On The Failure Of Inflation Targeting, The Hubris Of Central Planning, The "Lost Pilot" Effect, And Economist IdiocySubmitted by Tyler Durden on 02/05/2012 10:49 -0500
As an ever greater portion of the world succumbs to authoritarian control (whether it is of military disposition, or as we first showed, a small room of economists defining the monetary fate of the future as central banks now hold nearly a third of world GDP within their balance sheets) we can't help but be amazed as the population simply sits idly by on the sidelines as the modern financial system repeats every single mistake of the past century, only this time with stakes so high not even Mars could bail out the world. Unfortunately, with the world having operated under patently false economic models spread by hacks whose only credibility is being endorsed by the same system that created these models over the past century, the only temporary solution to all financial problem is to "try harder." Sadly, the final outcome is well known - a global systematic reset, in which the foundation of all modern democracies - the myth of the welfare state (which at last check, was about $200 trillion underfunded on an NPV basis globally and is thus the most insolvent of all going concern entities in existence) is vaporized (there's that word again) leading to global conflict, misery and war. Sadly that is the price we will end up paying for over a century of flawed economic models, of "borrowing from the future", of ever more encroaching central planning, and of an economic paradigm so flawed that as Bill Buckler puts it, "Keynes’ response to those who questioned the “longer-term” consequences of his advocacy of credit-creation as a basis for money was - “In the long run, we are all dead”. It is difficult to overemphasise the venal arrogance of this remark or the destructiveness of its legacy." Alas, the last thing the central planning "fools" (more on that shortly) will admit is their erroneous hubris, which in the years to come will claims millions of lives. In the meantime, we can merely comfort ourselves with ever more insightful analyses into the heart of the broken system under which we all labor, such as this one by SocGen's Dylan Grice, whose latest letter on Popular Delusions is a call for "honest fools" - "Frequently, when we make mistakes we try to correct them not by changing the flawed thinking which led to the mistake in the first place, but by reapplying the same flawed thinking with even more determination. Behavioural psychologists call it the “lost pilot” effect, after the lost pilot who tried to reassure his passenger: “I have no idea where we’re going, but we’re making good time!” Policy makers on both sides of the Atlantic are treating today’s malaise with the same flaky thinking which created it in the first place. How can that work?" Simple answer: it can't.
Presenting The Interactive "Wiggle-Room Index" Or Which Countries Will Be Forced To Bail Out The Developed WorldSubmitted by Tyler Durden on 01/26/2012 16:13 -0500
Update: literally seconds after this article was posted, we receive news that the IMF will seek Saudi contribution to the European bailout fund. There you have it - you enjoy that implicit US protection Saudi emirs? It is about to cost you.
While it is best to pray that NASA will find some very rich and not so intelligent life on Mars so it can bail out the world as it sinks deeper and deeper into a untenable debt hole (which somehow can be "filled" only by issuing more debt at least according to tenured economists at ivy league institutions), a strategy of planning for a realistic outcome may not be a bad idea. The question then is who in the world has some/any spare leverage capacity to incur even more debt and use the proceeds to fund a Eurozone-American-Chinese collapse. Enter the Economist's "wiggle-room index." The publication, best known for recently introducing the "shoe thrower index" (remember the Arab Spring and how Fed induced runaway inflation generated a "democratic" revolution across MENA?) has compiled a list of those developing world countries which still have capacity to provide credible global bailout capital (in fiat form of course - after all that is the only thing that the Ponzi understands) or as the Economist says, the "emerging economies that have the most monetary and fiscal firepower." So if you are on this list (ahem China, Indonesia and Saudi Arabia) - our condolences - you are about to be dragged into the epic slow-motion ongoing collapse of the developed world, kicking and screaming, with some 44 caliber persuasion if needed, but you will be there, before it all falls apart. The time to repay all favors to Uncle Sam is coming.
Credit Is From Mars, Stocks Are From Venus, Or Another Reason Why This Market Looks Increasingly Like 2008Submitted by Tyler Durden on 09/14/2011 14:03 -0500
The fact that stocks keep reacting more positively to Greek news, than Greek bonds is scary. It is somewhat reminiscent of 2008 when stocks kept rallying on allegedly good news even when debt struggled to perform on the news that was supposed to impact it most. And for all the talk that Greece is priced in, the reaction after the erroneous headline about Austria approving EFSF shows that is unlikely true. Stocks hit 1163 on that news and the decline only stopped because the correction was printed. That is over 2.5% lower than we are right now, so I don't think Greek default is priced in. Stock futures are up a full 3% from their overnight lows. Crazy and broken moves. The truly scary thing is we haven't even had the full "Eurobonds announced" rally. Where does that take SPX? 1230 again? I just can't convince myself that long is the right trade right now. Ironically, strong stocks may be their own worst enemy, as they give some European politicians the strength to do what they want - and not provide more funds to bailouts. Now I'm clutching at straws, but hey, what else to do as stocks march higher. I have checked the newswire several times while writing this. Expecting to see some new comments or twist on the comments that justifies this push in stocks, and I just can't see it. And I really don't see a strong reaction in the credit markets either. Even BAC cannot seem to rally back to Warren's strike price, let alone where they got in the immediate aftermath of his headline grabbing, stock spiking, investment.