As I Said Was Guaranteed To Happen Two Years Ago: Greece = Kaboom! But Now Many Misunderstand The ConsequencesSubmitted by Reggie Middleton on 02/15/2012 13:45 -0400
The complacency of the markets is amazing given the risks at hand. I don't think I'm that smart, so is it that so many others are that stupid? It can't be, can it?
ZeroHedge’s post on the apparent breakdown of Okun’s “Law” highlights the ongoing tragicomedy of how the science of central economic planning eventually confounds, and then consumes itself. Economics is, after all, a social “science”, an elaborate study of human beings and, most importantly, human interactions. Robert Okun, for his part, merely observed in 1962 that when “output” (whatever statistical measure is en vogue) rises by 3%, the unemployment rate seems to fall by 1%. For some reason, economics assumes that if it is true in the past, it will be true forever, so it was written into the canon of orthodox economic practice. Economics has inferred causation into that relationship, giving it a layer of permanence that may not be warranted. Econometrics has always had this inherent flaw. The science of modern economics makes assumptions based on certain data, and then extrapolates them as if these assumptions will always and everywhere be valid. There is this non-trivial postulation that correlation equals causation. In the case of Okun’s Law, it seems fully logical that there might be causation since it makes intuitive sense – more economic activity should probably lead to more jobs, and vice versa. But to assume a two-variable approach to something that should be far more complex is more than just dangerous, it is unscientific. In fact, Okun’s Law has already been adjusted somewhat, most famously by Ben Bernanke and Andrew Abel in their 1991 book. It was upgraded to a 2% change in output corresponding with a 1% inverse change in unemployment. Apparently with the economic “success” of that period, Okun needed a re-calibration.
Moody's Downgrades Italy, Spain, Portugal And Others; Puts UK, France On Outlook Negative - Full StatementSubmitted by Tyler Durden on 02/13/2012 19:00 -0400
You know there is a reason why Europe just came crawling with an advance handout looking for US assistance: Moody's just went apeshit on Europe.
- Austria: outlook on Aaa rating changed to negative
- France: outlook on Aaa rating changed to negative
- Italy: downgraded to A3 from A2, negative outlook
- Malta: downgraded to A3 from A2, negative outlook
- Portugal: downgraded to Ba3 from Ba2, negative outlook
- Slovakia: downgraded to A2 from A1, negative outlook
- Slovenia: downgraded to A2 from A1, negative outlook
- Spain: downgraded to A3 from A1, negative outlook
- United Kingdom: outlook on Aaa rating changed to negative
In other news, we wouldn't want to be the company that insured Moody's Milan offices.
Everything you always wanted to know about LTRO but were afraid to read.
Is a bonus culture beneficial to the economy?
With major trade partners battered by recession, the latest trade data seem to give credence to a China hard-landing crash scenario by some forecasters.
To confirm a reversal in Treasuries we need a bona fide breakout.
While unemployment is a big problem for the Chinese Government, inflation is a HUGE problem. Over one third of China's population lives off less than $2 a day. If the price of food rises in China... those "mass incidents" will explode into outright widespread rioting and civil unrest.
You know times are hard when you can't even give your distressed assets away!!!
Did Pelosi and Bachus draw straws about who was going to be subject to a congressional ethics investiation based on their insider trading?
Lots of motion, little progress.
Much has been made of today's Reuters story how "Iran turns to barter for food as sanctions cripple imports" in which we learn that "Iran is turning to barter - offering gold bullion in overseas vaults or tankerloads of oil - in return for food", and whose purpose no doubt is to demonstrate just how crippled the Iranian economy is as a result of the ongoing US embargo. Incidentally this story is 100% the opposite of the Debka-spun groundless disinformation from a few weeks ago that India was preparing to pay for Iran's oil in gold (they got the asset right, but the flow of funds direction hopelessly wrong). While there is certainly truth to the fact that the US is actively seeking to destabilize the local government, we wonder why? After all as the opportunity cost for the existing regime to do something drastic gets ever lower as the popular resentment rises, leaving the local administration with few options but to engage either the US or Israel. Unless of course, this is the ultimate goal. Yet going back to the Reuters story, it would be quite dramatic, if only it was not the case that Iran has been laying the groundwork for a barter economy for many months now, something which various other analysts perceive as the basis for the destruction of the petrodollar system. Perhaps regular readers will recall that back in July, we wrote an article titled "China And Iran To Bypass Dollar, Plan Oil Barter System." Specifically, we wrote that "according to the FT, China has decided to commence a barter system in which Iranian oil is exchanged directly for Chinese exports. The net result: not only a slap for the US Dollar, but implicitly for all fiat intermediaries, as Iran and China are about to prove that when it comes to exchanging hard resources for critical Chinese goods and services, the world's so called reserve currency is completely irrelevant." Seen in this light the fact that Iran is actually proceeding with a barter system, something that had been in the works for quite a while, actually puts the Reuters story in a totally different light: instead of one predicting the imminent demise of the Iranian economy, the conclusion is inverted, and underscores the culmination of what may have been an extended barter preparation period, has finally gone from beta to (pardon the pun) gold, and Iran is now successfully engaging in global trade without the use of the historical reserve currency.
FX Concepts' John Taylor is out with today's slam dunk de-noisification of all that is irrelevant with the following summary of what is really going on as the world's central banks embark on the latest and hopefully final attempt to reliquify everything. All we can add to Taylor's analysis, especially in light of today's incremental easing in ECB collateral requirements, is that the biggest beneficiary by far of what in a few months will be another multi-trillion balance sheet expansion, is and continues to be hard, non-dilutable, i.e., real, money. Because as fiat currency loses all relevance in a world in which it is printed on a daily basis by the central banks, whether or not we end up with a Weimar scenario, the cash thrown out by the even profitable companies will be increasingly more meaningless. Yet the take home message is that banks will never, ever stop diluting existing money. They simply can't as the past few months have so vividly demonstrated.
Here comes the (re)crash and the search for shortable stock is on! The good thing about bankruptcy is that despite silly manilly market, bankrupt is bankrupt and the stock will act accordingly. Ask GGP/LEH investors.
A few months ago, the Mayor of Newark, NJ announced a similar program designed to reward citizens for snitching on gun owners. According to the mayor, “We don’t even have to have a conviction,” for an informant to get paid a cool $1,000 cash. Rat out your neighbor, get paid. Simple. (As an aside, police in neighboring East Orange, NJ have rolled out a new pre-crime surveillance system. In the words of Police Chief William Robinson, “The police are observing you. The police are recording you. And the police are responding.” Big Brother is clearly watching.) In the financial system, there are droves of civilian agencies that have been coerced into becoming government spies. As we discussed a few weeks ago, everyone from bankers to brokers to gold dealers are obliged to submit ‘suspicious activity reports’ to the federal government. They even have minimum quotas. What’s more, these so-called “SARs” must remain top-secret. It’s a crime for your banker to inform you that you were the subject of a suspicious activity report. Yesterday, the Financial Crimes Enforcement Network (FinCEN), the federal agency which oversees the legions of unpaid government spies, added a few more businesses to the list. Now non-bank mortgage lenders and originators must ‘assist law enforcement’ by submitting suspicious activity reports.