3% in January (BBG)
• As U.S. Exits, China Takes On Afghanistan Role (WSJ)
• EU money funds cut exposure to bank debt (FT)
• China Inflation Drops to Five-Year Low in January (WSJ)
• Oil-Price Rebound Predicted (WSJ)

So far it has been largely a repeat of the previous overnight session, where absent significant macro drivers, the attention again remains focused both on China, which reported some truly ugly inflation (with 0.8% Y/Y CPI the lowest since Lehman, just call it deflation net of the "goalseeking") data (which as usually is "good for stocks" pushing the SHCOMP 1.5% higher as it means even more easing), and on Greece, which has not made any major headlines in the past 24 hours as patience on both sides is growing thin ahead of the final "bluff" showdown between Greece and the Eurozone is imminent. The question as usual is who will have just a fraction more leverage in the final assessment - Greece has made its ask known, and it comes in the form of 10 billion euros in short-term "bridge" financing consisting of €8 billion increase in Bills issuance and €1.9 billion in ECB profits, as it tries to stave off a funding crunch, a proposal which will be presented on the Wednesday meeting of euro area finance ministers in Brussels. The question remains what Europe's countrbid, if any, will be. For the answer: stay tuned in 24 hours.

In some countries, the 'solution' the state chooses for its ignominous billionaire class of inequality-garnering, economy-wrecking individuals is to either a) turn one's back for a brief enough moment as to allow the tyrant to leave the country in search of a golden beach upon which to lament how great a trade being long European bonds would have been' or b) enhance their wealth further on a quid pro quo basis. In China, the 'treatment' for corrupt billionaires who love casinos, cigars, and luxury cars is much simpler... execution.

The world economy stands on the brink of a second credit crisis as the vital transmission systems for lending between banks begin to seize up and the debt markets fall over. The latest round of quantitative easing from the European Central Bank will buy some time but it looks like too little too late.

In the absence of any notable developments overnight, the market remains focused on the rapidly moving situation in Greece, which as detailed over the weekend, responded to Europe's Friday ultimatum very vocally and belligerently, crushing any speculation that Syriza would back down or compromise, and with just days left until the emergency Eurogroup meeting in three days, whispers that a Grexit is imminent grow louder. The only outstanding item is what happens to the EUR and to risk assets: do they rise when the Eurozone kicks out its weakest member, or will they tumble as UBS suggested this morning when it said that "the escalation of tensions between the Greek government and its creditors is so far being shrugged off by investors, an attitude which is overly simplistic and ignores the risk of market dislocations" while Morgan Stanley adds that a Grexit would likely lead to the EURUSD sliding near its all time lows of about 0.90.

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.

The phony 5.7% domestic unemployment rate reported yesterday has nothing to do with full employment. The relevant number in the report is that there are still 101 million working age Americans who do not have jobs, and only 45 million of them are on OASI retirement benefits. And that says nothing about the tens of millions of job holders who are employed far less than a full 40 hour work week. In short, there is a surfeit of available labor at home and abroad, meaning 3-4% wage gains are not coming down the pike any time soon or ever. So if that’s what the Fed is waiting for - then the so-called “lift-off” may not be coming even this year. And in any event, the trivial 25 bps increases in the funds rate that may eventually come have nothing to do with interest rate “normalization” or the return of honest price discovery in the casino. And that suits the needs of the Wall Street gamblers just fine.

Greece’s problem can only be truly solved if large scale debt restructuring is accepted and executed. But that would initiate a chain of events that would bring down the bloated zombie that is Wall Street. And it just so happens that this zombie rules the planet. We are all addicted to the zombie. It allows us to fool ourselves into thinking we are doing well – well, sort of -, but the longer term implications of that behavior will be devastating. We’re all going to be Greece, that’s inevitable. It’s not some maybe thing. The only thing that keeps us from realizing that is that the big media outlets have become part of the same industry that Wall Street, and the governments it controls, have full control over. And that in turn says something about the importance of what Yanis Varoufakis and Syriza are trying to accomplish. They’re taking the battle to the finance empire. And it should not be a lonely fight. Because if the international Wall Street banks succeed in Greece, some theater eerily uncomfortably near you will be next. That is cast in stone.

At the end of the day, the issue here is one of freedom, and freedom is the freedom to choose – even if we make a bad choice. The argument that I must vaccinate my children for the good of the community is not only scientifically questionable, it is an unethical precept. It is the argument all dictators and totalitarians have used. “Comrade, you must work tirelessly for the good of the collective. You must give up your money and property for the good of the collective, and now … you must allow us to inject your children with what we deem is good for the collective.” If American’s don’t stand up against this, then we are lost. Because we have lost ownership of ourselves. Our bodies are no longer solely ours – we and our children are able to be commandeered for the “greater good.”

Taking interest rates so negative that they threaten a run on bank deposits should not be seen as success --- it is failure. Creating bank reserves at that pace should not be seen as success --- it is failure. The next failure may well be some government-inspired restriction on capital inflows. Well, you could call such restrictions, and risking the liquidity of banks, monetary success if you like, but then you probably also think it’s a success to throw the ball one yard from the touchline.