Lehman

These dirty little secrets about Europe are being hidden from the general public? Why do you think that is?

Situation “too uncertain,” but for 2013, “we’re pessimistic.”

Just before Lehman, these people had exactly zero predictive capabilities.

Yes, even the perennially rose-colored eyeglass wearing IMF is seeing the Eurocalypse, but what's even more interesting is what's not being said.

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...

Imagine if in 2007, Ben Bernanke, Mervyn King, Jean Claude Trichet et al, had actually possessed the analytical foresight to see what was coming, organised a meeting with the world's media and explained how, using their collective wisdom, they would solve the problem.

"There's going to be a massive global crisis, but there's no need to worry. We're just going to print money."

 

"Is that it?"

How would most people have reacted then? We think they would have laughed out loud. Why are so many of us reacting differently now? The nature of markets is that they periodically forget the lessons of history. Confidence in the status quo seems as entrenched now as it was in 2007 but Gold appears to be exhibiting 'Giffen-like' behavior where, instead of falling, demand is rising as prices rise.

While the entire 'developed' world is now openly engaged in destroying the balance sheet of its assorted central banks - the sole means to devalue local currencies, a liability, by accepting ever more toxic 'assets' as currency collateral - thereby pursuing strategies which until now were strictly relegated to the banana republic playbook, there are some countries who see what is coming over the horizon, and refuse to join the printing frenzy. One such place is China, for whom, as we have repeatedly shown the threat of a fast onset of inflation is far greater (3x more bank deposits as a % of GDP than in the US, means a soaring capital market as a result of inflation will benefit far less while a deposit exodus will cause hyperinflationary havoc in minutes) than any other developed world country. And with the inability to hide "non-core" CPI as a result of food and energy being such a greater portion of overall inflationary bean counting than in the US, it means that despite the demands of Tim Geithner for immediate more easing by China, the PBOC is now stuck waiting to import everyone else's inflation: this includes the Fed, ECB, BOE, BOJ, Korea, Australia and all other bank engaged in adding liquidity, while its own hands are quite tied. Because recall that it was only last year that the NYT said that: "Inflation in China Poses Big Threat to Global Trade." Now we are told that lack of inflation poses the same threat, when in reality what they mean is that with the world tapped out, one more source of marginal liquidity is needed. Judging by overnight comments from the PBOC's head Zhou Xiaochuan that liquidity, suddenly so very needed to keep the game of musical chairs going, is not going to come from China just as we have warned for months on end.

We talk a lot about the importance of owning precious metals… and often for the sake of convenience, we lump gold and silver together in the same category. But while the two share similar characteristics as excellent inflation hedges and stores of value, silver has unique fundamentals worth considering. For starters, while the entire gold market is small, the silver market is even smaller. This means that, in a boom, silver is going to rise more rapidly than gold. In a bust, silver is going to drop more rapidly. This gives silver an interesting edge as a speculation. And one way to play this is to buy specific types of silver whose premiums soar during financial panics.

Slap one out of 1000 bankers on the wrist and make millions of muppets happy???

Much of Southern Europe is in a deep recession, and Greece is an unnecessary distraction.

Recession drives contingent liabilities into present liabilities quickly and with force and the cattle are now out of control and the stampede has begun. For those of you perhaps wishing for and certainly waiting for some type of “Lehman Moment” to flee; you may find it soon. The danger has always been that Europe will believe its own stuff and then make judgments based upon it and if this turns out to be the case then the decisions will be wrong and the consequences horrific.

In the last few weeks much has been said about how the US economy, after nearly collapsing in the Lehman aftermath has staged a gradual, if painful and very slow improvement in the last 3 years. Sure enough, After jobs peaked at an all time high of 138 million in January 2008, they then tumbled to a depression low of 129.2 million in February 2010 and beginning in September 2010 have posted 24 consecutive months of growth, rising to 133.5 million last month: a 4.25 million trough to, so far peak.  Not bad. What, however, has received little discussion by either presidential candidate, primarily because it is largely a byproduct of both Republican and Democratic action, is what can be seen on the chart below courtesy of Diapason Securities, namely the New Normal angle of debt increase, which from merely steep, has mutated into beyond acute. What one can see is that the public cost of "normalization", aka the Trade Off of the new normal is an additional $4.25 trilion in debt over and above where the previous historic trendline would put total US debt, just under $12 trillion. Instead total debt is now $16.2 trillion. Oddly enough, this translates to precisely $1,000,000 per job gained or saved from the first (and certainly not last) post-crisis trough: yet another fact that will not be mentioned in either the mainstream press or any presidential debate, as sadly trading off record amounts of public debt for new jobs is the only game left in town for either party. 

Angela Merkel is finally coming to the one country where the local media will not tire of photoshopping her in various Nazi outfits. The result: at least 6,000 policemen (and more like 7,000 according to Spiegel) will be deployed to protect her on her 6 hour visit to Greece on Tuesday, the first since the crisis erupted in 2009, and which has seen Greek unemployment explode from manageable to 25% at last check. Another result: parties from across the spectrum have said they will protest her visit, and strikes will further shut down what is already a completely shuttered economy. "She does not come to support Greece, which her policies have brought to the brink. She comes to save the corrupt, disgraced and servile political system," said Alexis Tsipras, who leads the opposition Syriza alliance. "We will give her the welcome she deserves."..."We don't want her here," said Yannis Georgiou, 72, who has seen his pension cut by one third. "We will take to the streets against austerity and against the government. Maybe Merkel will hear something and see what we're going through." Finally, with virtually the entire police force tasked with defending Merkel from the residents of her Southeastern European colony, it means that virtually every other place of interest will be left unguarded. Hopefully, nobody in Greece has seen Die Hard with a Vengeance and has access to dump trucks. The one thing Greece has going for it: there is virtually no official gold left anywhere that can be stolen (most of it already has been transferred elsewhere), or otherwise any tourist armed with a camera and located in the vicinity of the National Bank of Greece could film a sequel to what many consider the best Die Hard of all.

Spain was already experiencing a banking crisis as well as a sovereign crisis. It’s now on the verge of a constitutional crisis (as well as its ongoing sovereign and banking crises).

There was a time when the world had (somewhat) free markets. Then Lehman failed as the inevitable culmination of a credit bubble that was second in size and severity only to the one being blown currently, and the central planners took over, converting equity, bond and FX markets into nothing but monetary policy tools dominated by central banks. Below is a great summary of how parallel to SkyNet's HFT takeover of stock trading, the central planners conducted their own not so stealthy take over of all capital markets. The chart is open-ended. Expect much more intervention by the Big 4 in the months and years ahead as the circular nature of increased central bank intervention leading to less faith in financial markets leading to increased private sector deleveraging leading to increased-er central bank intervention and so on, accelerates.