Corruption

This is the sort of thing you’d expect to see in a Banana Republic. Which makes perfect sense, because America is a Banana Republic.

“There’s a saying that helps explain our mood around here. When the sea is this turbulent, the only thing you can do is sit on the sand and watch. It’s not time to get in a boat."

Clearly the title to this piece will be viewed as controversial, if not entirely heretical, by many readers. However, the facts (and more importantly) the economic principles here are unequivocal. “Bigger” is not better.

Martin Winterkorn, engulfed by a diesel-emissions scandal at Volkswagen AG, amassed a $32 million pension before stepping down Wednesday, and may reap millions more in severance depending on how the supervisory board classifies his exit.

There is blood on the streets wherever you look in Brazil today, but probably of most interest to the hundreds of US asset managers (the ones managing your mutual funds) is what happens to Petrobras as it remains so widely held. As we noted below, bond prices are collapsing and default risk is soaring, and with the nation's currency collapsing amid the lower-for-longer oil prices, $90 billion of dollar-denominated debt could soon potentially be too burdensome for the company to repay.

Newly-upgraded Portugal unleashed a budget bombsell on Wednesday when it revised its 2014 deficit higher by some 60% after a failure to liquidate the predecessor to bailed out Banco Espirito Santo left taxpayers holding a €5 billion bag. 

“Unless we get up off our fat surpluses and recognize that television in the main is being used to distract, delude, amuse, and insulate us, then television and those who finance it, those who look at it, and those who work at it, may see a totally different picture too late.”

Ironically, As Xi says "won't devalue the Yuan," The PBOC devalues the Yuan for the 3rd day to the weakest in a month...

Following last night's ADB China growth downgrade, and warnings from The IMF's Lagarde that a "China slowdown is a major risk to the global economy," the weakness seen in Europe and US is continuing across AsiaPac tonight ahead of China's much-watched PMI data (though we are not sure why - since no "bad news" excuse is needed to enable super-easy policy). With Xi in the US, one would imagine a 'beat' for PMI will be engineered, although industrial metals are extending their losses. Credit markets area nxious with Malaysia CDS at 2011 highs, Philippines highest since 2014, and China back on the rise. Xi begins his speech tonight reminding The Fed that China "is the biggest developing nation in the world," and its economy "is stable" despite Yellen's fears.

Hot on the heels of British military threats of a coup, the potential for a truly 'red' black swan of an event has reared its ugly head in China, just as Xi tours America. As Reuters reports, bitterness is growing within China's armed forces to President Xi Jinping's decision to cut troop numbers by 300,000, and, according to a source and commentaries in the military's newspaper, considerable effort will be needed to overcome opposition to the order with PLA official sources warning "people are worried, it's been too sudden."

"We’re not Bolivia for God’s sake"...

"Possible Actions: Publicize presence of transiting (or externally focused) extremist groups in Syria, not limited to mention of Hamas and PIJ. Publicize Syrian efforts against extremist groups in a way that suggests weakness, signs of instability, and uncontrolled blowback. The SARG,s argument (usually used after terror attacks in Syria) that it too is a victim of terrorism should be used against it to give greater prominence to increasing signs of instability within Syria."

While Mr. Dimon's view - "Amerca has the best hand ever dealt right now." is certainly uplifting, it is a bit delusional. But of course, give any person a billion dollars and they will likely become just as detached from economic realities. Does America have "greatest hand ever dealt." The data certainly doesn't suggest such. However, that can change. We just have to stop hoping that we can magically cure a debt problem by adding more debt and then shuffling it between Central Banks.

The Saudis must alter course, seek a consensus on prices and volumes with their fellow OPEC members, coordinate with Russia, and reduce output from 2015’s average (approx. 10.5 mmbbl/d) to signal their commitment. Why? Crude prices staying lower for longer will rapidly devastate the Saudi economy.

As WSJ reports, "the FBI has opened an investigation into allegations of money-laundering related to a Malaysian state investment fund, a person familiar with the matter said. The scope of the investigation wasn’t known. It is the latest in a series of international investigations related to the fund that have been revealed in the past several weeks."

Rousseff - hand-picked by Lula da Silva to succeed him - appears to be caught up in da Silva's backdraft. Opposition parties also claim she violated Brazil's fiscal responsibility law when she doctored government accounts to allow more public spending prior to the October election last year. Rousseff in turn described the attempt to use Brazil's economic crisis as an opportunity to seize power a modern day coup.