No government debt has ever been or can ever be repaid in full. This is especially the case when a government imposes a monopoly on what can be used as money by passing and enforcing “legal tender” laws. The US did this with the introduction of the Fed in 1913. Eventual default becomes an absolute certainty when government makes its own debt paper the ONLY “reserve” behind the “money” it alone can create. The US did this under President Nixon in 1971. The whole world went along with it because the US Dollar was the reserve currency and no government or people anywhere dared jettison it. The result is the global financial quagmire we see everywhere we look. - Bill Buckler
When it comes to providing analytical perspectives and empirical insights into the realm of sovereign deterioration, few come close to the work of Reinhart and Rogoff. Citi’s Willem Buiter is one such man. In his latest summary piece describing in excruciating detail just how bad things are at the sovereign level (and judging by tonight's opening print in the EURUSD more are starting to realize this), Buiter provides a terrific country by country guide of what is now an insolvent world, starting with the merely extremely risky, going through the backstop-baiters, and finishing with the time bombs that have already gone off and everybody pretends not to care. For those who do care, this is a definitive guide to what each individual European (and not only) country can look forward to in an age of global moral hazard. The only open question: with China's interest now to preserve the Euro's viability, how will Beijing act in the next few months as the eurozone finally starts unraveling.
Founder Of Brook Hunt Sees Copper Peaking In Near-Term, Plunging To "Forgotten Levels" Of $1,500 By 2016Submitted by Tyler Durden on 01/08/2011 17:41 -0500
Simon Hunt, founder of Brook Hunt, puts a dent in the dreams of all those who expect to see a continuing surge in copper prices throughout 2011 and further. The copper specialist, who has since left the firm he founded and is now head of Simon Hunt Strategic Services which specialises in copper, global economics and China, is arguably one of the premier experts on the topic of copper. It therefore behooves the copper bulls to pay attention to his latest interim note which contains "our principal reasons why copper
prices this year won?t live up to the hopes of so many bulls." And his long-term vision is about as scary as they get: "Peak prices
for 2011 will be experienced in the first quarter of the year, if they
have not already been seen. Prices will then fall until around the start
of the fourth quarter, hitting a low of some $5500. Recovery will
follow rising parabolically in 2012 to some $14,000 by the end of next
year. This will signal the end of the gaming of copper prices. A return to
global recession, deflation and the destruction of large end uses of
copper will see prices crashing to levels long since forgotten - to
under $1500 by 2016. It will be at that point that the real
restructuring of the industry will take place. Future trend growth
rates for world refined copper consumption will be below 2% a year
implying that marginal producers will be closed down. It is not a
shortage of supply that will shape the future of copper but a shortage
of required material for furnaces." Full note attached.
chairman bun s. bernanke speaks...through the ALI G Translator
We have been claiming for almost half a year now that with the policy tool known as stocks now completely irrelevant, the places where traders can still find some Fed-free volatility (for the time being) is in the FX and bond markets. We are confident that in 2011 the MOVE bond vol index will be far more relevant that then the VIX, and that 200 pip daily moves in key FX pairs such as the EURUSD will be a normal occurrence. As validation of the first, just after the NFP number was announced, it was not US stocks, but the massive German treasury market that was halted due to a surge in volatility. This bears repeating: the massive, presumably liquid, and critical sovereign debt market of Europe's biggest economy was halted! We look forward to many more such examples of connected vessels, as computer, robots and the few remaining homo sapiens traders, pursue only modestly manipulated markets in which to trade volatility.
... That's what some model (quite possibly from Ford or Wilhelmina) in Barclay's FX department predicts tomorrow's NFP number will be. And just in case the first number is wrong, basedon what can only be attributed to Barcap borrowing Birinyi's ruler, the firm says there is a 95% confidence interval that the actual number will come at 450,000. And there's your whisper number. .
This Mornings News Flow Is Essentially A "Didn't Reggie Tell Us This In Full Detail Up To Two Years Ago" Parade As Indebted Europe Continues To Rip At The Seams!Submitted by Reggie Middleton on 01/05/2011 09:08 -0500
Don't say I didn't tell 'ya so!
The Chinese rhetoric on US Treasury holdings is once again heating up. After a year ago former PBOC advisor Yu Yongding called for a reduction in China's holdings of US Treasurys, popular magazine Caijing published another call to arms by the disgruntled ex-central banker. In apparent disagreement with traditional monetary policy and the Yuan peg, Yu said that moving towards a more market-driven exchange rate would mean reduced intervention in the foreign currency markets, giving China the option of winding down its holdings of U.S. debt. "China should strive to reduce instead of further increasing (its holdings of) dollar assets," he said. "Specifically, China should reduce the growth of its foreign exchange reserves as soon as possible. Furthermore, with the Fed now firmly holding far more US debt than China, the world's fastest growing economy is realizing that is negotiating power when it comes to US leverage via bond holdings is getting smaller with every day. Perhaps the country is finally realizing that it would be best to sell to the Fed now when it can, rather than some time in the future, when it has to, and do so on Bernanke's terms.
Michael Hudson: Average Stock Held for 22 Seconds and Average Foreign Currency Position Held for 30 SecondsSubmitted by George Washington on 01/03/2011 11:39 -0500
With the value proposition of sell-side research now completely gone, as most of it has become merely a conduit for shot gun propaganda (is there even one sell on Goldman's most recent conviction list?), third party research shops such as Credit Sights are promptly becoming the only objective and impartial sources of analytical insight. In its January 3 market commentary Credit Sights shares the first semi-official view of the adverse consequences to the economy should the current liquidity surge from the Fed not be moderated (and with such pundits as Fred "Dynamite" Mishkin telling Bloomberg earlier today that QE3 will not come, it is guaranteed that QE3 is imminent). In a nutshell: "a rising oil price creates economic headwinds via numerous channels
particularly if the increase is sudden. A decline in disposable incomes,
reduced consumer confidence, lower levels of travel, a decline in
demand for gas-guzzling larger autos and an upward bias to inflationary
expectations are all spin off effects on the consumer of a rapid ascent
in the price of oil." Which is why as liquidity continues looking for paths of least resistance, and finds them in such places as commodities (especially now that China has all but shut down the door to importing US liquidity) it is precisely the risk of a price spike in crude that is rapidly becoming the biggest risk to the "wealth effect" derived from the continued lunacy out of the Fed.
Here Comes The Push To Repeal Obamacare, As Goolsbee Starts The Mutual Asured Destruction Charade On Raising The Debt CeilingSubmitted by Tyler Durden on 01/02/2011 14:10 -0500
The new year is finally here, which means the new composition of Congress and the Senate is now in play and tickets to another year of political theater are rapdily selling out. In the meantime, republicans are not wasting a single minute. Michigan Rep Fred Upton, who will lead the House Energy and Commerce committee, said today that he expects "significant" bipartisan support for a proposed repeal of the health care overhaul -- a vote he said would be held before President Obama's State of the Union address, reports Fox News. Politico chimes in: "We have 242 Republicans. There will be a significant number of Democrats, I think, that will join us. You will remember when that vote passed in the House last March, it only passed by seven votes." Of course, this is just more of the same theatrical BS that has made all of America sick and tired with the charade that is "democratic" governance. And wlsewhere, just to confirm that America's banana republic will be cemented in under three months, when Congress passes the debt ceiling to well over $15.5 trillion, Austan Goolsbee was heard advising America not to play chicken with the debt ceiling (i.e., to pass it to an arbitrary number with preferably one hundred zeroes). The alternative to not increasing the ceiling is per Goolsbee, in true kleptocrat fashion, untold misery and destruction.
In plain terms, the system is broken. Everyone, including the Fed, knows it. The financial world has collectively chosen to ignore this due to political pressure and career pressure. However, this will not last forever.
Davidowitz's Rant On Overt Optimism In The Retail Space And Malls Is Not Only On Point, But Has Been Preached At BoomBustBlog For 3 Years & CountingSubmitted by Reggie Middleton on 12/31/2010 10:05 -0500
When one spits the truth, there is really nothing to do but sit back and listen. Happy New Years to one and all...
We now live in a world where governments print worthless pieces of paper to buy other worthless pieces of paper that combined with worthless derivatives, finance assets whose values are totally dependent on all these worthless debt instruments. Thus most of these assets are also worth-less. So the world financial system is a house of cards where each instrument’s false value is artificially supported by another instrument’s false value. The fuse of the world financial market time bomb has been lit. There is no longer a question of IF it will happen but only WHEN and HOW. The world lives in blissful ignorance of this. Stockmarkets remain strong and investors worldwide have piled into government bonds in a perceived flight to safety. -
The future of media lies in creating truly compelling content, not iPad apps or Flash gadgets. Let's get back to the old school when media outlets broke truly investigative stories and they reported the news in lieu of having it reported to them. Isn't there a reason why ZeroHedge is so successful with absence of iPhone app, flash animation, etc.?