Mexico

Peak oil we can handle. We find new sources, we develop alternatives, and/or prices rise. It's all but certain that by the time we actually run out of oil, we'll already have shifted to something else. But "peak water" is a different story. There are no new sources; what we have is what we have. Absent a profound climate change that turns the evaporation/rainfall hydrologic cycle much more to our advantage, there likely isn't going to be enough to around. As the biosphere continually adds more billions of humans (the UN projects there will be another 3.5 billion people on the planet, a greater than 50% increase, by 2050 before a natural plateau really starts to dampen growth), the demand for clean water has the potential to far outstrip dwindling supplies. If that comes to pass, the result will be catastrophic. People around the world are already suffering and dying en masse from lack of access to something drinkable... and the problems look poised to get worse long before they get better.

Next week’s calendar is packed with important events and releases, aside of course from the biggest event of the week which are the Italian elections. In fact we already got the first one in the form of China's disappointing HSBC flash PMI which consensus expectations would print stable yet which dropped to a 4 month low. On Friday, the ISM is expected to come out mildly softer vs last month’s strong 53.1 print and consensus at 52.5. Chicago PMI will also be followed by markets on Thursday. On the central bank front markets will be primarily looking for further news on the BOJ leadership succession front. From the perspective of Fed speakers, Chairman Bernanke’s testimony ahead of the Senate Banking Committee will also be followed as markets continue to track the Fed’s assessment of the economic recovery. In the global currency warfare front, the Bank of Israel is expected to cut policy rates by 25bps on Monday, as well as the National Bank of Hungary on Tuesday.

• Risk of instability hangs over Italy poll (FT), Protest votes add to uncertainty in close Italy election (Reuters), and... Risk On
• Czech inspectors find horsemeat in IKEA meatballs (Reuters)
• China’s Slower Manufacturing Casts Shadow Over Recovery (Bloomberg)
• So much for reform: China Prepares for Government Shuffle as Zhou Stays at PBOC (Bloomberg)
• France to pause austerity, cut spending next year instead: Hollande (Reuters)
• Sinopec to buy stake in Chesapeake assets for $1.02 billion (Reuters)
• White House warns states of looming pain from March 1 budget cuts (Reuters)
• China Quietly Invests Reserves in U.K. Properties (WSJ)
• Osborne Keeps Austerity as Investors See Downgrade as Late (BBG)
• South Korea's new president demands North drop nuclear ambitions (Reuters)
• Russia accuses U.S. of double standards over Syria (Reuters)

All Capitalist Systems Have Some Inequality.  We Don’t Want To Prevent All Inequality … Just Economy-Wrecking Levels

• Office Depot Agrees to Buy Officemax for $13.50/Shr in Stock
• Bulgarian Government Resigns Amid Protests (WSJ)
• Rome will burn, regardless of Italian election result (Reuters)
• Abe Says No Need for Foreign Bond Buys Under New BOJ Chief (BBG)
• Rhetoric Turns Harsh as Budget Cuts Loom (WSJ)
• Muddy Waters Secret China Weapon Is on SEC Website (BBG)
• Business Loans Flood the Market (WSJ)
• Staples May Be Winner in Office Depot-OfficeMax Merger (BBG)
• Fortescue Won't Pay Dividend, Profit Falls (WSJ)
• Key Euribor rate on hold after rate cut talk tempered (Reuters)
• FBI Probes Trading in Heinz Options  (WSJ)
• Spain Said to Impose Yield Ceiling on Bond Sales by Regions (BBG)
• BOK’s Kim Signals No Rate Cut Needed Now as Outlook Improves (BBG)

• Here comes the replay of 2011 as China starts the counter-reflation moves: China Central Bank Reverses Cash Pump (WSJ)
• Security group suspects Chinese military is behind hacking attacks (Reuters)
• Iceland Foreshadows Death of Currencies Lost in Crisis (BBG)
• China Allows More Firms to Sell Mutual Funds to Bolster Market (BBG)
• Uncertainty looms for Italians (FT)
• Forget the big comeback; Detroit focuses on what can be saved (Reuters)
• SAC’s Cohen May Face SEC Suit as Deposition Hurts Case (BBG)
• Hollande wrestles with austerity demands (FT)
• Obama Golf With Woods in Florida Risks Muddling Messsage (BBG)
• Simpson and Bowles to Offer Up Deficit (WSJ)
• Aso Says Japanese Government Not Planning Foreign Bond Buys (BBG) - ... until it changes its tune once more
• Abe to Decide on Bank of Japan Governor Nomination Next Week (BBG)

First it was Ireland, then the entire UK, then Germany, and gradually it spread to all of Europe (except for France of course, where it was always a delicacy). But it was only once its finally crossed the Alps and made its way to the Swiss factories of Nestle, the world's largest food maker, did the horsemeat scandal truly go global. The FT reports that "the escalating horsemeat scandal has ensnared two of the biggest names in the food industry, Nestlé, the world’s number-one food maker, and JBS, the largest beef producer by sales. Switzerland-based Nestlé on Monday removed pasta meals from shelves in Italy and Spain and suspended deliveries of all processed products containing meat from German supplier, H.J. Schypke, after tests revealed traces of horse DNA above 1 per cent. Nestlé said it had informed the authorities....Nestlé withdrew two chilled pasta products, Buitoni Beef Ravioli and Beef Tortellini from sale in Italy and Spain. Lasagnes à la Bolognaise Gourmandes, a frozen meat product for catering businesses produced in France, will also be withdrawn."

The big story this past week, besides the annual State of the Delusion speech by Barack “It won’t add a cent to the deficit” Obama, was the fate of the passengers on the Carnival Triumph as their skyscraper sized ship was left adrift at sea for days without power. The ordeal at sea of the Carnival Triumph and the leadership displayed by the Carnival management and executive officers is a microcosm of our declining empire. Rather than deal with our reality, Obama chose the Carnival Cruise Line method of public relations - misinformation, denial and delusion. He has embraced the Big Lie concept as if he had created it. Our cruise of illusions and delusions is headed for troubled water. The math challenged citizens on this ship have been enjoying the 24 hour pizza buffet without the labor required to pay for the bounty. This voyage is reaching an end and the bill is coming due. The engine is on fire but the captain is telling us all is well. Eventually, everyone will know the captain lied.

• G20 struggles over forex, at odds over debts (Reuters)
• Alwaleed Sells Airbus A380 to Invest in Middle East Firms (BBG)
• GOP Stalls Vote on Pick for Pentagon (WSJ)
• ECB officials rebuff currency targeting as G20 meets (Reuters)
• Not good for the reflation effort: Muto leads as Japan PM close to choosing nominee for Bank of Japan chief (Reuters)
• M&A Surges as Confidence Spurs Deals in Computers to Consumer (BBG)
• JPMorgan’s head of equity prop trading Gulati to launch own fund (FT)
• Tiffany & Co. sues Costco over engagement rings labeled ‘Tiffany' (WaPo)
• JPMorgan Said to Fire Traders, Realign Pay Amid Slump (BBG)
• Broker draws Tullett into Libor scandal  (FT)
• Airbus drops Lithium-Ion batteries for A350 (Reuters)

5% fewer words, slightly shorter than last year but just as hope-full. From a hike (and inflation-indexed) in the minimum wage to a 140x multiplier of genome sciences investment (now that is Keynesian awesomeness); from extending homeownership (and refinancing plans) even more to energy independence; from Apple, Ford, and CAT's US Manufacturing to Bridge-Building and infrastructure spending; and from Trans-Pacific and -Atlantic Trade to cyber-security; it's all gonna be great - because as President Obama reminded us at the start... "Our housing market is healing, our stock market is rebounding," and this won't add a dime to the deficit... oh and that Student loan bubble - no worries, there's a college scorecard so now you know where to get the biggest bang for your credit-based buck. Summing it all up: Guns 9 : 3 Freedom ; Jobs 31 : 17 Tax ; Congress 17 : 40 Work ; Recovery 2 : 0 Unicorns ; Spending 3 : 2 Cutting

The chart below, from the Economist, takes a look at how long it would take an individual from any given country to become a millionaire based on "how much the main breadwinner in an average household makes each year (before tax)." No major surprises here: the fastest spawning place for a budding millionaire, a term that has long ago lost its one-time cachet thanks to the world's central banks who have pumped some $14 trillion into the market, is the US, while those hoping to hit the vaunted seven figures in Bulgaria, Mexico and Romania would need to wait about 2-3 average lifetimes before they hit their monetary goal.

The economic collapse is not a single event.  The economic collapse has been happening, it is is happening right now, and it will continue to happen.  Yes, there will be times when our decline will be punctuated by moments of great crisis, but that will be the exception rather than the rule.  A lot of people that write about "the economic collapse" hype it up as if it will be some huge "event" that will happen very rapidly and then once it is all over we will rebuild.  Unfortunately, that is not how the real world works.  We are living in the greatest debt bubble in the history of the world, and once it completely bursts there will be no going back to how things were before. But other than that, everything is rainbows and lollipops, right?

Currency War ... Trade War ... Hot War

It’s getting worse

With Abe picking his new dovish playmate, and Draghi doing his best to jawbone the EUR down without actually saying anything, it is becoming very clear that no matter what level of bullshit histrionics is used by the politicians and bankers in public, the currency wars have begun to gather pace. Japan's more open aggressive policy intervention is the game-changer (and increasingly fascinating how they will talk around it at the upcoming G-20), as if a weaker JPY is an important pillar of the strategy to make this export-oriented economy more competitive again, it brings into the picture something that was missing from earlier interactions among central banks of the advanced economies – competitive depreciation. The last time the world saw a fully fledged currency war was in the early 1930s. Morgan Stanley's Joachim Fels looks at what it was like and what lessons can be drawn for the sequence of events - there are definite winners and losers and a clear first-mover advantage.