Corruption

• How original: Syria prints new money as deficit grows (Reuters)- America is not Syria
• Former SNB head Hildebrand to become BlackRock vice chairman (FT)
• Osborne says Greece may have to quit euro (Reuters)
• Osborne Risks the Wrath of Merkel (FT)
• China second-quarter GDP growth may dip below 7 percent - government adviser (Reuters)
• Italian Borrowing Costs Surge at Auction of 1-Year Bills (Bloomberg)
• Greeks withdraw cash ahead of cliffhanger vote (Reuters)
• Merkel’s Choice Pits European Fate Against German Voter Interest (Bloomberg)
• Italy Tax Increases Backfire as Monti Tightens Belts (Bloomberg)
• Dimon says JPMorgan failed to rein in traders (Reuters)

The First BRIC to be Downgraded to Junk?

All that debt Obama acquired, and all the stimulus did work to redistribute wealth and income — it worked to redistribute wealth and income toward the well-connected crony capitalist groups that funded Obama into office. Obama can talk all he likes about cutting taxes for the middle class; the data shows who Obama’s redistribution policies have overwhelmingly favoured. Of course, leftists and statists often end up favouring the super-rich. That’s been the underlying reality of communism — politburos, bureaucrats, technocrats, party members all benefit at the expense of everyone else (in spite of all that proletarian rhetoric). Inviting the state to carve up national income and redistribute it is an invitation to corruption, and graft. Obama talks an updated version of the old communist rhetoric about redistributing wealth to the working class — he even adopted Stalin’s slogan “forward” — yet just like Stalin the reality of his policies is more wealth for the richest and most well-connected. What a surprise.

The game continues.  Talk up the economy, talk down printing and pray. If the market heads into the Fed meeting at current levels it runs the risk of being disappointed.  If this is combined with continued economic weakness then the real set up happens between the June meeting and the August one.  It is in that interim period that the market could throw another one of its hissy fits and beg for more liquidity.  Money supply growth is extremely sluggish right now all over the world.  The velocity never happened and the global economy is rolling over.  The Fed is already behind the curve and so when they are forced to act the infusion will have to be huge just to stem the momentum. Mike Krieger suggests people go back and look at different asset classes from the prior two lows in China’s M2 year-over-year growth rate.  The first one occurred in late 2004.  The M2 growth rate then accelerated until around mid 2006.  In that time period gold prices went up around 65% and the S&P 500 went up 20%.  In the second period of acceleration from late 2008 to late 2009 gold was up 65% and the S&P500 was up 15%.  We are at one of these inflection points and considering the DOW/Gold ratio is still holding gains from its countertrend rally from last August of almost 40%, this is probably one of the best entry points to buy gold and short the Dow of any time in the last decade.

Capitalism can be subverted by either an Elite or the majority. Marx traced out how Capital (wealth) naturally consolidates into monopolies or cartels (shared monopolies). These concentrations of wealth then buy political influence via campaign contributions, armies of lobbyists and the full spectrum of cronyism: sweetheart deals, envelopes of cash, revolving doors between the cartels and their regulators, plum jobs for lazy nephews and so on. This base corruption of the Central State, which is now the dominant force in the economy, allows Elites to change the rules rather than accept failure (also known as losses). Thus we have Crony Capitalism: profits are private and yours to keep, losses are transferred to the taxpaying public. This mechanism is well known and catches most of the attention. But M.M. highlighted the way the democratic majority can subvert capitalism. This is generally ignored for the simple reason that most commentators are part of the majority subverting capitalism to benefit their own self-interest.

This leads to a terminal state of self-delusion and self-justification

The end game of this global monetary crisis is the imposition of a 100% digital monetary system that would permanently end what little economic freedoms we still retain today. Educate. Resist. Fight Back. Win.

A month and a half after the SEC took a much-deserved break from watching taxpayer-funded pornography, and stumbled on the scene with its latest pathetic attempt to scapegoat someone, anyone, for its years of gross incompetence, corruption, and inability to prosecute any of the true perpetrators for an event that wiped out tens of trillions in US wealth, by suing Egan-Jones for "improperly" filing their NRSRO application in what was a glaring attempt to shut them up, the only rating agency with any credibility has done what nobody else in the history of modern crony capitalist-cum-socialist America has dared to do: fight back. We have only three words for Sean Egan: For. The. Win.

10 Questions ...

The person who has caused global stock markets so much consternation by daring to play chicken with Germany until the bitter end conducts a  no holds barred interview with Germany's Spiegel. There is little love lost between the Syriza leader and the Germans, who were quite surprised to find a political leader who is willing to play blink with Germany, with the ECB, and the developed world until the very end, or June 17, whichever comes sooner. Tsipras' bottom line: "We're trying to convince our European partners that it's also in their interest to finally lift the austerity diktat." Alas, the European "partners", as evidenced by Lagarde's Guardian interview this weekend, have an image of Greece as a bunch of lazy tax evaders, who only seek to mooch on the German teat, resulting in 60% of Germans now pushing for Greece to be kicked out of the Euro, consequences be damned. Nothing new there. What is curious is Tsipras' answer to the question everyone wants to ask: "If Greece ultimately exits the euro, you will also bear some of the blame. You promised your voters the impossible: retaining the euro while breaking Greece's agreements with the rest of Europe. How can such a plan find success?" His response: " I don't see any contradiction in that. We simply don't want the money of European citizens to vanish into a bottomless pit...we think these resources should also be put to sensible use: for investments that can also generate prosperity. Only then will we in fact be able to pay back our debts." Yet the line that will draw the most ire out of the already exhausted German taxpaying public is the following:

"if our economic foundation is completely destroyed and the decisions of an elected Greek government are not responsible for it but, rather, certain political forces in Europe. Then they too will be guilty, for example Angela Merkel."

Well, in the US, it is all Bush's fault; in Greece, it appears to be Merkel's.

While the Spanish government feverishly attempts to wrap up the country’s euphemistic financial system reform, the ever-expanding black holes, multiple balance-sheets restructuring with infinite amounts of public funds and reiterated calls for the need to further consolidate financial institutions seem to be setting up the stage for a self-fulfilling prophecy of Mayan proportions.  Hopefully, this time around, we can learn from the not-so-ancient Mesoamericans’ hard-learnt lessons of the dangers implied in the state breaking the rules of free market capitalism when bailing out institutions and interest groups at the taxpayers’ expense. If we don’t, at least the endgame should not take anyone by surprise.

By now everyone is well aware what the main tension involving this year's presidential campaign as far as Mitt Romney is concerned, will be his professional past, namely his experience at, and exposure to, Bain Capital. By now most have also gotten a sense of the angle of attack that the incumbent will rely on in order to discredit his GOP challenger, and if they haven't, they will soon enough: after all in Obama's own words "Mitt Romney's record at Bain Capital is what this campaign is going to be about." In other words, Romney's history with managing private (emphasis added) equity. Yet at Marc Thiessen at the WaPo points out, the logical retort from the Romney camp would be to shift attention to something potentially more embarrassing: Obama's record with public equity. Because, frankly, it is deplorable. And while one may debate the number of job losses at the companies that Bain took private, the driving prerogative for Romney was to generate value for his investors and shareholders. This in itself will hardly be debated by Obama. In other words, for any and all of his other failings, Romney succeeded at his primary task. The question then is: did Obama do the same? Did he succeed in investing public equity, i.e., the taxpayer capital that the US financial mechanism has afforded him. Sadly, the answer appears to be a resounding no.

A "failed state" — but Germany is still trying to save the euro, up to a point....

That much of the "news" is artifice and propaganda is a given. How can a society make good decisions about its future when the "facts" such as the unemployment rate are massaged and manipulated, and so many of the "reforms" are simulacra designed by the very wolves supposedly being tamed? Answer: it can't. The same question can be asked of a society in which the "editorial" side of the mainstream media is dominated by an "Argument Industry" that pours gasoline on every conflict and avoids solutions like a vampire avoids the Cross and garlic. Finding solutions would decimate the "Argument Industry" and slash profits. That leaves us with the same question: How can a society make good decisions about its future when every challenge is conflated into extremes that cannot abide compromise or even recognize "outside the box" solutions? Answer: it can't.

Goodbye, living spirit.

Here in the U.S., I think that The Bernank’s plan was to pretend they didn’t need to print more money, get commodity prices down and then hope that the economy would respond favorably to that development.  This wouldn’t have negated the need for more printing; however, it would have bought time and allowed for a potentially lesser degree of action.  Instead, what has happened is that the global ponzi is completely and totally incapable of holding itself together without consistent and increasingly large infusions of Central Bank money.  The debt burden is too large, the mal-investments too pervasive, the corruption too systemic.  The whole house of cards that is the global economy will vanish into dust rather quickly without more and more printing.  So what do you think they are going to do? If I am correct, and the U.S. economy itself is now in the early stages of what will probably turn into a serious economic slowdown, then it will not be easily stopped with incremental Central Bank policies.  The fact that they have waited this long and the fact that the global economy is in the midst of a serious slowdown tells me one thing.  They are way behind the curve and by the time they realize this it will be too late to stem the momentum.  That said, I do expect them to respond and the fact that things will have gotten much worse than they expected will mean a major response.  I’m not talking operation twist part deux.  I mean a serious print.  Potentially the BIG ONE.