Fisher

• 'Pussy Riot' band members found guilty (Al Jazeera)
• Merkel Says Germany Backs Draghi’s ECB Aid Conditionality (Bloomberg)
• Now, the reverse psychology: Hilsenrath: Fed 'Hawks' Weigh In Against More Action (WSJ)
• London Firings Seen Surging As Finance Firms Add NY Jobs (Bloomberg)
• Facebook Second-Worst IPO Performer After Share Lock-Up (Bloomberg)
• Kocherlakota Says FOMC Goes Too Far With 2014 Rate Pledge (Bloomberg)
• China Said to Order Action by Banks as Developer Loans Sour (Bloomberg)
• Australian Treasury Dismisses AUD Intervention Calls (Dow Jones)
• Brevan Howard Loses Third Founder As Rokos Said To Leave (Bloomberg)
• Japan eyes end to decades long deflation (Reuters)... for 30 years now
• Ex-Morgan Stanley Executive Gets Nine Months in China Case (Bloomberg)

It was not enough that the Fed's Richard Fisher was 'allowed' on CNBC this afternoon to expropriate himself and his merry-Fed-men from his 'fanatical' colleague nemesis Rosengren; but Maria B., for one glorious moment, asked a question so sensible it was stunning: "Is The Fed Bailing Out The White House?" The notably business-man-background Fisher was wonderfully heretical in explaining that additional stimulus would have little impact, that the Fed's action would indeed 'look political', and that "US lawmakers need to get their fiscal act together." While he doesn't see a high likelihood of a recession in 2013, he comprehends clearly the wait-and-see 'defensive crouch' that businesses are in given the huge uncertainty. On a slow day, with so much print-and-it's-all-fixed hope, the clarifying vision of at least one man on the FOMC is perhaps worth holding onto.

The presidential season has started in earnest. First to hit the hustings was the president of the Federal Reserve Bank of Boston, Eric Rosengren, who, true to his blue-state roots, pressed the case for an open-ended asset purchase program. Dallas Fed President Richard Fisher made the red-state argument for easing off the monetary gas pedal. Increased chatter from Fed officials is a marker Morgan Stanley's Vince Reinhart has long-identified as signifying increased chance of Fed action. And we are hearing it. But why do Fed officials talk so much in advance of action? Fed officials must be disappointed by an economic outlook that falls short of both of their objectives. They individually think that policy can do better, but they cannot collectively agree on how.

When it comes to building wealth, muddying the difference between perception and reality is the key manipulation tool that banksters use to goad people into wrong choices.

NOT JUST SANDY WEILL ...

Too Big Leads To Destruction of the Rule of Law

Falling interest rates are a feature of our current monetary regime, so central that any look at a graph of 10-year Treasury yields shows that it is a ratchet (and a racket, but that is a topic for another day!).  There are corrections, but over 31 years the rate of interest has been falling too steadily and for too long to be the product of random chance.  It is a salient, if not the central fact, of life in the irredeemable US dollar system. Irving Fisher, writing about falling prices (I shall address the connection between falling prices and falling interest rates in a forthcoming paper) proposed a paradox: “The more the debtors pay, the more they owe.” Debtors slowly pay down their debts and reduce the principle owed.  This would reduce the NPV of their debts in a normal environment.  But in a falling-interest-rate environment, the NPV of outstanding debt is rising due to the falling interest rate at a pace much faster than it is falling due to debtors’ payments.  The debtors are on a treadmill and they are going backwards at an accelerating rate. How apropos is Fisher’s eloquent sentence summarizing the problem!

The XLE closed yesterday at 63 - only a buck above the June 1 lows. For the year, XLE is now down a whopping 8 bucks. And of course oil, which started the year at 103 and peaked at 110, has dropped to 78. Jefferies' David Zervos offers some critical insight into the energy sector bloodbath in the last few months, which of course begs the question - what in the world is going on? Shouldn't all this accomodative policy by the Fed, ECB, SNB, BoE and BOJ be sending commodities to the moon? The answer, he believes, is straightforward - central banks are NOT being accomodative enough. These downward trends in the energy and commodity complex should be a warning sign to anyone with a "price stability" mandate. For now we should look at this energy cliff as an early warning sign for stress in the system. And as such we should expect the usual central bank backstopping to come out in force if this trend picks up material steam! Its the same old story, reflation or bust - and Zervos is still betting the central bankers deliver the former!

"Private Debt Doesn't Matter" Because "Banks Can't Create Money Out of Thin Air"

All you need to read.

Fed governors regurgitate it time and again to rationalize their policies.

Reflecting on yesterday's monetary-policy-hope-driven rally, UBS' Art Cashin prefers to focus on Richard Fisher's very frank (and succinct) speech on the limits of monetary policy and the importance of fiscal policy.  Urging everyone to read it, and send it to your Congressman and Senators, he reminds us that Fisher is the only Fed policymaker to have been a banker and a money manager, and in the words of Richard Fisher, he worries that: "there is a growing sense that we are unwittingly, or worse, deliberately, monetizing the wayward ways of Congress."

Deflation has effectively been abolished by central banking. But is it sustainable? The endless post-Keynesian outgrowth of debt suggests not. In fact, what is ultimately suggested is that the abolition of small-scale deflationary liquidations has just primed the system for a much, much larger liquidation later on. Central bankers have shirked the historical growth cycle consisting both of periods of growth and expansion, as well as periods of contraction and liquidation. They have certainly had a good run. Those warning of impending hyperinflation following 2008 were proven wrong; deflationary forces offset the inflationary impact of bailouts and monetary expansion, even as food prices hit records, and revolutions spread throughout emerging markets. And Japan — the prototypical unliquidated zombie economy — has been stuck in a depressive rut for most of the last twenty years. These interventions, it seems, have pernicious negative side-effects. Those twin delusions central bankers have sought to cater to — for creditors, that debt is wealth and should never be liquidated, and for debtors that debt is an easy or free lunch — have been smashed by the juggernaut of history many times before. While we cannot know exactly when, or exactly how — and in spite of the best efforts of central bankers — we think they will soon be smashed again.

• Dublin in final push for EU treaty Yes vote (FT)
• Spain cries for help: is Berlin listening? (Reuters)
• Crisis draws squatters to Spain's empty buildings (Reuters)
• EU World Bank Chief Urges Euro Bonds (WSJ)
• but... EU: Current Plan Is Not To Let ESM Directly Recapitalize Banks (WSJ)
• Graff pulls Hong Kong IPO, latest victim of weak markets (Reuters) - was MS underwriter?
• EU Weighs Direct Aid to Banks as Antidote to Crisis (Bloomberg)
• Dewey's bankruptcy: Let the rumble begin (Dewey)
• More are cutting off Greek trade: Trade credit insurers balk at Greek risk (FT)
• Rosengren wants more Fed easing; Dudley, Fisher don't (Reuters)
• EU throws Spain two potential lifelines (Reuters)
• Fed's Bullard says more quantitative easing unlikely for now, warns on Europe (Reuters)

California Fish Contaminated with Fukushima Radiation