"We think that something structurally has changed since the GFC, a change that seems destined to continue to hold back growth in the near-term and more worryingly has lowered the longer-term trend rate of growth. In the absence of structural reforms, a lack of appetite for debt restructuring and no ability to pursue more aggressive fiscal policy, the temptation will be strong globally to continue to throw liquidity at the problem which is likely to continue to have more impact on asset prices than the actual economy. Bubbles could easily form which could ultimately be the catalyst for the imbalances that will likely lead to the next recession or crisis... Our base case is that the world needs low yields and high liquidity given the huge amount of outstanding debt that we’re still left with post the leverage bubble and the GFC. There’s still too much leverage for us to believe that accidents won’t happen with the removal of too much stimulus. If we’re correct, we may see a reaction somewhere to tapering and this in turn may force the Fed into a much slower tapering path than it wants."
Despite the ratings agencies (Moody's Dec 5th and S&P Nov 22nd) seemingly premature raising of the outlook for the nation's sovereign credit rating (from negative to stable), economic hardship in Spain looks likely to continue as loan defaults surge and the unemployment rate remains the second highest in the EU.
- U.S. set to adopt Volcker rule to curb bank trading gambles (Reuters) After vote, lawsuits likely next hurdle for Volcker rule (Reuters)
- U.S. Congress budget talks could produce Tuesday deal, aides say (Reuters)
- Wealthy Go Frugal This Holiday Amid Uneven U.S. Recovery (BBG)
- Tearful Thai PM urges protesters to take part in election (Reuters)
- Fed’s Bullard Sees Higher QE Taper Odds as Labor Market Improves (BBG)
- Coeure Says ECB Would Offer More LTROs Only When Banks Can Lend (BBG)
- Inside China's Super-Sterile Chicken Farms (WSJ)
- Mandela Service Rivals JFK’s as Leaders Meet in South Africa (BBG)
- China data defy slowdown forecasts (FT), and of course the word is "data"
- Cold, ice grip U.S. as more snow to blanket East (Reuters)
From Bernanke's infamous 2008 "not forecasting a recession" call to Fannie Mae CEO Franklin Raines 2004 "subprime assets are riskless" commentary, the following 10 "predictions" - as opposed to Wien "surprises" - will go down in infamy for their degree of errant-ness...
"If you repeat a lie often enough, people will believe it." Sadly, that appears to be the approach that the Obama administration and the mainstream media are taking with the U.S. economy. They seem to believe that if they just keep telling the American people over and over that things are getting better, eventually the American people will believe that it is actually true. And of course the reality of the matter is that we should have seen some sort of an economic recovery by now. Those running our system have literally been mortgaging the future in a desperate attempt to try to pump up our economic numbers. The federal government has been on the greatest debt binge in U.S. history and the Federal Reserve has been printing money like crazed lunatics. All of that "stimulus" should have had some positive short-term effects on the economy. Sadly, all of those "emergency measures" do not appear to have done much at all.
Although the U.S. stock market continues to hit new nominal highs on a nearly daily basis, the U.S. economy bumps along at a lackluster pace. This disconnect has been achieved by a massive Fed experiment in monetary stimulation. Through the combination of seemingly endless maintenance of zero interest rates and the injection of some $1trillion a year of synthetic money into fixed-income markets, the Fed is hoping that the boom it is creating on Wall Street will lead to a boom on Main Street. In reality, this a very dangerous economic gamble of enormously high stakes. As we have seen in the recent past, financial bubbles can leave catastrophe in their wake.
“In 1960, about one in four renters paid more than 30% of income for housing. Today, one in two are cost burdened,” according to a new study (ironically) by Harvard University. As Bloomberg BusinessWeek's Peter Coy notes, the availability of apartments, especially cheaper ones, hasn’t nearly kept up with demand, and the problem has worsened since the 2007-09 recession. Remarkably, the number or people with severe cost burdens (paying over 50% of income to rent) is up by 2.5 million in just four years, to 11.3 million; and as usual, the pinch is hardest on the poor. The share of cost-burdened renters increased by a stunning 12 percentage points between 2000 and 2010, the largest jump in any decade dating back at least to 1960.
- Glass-Steagall Fans Plan New Assault If Volcker Rule Deemed Weak (BBG) ... "if"? The banks control the legislators and regulators...
- Cellphone data spying: It's not just the NSA (USA Today)
- Major tech companies push for limits on government surveillance (Reuters)
- Shanghai Warns Kids to Stay Indoors for Seventh Day on Smog (BBG)
- Protesters fell Lenin statue, tell Ukraine's president 'you're next' (Reuters)
- Everyone must be flying private these days: EADS to cut 5000-6000 jobs, close Paris HQ in restructuring (FT)
- Big Players Trade 'Upstairs' (WSJ)
- There’s no way to tell how many people who think they’ve signed up for health insurance through the U.S. exchange actually have (BBG)
- Slower China inflation reduces worries of tighter policy (Reuters)
We're baffled by the storyline portrayed by the dying legacy media, sponsored by Wall Street and the CEO executive suites of mega-corps, and supported by the propaganda data agencies of the U.S. government. The BLS, BEA, CBO, CNBC, CNN, and a myriad of other government sponsored letters present supposedly accurate data that is designed to convince the ignorant masses everything is fine and their lives are improving. For anyone willing to uncover the facts and think critically about the storyline being presented, an entirely different reality is revealed. The simple chart below obliterates the “official” storyline. Do you have the uncomfortable feeling that your financial situation has been declining for the first 13 years of the 21st Century?
Chart Of The Day: US Labor Force Declines By 25,000 In Past Year Despite 2.4 Million Rise In Employable AmericansSubmitted by Tyler Durden on 12/07/2013 13:48 -0400
As today's chart of the day shows, while the civilian noninstitutional population (i.e. employable Americans over the age of 16) grew by 2.4 million in the past year (from 244.2 million to 246.6 million), the US labor force somehow, very mysteriously, declined.
As the eurozone debt crisis has steadily widened the divide between Europe’s stronger northern economies and the weaker, more debt-laden economies in the south (with France a kind of no man’s land economy in between), one question is on everyone’s mind: Can Europe’s monetary union – indeed, the European Union itself – survive? Fiscal and financial measures aimed at strengthening eurozone governance have been inadequate to restore confidence in the euro. And Europe’s troubled economies have been slow to undertake structural reforms and by maintaining large trade surpluses, Germany is exporting unemployment and recession to its weaker neighbors. But how will Germany react when the north-south divide becomes large enough to threaten the euro’s survival? Two outcomes now seem possible. Europe’s north-south divide has become a time bomb lying at the foundations of the currency union.
The stock market. Source of unknown riches - but not necessarily for investors. So-called "professional" investors offer to manage your money. However, their fees are based on the level of assets managed, not performance. Hence their goal is to maximize assets, not performance, and prey for markets to behave. You will never hear a bad word about stocks from a professional money manager. the by-laws of many mutual funds do not allow the manager to have cash levels above 5% of assets. He has to be invested at least 95% at all times. On one hand, it is probably right to force money managers to concentrate on stock picking, not market timing. On the other hand, this puts the onus of market timing onto the inidiviual investors. Lighthouse's Alex Gloy's excellent presentation below proves finance doesn't have to be complex (people make it complex). Gloy goes on to discuss the link between GDP and Profits, performance, valuation, inflation, and war and their effect on all markets.
As a distant but interested observer of history and investment markets, Marc Faber is fascinated how major events that arose from longer-term trends are often explained by short-term causes.; and more often than not, bailouts (short-term fixes) create larger problems down the road, and that the authorities should use them only very rarely and with great caution. Faber sides with J.R. Hicks, who maintained that “really catastrophic depression” is likely to occur “when there is profound monetary instability — when the rot in the monetary system goes very deep”. Simply put, a financial crisis doesn’t happen accidentally, but follows after a prolonged period of excesses (expansionary monetary policies and/or fiscal policies leading to excessive credit growth and excessive speculation). The problem lies in timing the onset of the crisis.
End America’s central bank because it caused the crashes of 2008, 1987, and 1929 and will blunder again. That’s what many critics are saying about the Federal Reserve System (the Fed), which turns 100 on December 23. They note that on the Fed’s watch America has endured numerous bubbles, crashes, and inflationary cycles that have greatly devalued the dollar. The Fed, they say, has caused or aggravated several crashes. “If you say the goal of the Fed was to prevent calamities, then you have to say that it has been a failure,” says William A. Fleckenstein. “History and current experience,” Joe Salerno adds, “reveal to us that groups endowed with a legal monopoly over any area of the economy are prone to use it to the hilt to enrich themselves, their friends and allies.”
This tragic story emanating from the UK just doesn’t seem to go away. Probably because it’s true. The food crisis across the pond first came to our attention in earnest back in October when the Red Cross announced it was set to provide food aid to the UK for the first time since World War II. The latest twist to this unacceptable saga comes via a letter send by a group of doctors and senior academics from the Medical Research Council and two leading universities to the British Medical Journal calling it a “public healthy emergency” and accusing the government of covering up the problem by delaying a report on the subject.