In the 1st installment of this article – May the Odds Ever Be in Your Favor – The Reaping, we addressed how wealth inequality created by men rigging the system and utilizing media propaganda ultimately leads to rebellion. In Part 2, we will show how hope and defiance can ignite the flame of liberty in the minds of men. Edward Snowden has ignited that flame. A Lot of Hope is Dangerous... Linear thinking old timers are likely to scoff at the notion that some trilogy of novels for teenagers could capture the mood of the time in a way that explains how the people of this country will respond to the current worsening Crisis. History is cyclical and we’ve returned to a time where leaders will step forward to lead and brave heroes step forward to fight. The future of the country hangs in the balance.
For the last year or two, European banks have engaged in the ultimate of self-referential M.A.D. trades - buying the sovereign debt of their own nation in inordinate size to maintain the ECB's illusion of control (even as their economies collapse and stagnate) while referentially obtaining the funding for said purchase from the ECB by repoing the purchase back to the central bank, usually with no haircut to mention. Today though, as The FT reports, a top official at the European Central Bank has signalled it will try to force eurozone banks to hold capital against sovereign bonds, in an attempt to stop weak lenders using its cash to hoover up the debts of crisis-hit countries.
The Bank of England's Tucker, who has worked with U.S regulators on the cross-border hurdles to taking down an international firm said that "U.S authorities could do it today--and I mean today". The FDIC official in charge of planning for resolutions, confirmed that the U.S system is ready to handle a big-bank collapse.
While the idea of the interventionist suppression of short-term 'normal' volatility leading to extreme volatility scenarios is not new, hearing it explained so transparently by a current (and practicing) central banker is still somewhat shocking. As Buba's Jens Weidmann recent speech at Harvard attests, "The idea of monetary policy safeguarding stability on multiple fronts is alluring. But by giving in to that allure, we would likely end up in a world even less stable than before."
A dispassionate analysis of Bitcoins, their function and implications.
It is only fitting that promptly following the third worst bear market of all time resulting from the bursting of the biggest, until that point, credit bubble that as a result of over $10 trillion in global fungible central bank balance sheet expansion, and a new and improve and bigger than ever credit bubble, one which includes the sovereigns too, the S&P is now 162% higher from its March 9 2009 lows of 676.53, making this the fourth biggest bull market in US history. The next logical question: what would make this relentless Fed balance sheet tracking "bull market" become the 3rd biggest bull market in history, or 2nd biggest... or biggest of all time. Here are the S&P500 breakevens for those particular thresholds...
"The employment situation in America is in a state of serious dysfunction," is how Elliott Management's Paul Singer begins his discussion of the problems (that existed before 2008) that are getting worse... "A related problem in America is benefits policies that encourage dependency. This is insidious and life-draining, because a balance must be struck between helping those truly in need and providing harmful incentives for able-bodied people not to work. If the government makes it less economically attractive to work than to receive a check, the predictable result will be an increase in handouts and a drain on the productive sectors of the economy."
It would appear that French-owned Fitch, following its rating-watch-negative shift on the US credit rating last week, has got a tap on the shoulder from the powers that be. As Hollande complains about Obama's espionage, Fitch has released a statement explaining how the USA can do whatever it wants and not be downgraded. With only the Chinese ratings agency "able" to openly comment on the creditworthiness of the USA, it is no surprise that Fitch gave itself an "out" on the basis of the USDollar's exorbitant previlege.
How Fitch has not downgraded the U.S. already is a mystery to analysts looking at the U.S. fiscal position and the lack of political will to tackle it. It seems likely that significant political pressure is being put on credit ratings agencies regarding their credit rating of the U.S.
So what exactly did Reid know and when?
- *UNITED STATES' AAA IDR RATING MAY BE CUT BY FITCH :3352Z US
- FITCH SAYS PUTS U.S. ON RATING WATCH NEGATIVE AS U.S. AUTHORITIES HAVE NOT RAISED FEDERAL DEBT CEILING IN A "TIMELY MANNER
- *FITCH STILL SEES U.S. DEBT CEILING TO BE RAISED SOON :3352Z US
- *FITCH SEES RESOLVING US RWN BY END OF 1Q '14 AT LATEST
- *FITCH STILL SEES U.S. DEBT CEILING TO BE RAISED SOON :3352Z US
- *FITCH SEES U.S. ECONOMIC GROWTH REVERTING TO 2.25% AFTER 2017
Gold’s price falls are very counter intuitive and suggests that Wall Street banks, either independently or in unison with the U.S. authorities possibly through the Working Group On Financial Markets or the Plunge Protection Team, are suppressing gold lower.
Gold imports have virtually dried up in India. Battling a high trade deficit, the country has set the import duty on the precious metal at a record 10%.
Not much comment necessary on a topic we have beaten to horse pulp in the past 2 weeks aside to note that this time is ironically different from 2011 as the inversion in the CDS curve is considerably more biased to a piling up of short-term default risk than in 2011.
Yesterday we described the various scenarios available to Treasury in the next few weeks should the shutdown and debt ceiling debacle carry on longer than the equity markets believe possible. As BofAML notes, however, the most plausible option for the Treasury could be implementing a delayed payment regime. In such a scenario, the Treasury would wait until it has enough cash to pay off an entire day’s obligations and then make those payments on a day-to-day basis. Given the lack of a precedent, it is hard to quantify the impact on the financial markets in the event that the Treasury was to miss payment on a UST; but the following looks at the impact on a market by market basis.
For all complaints about painful, unprecedented (f)austerity, the PIIGS (even those with restructured debt such as Greece) sure have no problems raking up debt at a record pace. Over the weekend, Spanish Expansion reported that Spanish official debt (ignoring the contingent liabilities) just hit a new record. "The debt of the whole general government reached 942.8 billion euros in the second quarter, representing an increase of 17.1% compared to the same period last year. Debt to GDP of 92.2% exceeds the limit set by the government for 2013..." Moments ago, it was Italy's turn to show that with employment still plunging, the only thing rising in Europe is total debt. From Reuters, which cites a draft Treasury document it just obtained: "Italy's public debt will rise next year to a new record of 132.2 percent of output, up from a previous forecast of 129.0 percent."