Greece

Inflation slowed in 24 (of 27) EU nations in April to leave the average EU rate at 1.4% (versus 1.9% in March). Greece entered deflation in March for the first time in 45 years and Latvia consumer prices fell 0.4% in April (versus +2.8% a year ago). This notable plunge, while 'helpful' for the average spender in the short-term, is a problem, as Bloomberg's Niraj Shah notes, sustained falling prices will increase the nation's debt burden. At the other end of the spectrum, Romania and Estonia both have inflation running above 4% and 3% respectively. Of course, none of this serial 'depression' matters, since Draghi has your back and Hollande says "the crisis is over."

The emir of Qatar is a busy man: in addition to providing funding and weapons to the mercenary group formerly known as Syrian "rebels" in order to boost his already incalculable wealth and promote his LNG interests in the region over those of Saudi Arabia, in the process isolating Russia as the marginal provider of energy to Europe and furthering western interests even if it means escalating the Syrian civil war, he is also diversifying his assets. And he is doing so in a way that would provide for a quick and painless getaway should things in his country turn sour (now that the US and Russian fleets are converging nearby, this is no longer a merely token possibility): by buying Greek islands. And now that the world has seen the "lead investors" step in, the uber-wealthiest are scrambling to ape one of the world's richest people and stake their own Greek island claim.

Read 'Em and Weep

If there is one market that represents the sheer unbridled lack of respect for risk it is the Greek Government bond market. In the last year, GGB prices have surged 380% from under EUR 14 to almost EUR 67% of par today! That is a plunge in yields from over 29% in May 2012 to a mere 8% currently (US Treasuries yielded 8% in 1994)... The driver for all this exuberance? Every major macro data point for Greece has worsened from a year ago - from unemployment to GDP growth... behond the 'wretch'-for-yield. Or perhaps we are overthinking it: it appears that Greek bond prices are merely matching Greek youth unemployment almost tick for tick: expect GGBs to hit par when every single Greek between the ages of 16 and 25 is out of a job.

Parasites must balance their drive to maximize what they extract from their host with the risk of losing everything by killing their host. This is the dilemma of the parasitic partnership of the central state and financial Elites everywhere: to extract the maximum possible in debt payments and taxes without sparking rebellion and revolution. The 30 million whose labor funds the parasitic status quo don't have to rebel; they simply have to stop going to work, stop starting enterprises, stop being productive. They just have to tire of being the host, tire of being debt-serfs, tire of being tax donkeys. The trick to suppressing revolution is to keep debt-tax serfdom bearable. The parasitic Elites are keeping the host going, but at a high cost in resiliency. Let's see how long the host lasts once a crisis hits.

The middle class American worker is in danger of becoming an endangered species.  The politicians are not telling you the truth, and the mainstream media is certainly not telling you the truth, but the reality is that there is nothing but bad news on the horizon for workers in the United States. The American people inherited the greatest economic machine in the history of the world, and we have wrecked it.  Decades of very foolish decisions have resulted in the period of steady economic decline that we are experiencing now. Today, American workers are living in an economy that is rapidly declining, and their jobs are steadily being stolen by robots, computers and foreign workers that live in countries where it is legal to pay slave labor wages.  Politicians from both political parties refuse to do anything to stop the bleeding because they think that the status quo is working just great. So don't expect things to get better any time soon. The following are 10 charts that demonstrate the slow, agonizing death of the American worker...

In a world in which fundamentals no longer drive risk prices (that task is left to central banks, and HFT stop hunts and momentum ignition patterns) or anything for that matter, it only makes sense that the day on which Japan posted a better than expected annualized, adjusted Q1 GDP of 3.5% compared to the expected 2.7% that the Nikkei would be down, following days of relentless surges higher. Of course, Japan's GDP wasn't really the stellar result many portrayed it to be, with the sequential rise coming in at 0.9%, just modestly higher than the 0.7% expected, although when reporting actual, nominal figures, it was up by just 0.4%, or below the 0.5% expected, meaning the entire annualized beat came from the gratuitous fudging of the deflator which was far lower than the -0.9% expected at -1.2%: so higher than expected deflation leading to an adjustment which implies more inflation - a perfect Keynesian mess. In other words, yet another largely made up number designed exclusively to stimulate "confidence" in the economy and to get the Japanese population to spend, even with wages stagnant and hardly rising in line with the "adjusted" growth. And since none of the above matters with risk levels set entirely by FX rates, in this case the USDJPY, the early strength in the Yen is what caused the Japanese stock market to close red.

So much for Europe's "recovery." In a quarter when the whisper was that some upside surprise would come out of Europe, the biggest overnight data releases, European standalone and consolidated GDPs were yet another flop, missing across the board from Germany (+0.1%, Exp. 0.3%), to France (-0.2%, Exp. 0.1%), to Italy (-0.5%, Exp. -0.4%), and to the entire Eurozone (-0.2%, Exp. 0.1%), As SocGen recapped, the first estimate of eurozone Q1 GDP comes in at -0.2% qoq, below consensus of a 0.1% drop. The economy shrank by 1.0% yoy, the worst rate since Dec-09. The decline of 0.5% qoq in Italy means that the economy has been in recession continuously since Q4-11. A 0.2% qoq drop in France means the economy has ‘double-dipped’, posting a second back-to-back drop in GDP since Q4-08. The increase of 0.1% qoq in Germany was disappointing and shows the economy is not in a position to support demand in the weaker member states (table below shows %q/q changes).

When is the economic collapse going to happen?  Just open up your eyes and take a look around the globe.  The next wave of the economic collapse may not have reached Wall Street yet, but it is already deeply affecting billions of lives all over the planet.  Much of Europe has already descended into a deep economic depression, very disturbing economic data is coming out of the second and third largest economies on the globe (China and Japan), and in most of the world economic inequality is growing even though 80 percent of the global population already lives on less than $10 a day.  Just because the Dow has been setting brand new all-time records lately does not mean that everything is okay.  Remember, a bubble is always the biggest right before it bursts.  The next major wave of the economic collapse is already sweeping across Europe and Asia and it is going to devastate the United States as well.

In some surprising news, and quite contrary to what its record low bond yields would indicate (for a key reason for said artificial demand for French, see The Greater Fool) today the Pew Research center released results from a poll of 7646 EU citizens in March 2013, showing that the new sick man of Europe is Europe itself, or rather the great unification project itself: the European Union. Perhaps most surprisingly, nowehere is this more evident than in France itself - the country where the idea of a European Union germinated in the first place - and where the decline in support for the EU has been the greatest in the past year, with just 22% responding affirmatively to the question whether 'economic integration strenghtened the economy', down from 36% a year ago, and the biggest drop of all surveyed EU member states.

There is no plan, no scheme that the Fed can concoct for exiting their support for the U.S. economy that will not negatively affect both the bond and equity markets and have a positive effect on the Dollar. The markets have relied upon the manna from Heaven to rise and virtually nothing else. The American economy cannot justify either the absolute levels of yield or the compression that has taken place or the lofty levels of our stock markets. All of this has had a single driver which is the Fed. The Fed has spent four years providing gifts for those that borrow and for the banks while penalizing those who save and invest. What one group gained the other lost. Now the Fed faces the dilemma of its own making; how to gradually exit their current strategy without setting the financial markets on their rear ends.

Another day, another US city on the brink of insolvency. This time it's Detroit, whose recently appointed emergency financial manager Kevyn Orr said may run out of cash next month and must cut costs such as long-term debt and retiree obligations. According to Bloomberg, "Orr’s report says the cost of $9.4 billion in bond, pension and other long-term liabilities is sapping the ability to provide such basic services as public safety and transportation. He listed cutting debt principal, retiree benefits and jobs among options he may take. “No one should underestimate the severity of the financial crisis,” He called his report "a sobering wake-up call about the dire financial straits the city of Detroit faces."

If England does not wake up and recognize what is happening then it will be Neville Chamberlin all over again. Appeasement is never a good answer and today no war is threatened just financial domination. Over time, if Britain remains in the European Union, they will get pushed down into the mud, lose their ability to govern themselves, watch as their financial institutions get trampled by Frankfurt. The Germans will force them into a space presently occupied by Greece, Slovenia and Cyprus. Retribution for two World Wars will finally be won in Berlin.

Japan should serve as a lesson to central planners around the world. Japan’s stock market/ real estate bubble burst in the early ‘90s. Since that time Japan has launched NINE QE efforts equal to roughly 25% of its GDP. And GDP growth has worsened despite these efforts from 2% to 1%. Ditto for employment.

On the surface, Abenomics - the radical unlimited stimulus plan put in place by newly elected Japanese PM Shinzo Abe – appears to be working. The Nikkei is up 68% since July, 2012, the yen has weakened by 30% over the same time frame, and Japanese consumer confidence is up sharply to the highest levels in six years. The theory behind Abenomics is that the rising stock market will create capital, and the falling yen will make Japan’s export-based economy more competitive in global markets, while newly profitable companies will hire more workers. In order for Abenomics to work, four things have to happen (below). Don’t hold your breath. Japan is a bug in search of a windshield. Longer-term, Abenomics is a recipe for disaster - have no illusions about that. But short-term … that’s another matter entirely, and therein lies opportunity.