On a regular basis we are placated by commercials to satisfy our craving to know which bathroom tissue is the most absorbent; debates 'infomercials' assuaging our fears over which vice-presidential candidate has the best dentist; and reality-shows that comfort our 'at least I am not as bad as...' need; there is an inescapable reality occurring right under our propagandized nose (as we noted here). Economic Reason has gathered together the Top 15 'reality' economic documentaries - so turn-on, tune-in, and drop-out of the mainstream for a few hours...
Slap one out of 1000 bankers on the wrist and make millions of muppets happy???
- Romney dominates presidential debate (FT)
- What Romney’s Debate Victory Means (Bloomberg)
- Obama Lead Shrinks in Two Battlegrounds (WSJ)
- "Everything will fall apart unless the Spanish conditions are extremely tough" German policy-maker (Telegraph)
- Draghi Stares at Spain as Brinkmanship Keeps ECB Waiting (Bloomberg)
- RBS facing loss after Spanish property firm collapse (Telegraph)
- Burdened by Old Mortgages, Banks Are Slow to Lend Now (WSJ)
- The Woman Who Took the Fall for JPMorgan Chase (NYT)
- European Banks Told to Hold On to $258 Billion of Fresh Capital (Bloomberg)
- Europe Weighs More Sanctions as Iran’s Currency Plummets (Bloomberg)
Here are a few interesting tidbits to chew on...
So, Jamie, you still think that Bear Stearns is not material to JPM investors?
- China accuses Bo Xilai of multiple crimes, expels him from communist party (Reuters), China seals Bo's fate ahead of November 8 leadership congress (Reuters)
- "Dozens of phone calls on days, nights and weekends" - How Bernanke Pulled the Fed His Way - Hilsenrath (WSJ)
- Fed won't "enable" irresponsible fiscal policy-Bullard (Reuters)
- PBOC Adviser Says Easing Restrained by Concerns on Homes (Bloomberg)
- Data Point to Euro-Zone Recession (WSJ)
- Fiscal cliff dims business mood (FT)
- FSA to Oversee Libor in Streamlining of Tarnished Rates (Bloomberg)
- Monti Says ECB Conditions, IMF Role Hinder Bond Requests (Bloomberg)
- Japan Heads for GDP Contraction as South Korea Weakens (Bloomberg)
- Moody’s downgrades South Africa (FT)
- Madrid Struggles With Homage to Catalonia (WSJ)
Some wonder why we have been so convinced that no matter what happens, that the Fed will have no choice but to continue pushing the monetary easing pedal to the metal. It is actually no secret: we explained the logic for the first time back in March of this year with "Here Is Why The Fed Will Have To Do At Least Another $3.6 Trillion In Quantitative Easing." The logic, in a nutshell, is simple: everyone who looks at modern monetary practice (as opposed to theory) through the prism of a 1980s textbook is woefully unprepared for the modern capital markets reality for one simple reason: shadow banking; and when accounting for the ongoing melt of shadow banking credit intermediates, which continues to accelerate, the Fed has a Herculean task ahead of it in restoring consolidated credit growth. Shadow banking, as we have explained many times most recently here, is merely an unregulated, inflationary-buffer (as it has no matched deposits) which provides the conventional banking credit transformations such as maturity, credit and liquidity, in the process generating term liabilities. In yet other words, shadow banking creates credit money which can then flow into monetary conduits such as economic "growth" or capital markets, however without creating the threat of inflation - if anything shadow banks are the biggest systemic deflationary threat, as due to the relatively short-term nature of their duration exposure, they tend to lock up at the first sing of trouble (see Money Markets breaking the buck within hours of the Lehman failure) and lead to utter economic mayhem unless preempted. Well, preempting the collapse in the shadow banking system is precisely what the Fed's primary role has so far been, even more so than pushing the S&P to new all time highs. The problem, however, as we will show today, is that even with the Fed's balance sheet at $2.8 trillion and set to rise to $5 trillion in 2 years, it will not be enough.
There is a common problem underlying the economic troubles of Europe, Japan, and the US: the symbiotic relationship between politicians who heed narrow interests and the growth of a financial sector that has become increasingly opaque (Igan and Mishra 2011). Bailouts have encouraged reckless behaviour in the financial sector, which builds up further risks – and will lead to another round of shocks, collapses, and bailouts. This is what Simon Johnson and Peter Boone have called the ‘doomsday cycle’. The continuing crisis in the Eurozone merely buys time for Japan and the US. Investors are seeking refuge in these two countries only because the dangers are most imminent in the Eurozone. Will these countries take this time to fix their underlying fiscal and financial problems? That seems unlikely. The nature of ‘irresponsible growth’ is different in each country and region – but it is similarly unsustainable and it is still growing. There are more crises to come and they are likely to be worse than the last one.
If you wanted to sum up the just-concluded Casey Research/Sprott Inc. Summit titled Navigating the Politicized Economy, you could say "The situation is hopeless but not serious." More than 20 speakers – many of them world-renowned financial experts and best-selling authors – gathered in Carlsbad, CA, from September 7 to 9 to ascertain exactly how hopeless, and what investors can do to protect themselves.
Meet the man, who many say (most of whom correctly) has been running pretty much everything from deep behind the scenes.
At the end of December 2010, Philipp Bagus (he of the must watch/read 'Tragedy of the Euro') provided a clarifying and succinct rebuttal or Bernanke's belief in the extreme monetary policy path he has embarked upon. Bernanke's latest diatribe, or perhaps legacy-defining, self-aggrandizing CYA comment, reminded us that perhaps we need such clarification once again. Critically, Bagus highlights the real exit-strategy dangers and inflationary impacts of Quantitative Easing (a term he finds repulsive in its' smoke-and-mirrors-laden optics) adding that:
Money printing cannot make society richer; it does not produce more real goods. It has a redistributive effect in favor of those who receive the new money first and to the detriment of those who receive it last. The money injection in a specific part of the economy distorts production. Thus, QE does not bring ease to the economy. To the contrary, QE makes the recession longer and harsher.
Or we might name it after the intentions behind it: "Currency Debasement I," "Bank Bailout I," "Government Bailout II," or simply "Consumer Impoverishment."
September Arrives, As Does The French "Dexia Moment" - France Nationalizes Its Second Largest Mortgage LenderSubmitted by Tyler Durden on 09/01/2012 15:32 -0500
September has arrived which means for Europe reality can, mercifully, return. First on the agenda: moments ago the French government suddenly announced the nationalization of troubled mortgage lender Credit Immobilier de France, which is also the country's second lagrest mortgage specialist after an attempt to find a buyer for the company failed. "To allow the CIF group to respect its overall commitments, the state decided to respond favourably to its request to grant it a guarantee," Finance Minister Pierre Moscovici said according to Reuters. What he really meant was that in order to avoid a bank run following the realization that the housing crisis has finally come home, his boss, socialist Hollande, has decided to renege on his core campaign promise, and bail out an "evil, evil" bank. Sadly, while the nationalization was predicted by us long ago, the reality is that the French government waited too long with the sale, which prompted the Moody's downgrade of CIF by 3 notches earlier this week, which in turn was the catalyst that made any delay in the nationalization inevitable. The alternative: fears that one of the key players in the French mortgage house of cards was effectively insolvent would spread like wildfire, leading to disastrous consequences for the banking system. End result: congratulations France: your Fannie/Freddie-Dexia moment has finally arrived, and the score, naturally: bankers 1 - taxpayers 0.
I have to admit, I am pretty sick of writing about Europe, particularly since nothing has changed over there in the last month.
Instead what’s happened is that Mario Draghi issued a borderline ridiculous statement that he somehow will be able to fix the EU’s solvency Crisis.
The actual speech started with a philosophical inquiry comparing the Euro to a bumblebee. I kid you not:
I am reminded that this is the 5-year anniversary of the emergency Fed Discount Rate cut in response to the collapse of Countrywide Financial (CFC) earlier that week.
Here come the facts!!! Warning, if you get your feelings hurt over hearing the truth, simply move on. You may have a couple of quarters lefft.