Fail

By the time the "too big to fail" banks and their lobbyists get through with the rules, banks will be relatively free to pursue lending practices that existed before the crash.

This morning, amidst news of Moodys cutting Greece's debt rating to Caa1, I came across a phrase I wish I'd thought of first, reading through a friend's morning commentary. The phrase? "Too Stupid to Stop". According to Bill Blain, Senior Director at Newedge in London, and self-professed Euro skeptic, "'Too Stupid to Stop' is based on politicians behaving as rational maximisers of their electoral objectives." He was referring to the real reason behind all the bank-demanded bailout loans for austerity measures throughout Europe. In the United States, that mantra can be extended to include appointed officials, like Treasury Secretary, Tim Geithner (still not admitting our record debt increase came directly from the $4 trillion worth of Treasury issuance and other forms of assistance extended to our banking system since late 2008, as we endure his stomach-churning 'show-begging' to the GOP for a debt cap raise) and Fed Chairman, Ben Bernanke (ditto). It also, of course, applies to congress people whose political survival depends on corporate and bank contributions and financial support, the ones that believe the Dodd-Frank bill changes anything. Rather than considering how governments have systematically done, and continue to do, the wrong (as in immoral, unfair, and uneconomically sound) thing by trying to preserve banks, any politicians possessing the ability to think independently (an oxymoron, I know) should be asking themselves instead, how clever they could be about closing them down. Take a cue from Iceland. But, the 'Too Stupid to Stop" behavior, prevents this from occurring.

Debt is slavery… or at least indentured servitude of the worst kind. That looming mortgage, the high interest credit card debt, the short-term car loan– these are the forces that keep people from breaking free and taking action. Ironically, debt begets more debt. According to FinAid, the average US student loan debt for a four-year private university graduate is nearly $36,000, and $24,000 for public. Throw in that first car loan and maybe a mortgage, and suddenly you’re staring at hundreds of thousands of dollars in demoralizing claims on your future income. At this point, most people figure… ‘hey, I’m already in debt up to my nose, might as well get in up to my eyeballs and buy a new plasma screen on credit.’ Debt is an enormous psychological burden that influences life’s major decisions. It’s why so many people stay committed to jobs that are unfulfilling in cities they detest under conditions they find disheartening. Nobody wants to rock the boat too much… take too many risks and you could lose your job, and hence the ability to make those monthly payments. This familiar story has been playing out across the developed world for years. This is not an ill, however, that exclusively affects individuals and families. Even at the macro level, debt has the power to subjugate entire nations to the whims of their creditors. Enter the IMF.

Asked about the fate of the economic "recovery", which incidentally is nothing more than a $2 trillion dollar dilution-funded blip on the depressionary downtrend commenced in December 2007, Greg Peters, the head of fixed income research, at Morgan Stanley, the firm whose other fixed income strategist Jim Caron will now have been proven wrong three years in a row following his annual broadly bullish call for a jump in rates (not based on bearish considerations such as those postulated by Bill Gross... bullish), tells Tom Keene that the recovery is "Too Young To Die." Yep. That's the justification. Alas there was no mention that the 98 year old ponzi scheme perpetrated by the Fed since 1913 is now "Too Obvious To All." And when that fails, many of the same people who get paid huge sums of recycled taxpayer money to come up with catchy four word slogans while spouting flawed economic projections will suddenly find themselves "Too Pitchforked To Fly Away (To Non Extradition Countries)"

Reuters reports that following the anticipated meeting of Greek political leaders, absolutely nothing has been achieved, and, dramatic pause, no consensus was reached on the debt crisis. Expect more protests, more violence, more boosts to GDP expectations following Keynesian logic that the greater the destruction the higher the bounce, etc.

And while the US is no longer allowed to auction off debt, in China the PBoC appears to be no longer able to auction off debt. As Business China reports, "the central bank scheduled the auction of RMB 20 billion worth of
one-year treasury bonds and RMB 10 billion in six-month bonds on the
country’s interbank bond market for May 13. But banks, faced with tight
liquidity, only purchased RMB 11.71 billion worth of one-year bonds and
RMB 9.63 billion worth of six-month bonds, the report said." In other words, there was a nearly 50% miss on the 3 month auction. The key reason: "The reference yield of one-year treasury bonds was raised to 3.0246% from the previous issuance, while the bond yield of 182-day discounted treasury bonds was 2.91%, the paper said." It appears investors don't agree with the central planners that 3% is an appropriate rate to compensate them for surging inflation. That, and also the fact that banks suddenly have no liquidity: "Tighter liquidity was behind the under-subscription, as the central bank resumed selling three-year notes on May 12 after a hiatus of more than five months, a bank analyst who was not named was cited as saying. The central bank also raised banks’ RRRs by 0.5 percentage points on the same day, effective May 18, the fifth consecutive month its has raised RRRs this year." And so the Catch 22 emerges: the more China fights inflation through RRR or rate hikes, the lower the purchasing power of domestic banks to purchase bonds (and yes, the US deficit is just a few hundred billions dollars too wide for it to come to China's rescue). Should the "15 minute" inflationary conundrum continue to express itself, and China be forced to rise rates even longer, very soon the country, just like the US to which it is pegged monetarily, will also be unable to raise any incremental capital.

Don't worry, your "investment" is safely protected by "contractual arrangements..."

Original piece here.

TEPCO continues to be stuck between a rock and a liquid place. Following recent efforts to stop the spillage of radioactive water into the ocean, the pseudo-nationalized utility is now experiencing the aftermath of radioactive water retention. From Kyodo: "The concentration levels of radioactive iodine and cesium in groundwater
near the troubled Nos. 1 and 2 reactors at the Fukushima Daiichi
nuclear power plant have increased up to several dozen times in one
week, suggesting that toxic water has seeped from nearby reactor turbine
buildings or elsewhere, Tokyo Electric Power Co. said Thursday. According to the latest findings, a groundwater sample taken April 6
near the No. 1 reactor turbine building showed radioactive iodine-131 of
72 becquerels per cubic meter, with the concentration level growing to
400 becquerels as of Wednesday. The concentration level of cesium-134
increased from 1.4 becquerels to 53 becquerels." Conventional thought is that this is due to contaminated water used to cool down overheating reactors: "A total of around 60,000 tons of contaminated water is believed to be flooding the basements of the Nos. 1 to 3 reactor turbine buildings as well as trenches connected to them, and the water is hampering work to restore the cooling functions of the reactors lost since the March 11 earthquake and ensuing tsunami." Yet the most troubling news once again comes from the plutonium containing Reactor 3 where the temperature rose suddenly. Not to worry though: "TEPCO officials said the data were likely due to a glitch in a measuring instrument." And with that we have another data reader which indicates unpleasant information being thrown away (this follows the halt of readings from the Drywell radiation counter in Reactor 1 following a reported surge).

And so the great decade + old eurozone game theory project of Europe is about to come crashing down. Following Europe's decision to leave Ireland out in the cold, due to the country's ongoing unwillingness to pander with unilateral concessions to the global banking syndicate, the Emerald Isle has apparently decided to call the EU's bluff. Reuters reports: "Ireland's government wants to impose losses on some senior bondholders in Irish lenders to reduce the burden on taxpayers from a prolonged banking crisis, a senior minister said on Sunday...Analysts widely expect the government to impose losses on senior
bondholders in nationalized lenders Anglo Irish Bank and Irish
Nationwide because they have sold their deposits and are being wound
down. Hitting any unsecured unguaranteed senior bonds in Bank of
Ireland and Allied Irish Banks (AIB), which amount to over 11 billion
euros, would be more controversial." Yet most controversial would be the fact that the Eurozone is now unable to control its wayward son, which seems set on actually following the will of its people than that of the plutocrats. And just like Tunisia set a precedent to the MENA region with an act many thought was unthinkable, should Ireland follow through with this near-revolutionary act of a debt impairing chain-reaction, most other countries are set to follow suit, leading not only to the inevitable end of the one currency block, expected for so long by many euroskeptics, but yet another US taxpayer funded bailout, as was revealed on Thursday of last week, when we observed the upcoming "threat to the international monetary system" as predicted by the IMF.

Just your typical London protest. The Telegraph has recorded the attempted break and entry into a bank, which however proves too much for scattered "anarchists" courtesy of reinforced glass. The same can not be said for the Ritz hotel unfortunately.

Angela Merkel is carefully observing what can only be classified as a peaceful revolution in Ireland, where a stunning amount, over 70% by some estimates, of voters turned out to punish the ruling Fianna Fail party for its betrayal of the Irish people and for the latest (and what some say last) broad banker bailout. The Telegraph reports that "Exit polls and early tallies from Ireland's general election heralded political annihilation for Fianna Fail (FF), the party which has ruled Ireland for more than 60 years of the Irish Republic's eight decades of independence." Bloomberg adds:  "Counting will continue today to fill the 166-seat parliament, with an exit poll giving Fine Gael and the Labour Party a combined 57 percent of the vote. Support for Fianna Fail, which has ruled for the last 14 years, dropped to 15 percent from 42 percent in the 2007 election, the poll showed." In other words, the Irish people have voted for a direct confrontation with the EU, and indirectly, for austerity: "Fine Gael leader Enda Kenny, likely to become prime minister, wants to re-negotiate the interest rate on the emergency loans and speed up planned spending cuts to narrow the budget gap. Labour is pushing for more tax increases." And the reason Merkel is not going to sleep much tonight is that Germany is next. The country, where the CDU saw a comparable annihilation in a recent Hamburg vote, faces several regional elections as early as a few weeks from now, and the political scene is expected to change drastically, as a warning to anyone who feels like putting the banking kleptocracy (again) over the interests of the taxpaying majority. But what is most troublesome for all those who think that the EURUSD at 1.38 is remotely credible, is that the European Nash Equilibrium is now completely destroyed, and the game theory defections are about to start in earnest: "Declan Ganley, the Irish businessman who led the 2008 No vote to the Lisbon Treaty, said Ireland must "have the balls" to threaten debt default and withdrawal from the single currency. "We have a hostage, it is called the euro," he said. "The euro is insolvent. The only question is whether Ireland should be sacrificed to keep the Ponzi scheme going. We have to have a Plan B to the misnamed bailout, which is to go back to the Irish Punt." Funny  nobody even pretends that modern economics is even a remotely viable concept. Also, the Fed's plan of keeping the USD artificially low against most currencies is about to crash and burn mercilessly.

If you don't know the stories of LTCM, Enron, Tyco, Worldcom, Adelphia, Global Crossing, the S&L Crisis, how portfolio insurance contributed to the 1987 crash, or countless other investing lessons going back centuries, then you have no business investing your or anyone else's money. Now, it looks like China MediaExpress Holdings is about to become another one of these lessons.

1 minute 23 seconds into the clip below a solitary Egyptian protester stands up to a riot police water cannon in an attempted recreation of the Tiananmen Square tank hold up... And gets blasted squarely in the face. Cause that's how Egypt rolls. Plus, whatever happens in Egypt stays in Egypt right? In other news, the first casualty has been reported, after reports from Khaled Said claim Egyptian police in Suez opened fire live ammunition killing Mustafa Reda Mahmoud Abdelfattah, 20 years old.

How the heck is the SEC supposed to identify and prosecute financial wrongdoing when they don't even have the staff in-place to analyze all of that data?!?