"America has carried on not simply because of the skill or vision of those in high office, but because we, the people, have remained faithful to the ideals of our forebears and true to our founding documents.... The question we ask today is not whether our government is too big or too small, but whether it works -- whether it helps families find jobs at a decent wage, care they can afford, a retirement that is dignified. Where the answer is yes, we intend to move forward. Where the answer is no, programs will end. And those of us who manage the public's dollars will be held to account, to spend wisely, reform bad habits, and do our business in the light of day, because only then can we restore the vital trust between a people and their government."
In an increasingly globalised economy, we need more global data measurement. The Economist presents a new attempt to measure global GDP. Globally, there was a big and swift return to strong GDP growth, built on the backs of emerging countries and particularly the BRICs. Since early 2010, rather than getting stronger and stronger, global growth has actually become weaker and weaker. This is quite a departure from certain narratives popular today.
In May 2011, Belarus surprised its citizens by devaluing its currency by 50% overnight in an attempt to kickstart its economy, leading to swift and brutal hyperinflation. And while written narratives of the most recent episode of monetary collapse are one thing, nothing is quite as amusing, and grounding for those attempting to "value" money (such as Nobel prize winning economists writing out of their steel exoskeletal ivory towers), as watching a bag of cash be used to pay for seven boxes of beer. And nothing is quite a cathartic as spending several hours trying to count said cash - cash backed by the "full faith and credit" of the Belarus central bank...
As Obi-Wan Kenobi might have said "This is not the debt ceiling debacle you are looking for." That is the seeming 180-degree shift that Goldman appears to have taken with its latest missive on the pending 'discussions'. Their reasoning that this time is different is based on the fact that, in contrast to now, the S&P 500 seemed immune to 'cliff' risks and traded in the 1300 range for the first half of 2011, even as the macro backdrop began to sharply deteriorate. Their models suggest it was clear that risk sentiment was buoying the market even as macro fundamentals were deteriorating. Goldman's view is that the swift market 20% sell-off was in part a reflection of a levitating market reconnecting to still-deteriorating macro fundamentals, possibly catalyzed by the political debate. This time around, they claim, the macro backdrop is, at least for now, stable and far better then in 2011, which perhaps, will allow the market to better absorb the upcoming debt ceiling debate. Unless, this happens...
Forecasting the future with any accuracy is a difficult affair. Being right about the facts, often obscured by various governments, and then correct in your deductions is never enough as macro impacts such as Draghi’s “Save the World” plan can often change the face of market outcomes in a New York minute. This is why so few people can predict the future of the markets with much accuracy. The central banks of the world have accumulated balance sheets of about 15 trillion dollars. There will be consequences of this including inflation, valuation of currencies and ultimately defaults as motivated by political and economic decisions. In the spring keep your eye on Greece, Portugal, Spain and Italy as nationalism returns to protect the various nations. In the United States rancor will resurface. Like in Europe, the “have-nots” control the votes but the push-backs will come and the intensity of them may startle many as the House refuses to accede to the demands and cries for the sharing of wealth. Polarization will continue and a shift in the population base will bring intense rivalry from one State to the next.
Presenting Dave Collum's now ubiquitous and all-encompassing annual review of markets and much, much more. From Baptists, Bankers, and Bootleggers to Capitalism, Corporate Debt, Government Corruption, and the Constitution, Dave provides a one-stop-shop summary of everything relevant this year (and how it will affect next year and beyond).
Once upon a time there lived an independent and industrious people in a land called Ameristan deep in the realm of Middle Income. Their kingdom was unlike any other recorded in the ancient histories, primarily because they had no “king”. Instead, the Ameristanians had decided long ago that kings were much more trouble than they were worth, and, using cost/benefit ratio analysis, came to the conclusion that it was better to hang such ambitious power mongers by their necks and govern themselves instead. Unfortunately, many generations had passed, and the revolutionary fire of Ameristan had grown tired and dormant. Eventually, many of the people began to forget where they had come from... Ameristan had become a land of Unicorn-burger flippers, Swamp Banshee back washers, Dwarf tossers, Jabberwocky jugglers, Bugbear shavers, etc. They were like the peasants of the old days; beggars, thieves, and slaves.
- Central Banks Ponder Going Beyond Inflation Mandates (BBG)
- Bloomberg Weighs Making Bid for The Financial Times (NYT)
- Hedge Funds Fall Out of Love with Equities (FT)
- Obama and Boehner resume US fiscal cliff talks (FT)
- Italy Front-Runner Vows Steady Hand (WSJ)
- Spanish Bailout Caution Grows as Business Lobbies Back Rajoy (BBG)
- Japan sinks into fresh recession (Reuters)
- China economic recovery intact, but weak exports drag (Reuters)
- Greece extends buyback offer to reach target (Reuters) ... but on Friday they promised it was done
- Basel Liquidity Rule May Be Watered Down Amid Crisis (BBG) ... just before they are scrapped
- Irish, Greek Workers Seen Suffering Most in 2013 Amid EU Slump (BBG)
The 8 day mini war between Israel and Gaza has come and gone and any attempts at provoking a wider regional conflict, one involving Iran (if indeed this was the intention), have failed. Which means the fallback plan - Syria - is back in play. And sure enough, as both the most recent naval map update, which shows a US aircraft carrier and a big deck amphibious warfare ship, both of which house thousands of troops and numerous offensive aircraft, and an RT news flash, indicating that thousands of troops have amassed near the Syrian shore confirm, the time for a US invasion may be near. The alibi? "Chemical weapons" of mass or non-mass destruction. In other words the Iraq playbook all over again.
There has been much fanfare over the swap lines that China's central bank has established with numerous countries.
The Great Depression brought about the Keynesian Revolution, complete with new analytical tools and economic programs that have been relied upon for decades. In dampening each successive downturn, authorities accumulated increasingly larger deficits and brought about a debt supercycle that lasted in excess of half a century. The efficacy of these tools and programs has slowly been eroded over the years as the accumulation of policy actions has reduced the flexibility to deal with crises as we reach budget constraints and stretch the Fed’s balance sheet beyond anything previously imagined. Some have referred to this as reaching the Keynesian endpoint. Keynes would barely recognize where we now find ourselves. In this ultra loose policy environment we are limited by our Keynesian toolkit. Without a new economic paradigm, the deleterious consequences of the current misguided policies are a foregone conclusion.
In a world that already makes little sense to most, Credit Suisse just pushed the envelope a little further. The bank has just announced that going forward it will be charging for firms to hold a CHF cash balance - i.e. the bank, given the already-negative Swiss government bond yields, has moved to its own NIRP for its clients. The need to do this suggests an overwhelming desire for short-term safety that flies in the face of the seeming level of complacency that exists in the European bond (and stock markets). As we have warned before, it seems that the currency wars that appear to have escalated have now started the 'capital control' wars as CS (and implicitly the SNB) adds this negative interest rate 'charge' to its already pegged currency in the vain hope that of managing the unmanageable flow of safe-haven-seeking cash.
- *CREDIT SUISSE INFORMS BANK CLIENTS OF NEGATIVE RATES ON CHF FROM DEC. 10
- *CREDIT SUISSE INFORMS CLIENTS IN SWIFT NOTICE, CONFIRMED BY BNK
A ground invasion, and a reoccupation of Gaza by the IDF could be the first step toward engaging Iran. It would allow for Israel to dislodge Hamas, and create a buffer between Israel and Egypt, and the forces of the Muslim Brotherhood. The Morsi government in Egypt has pledged to support the Palestinians — but is this a bluff? Does Egypt have the capability or the desire to really oppose Israel? Does Iran really have the capability or the desire to oppose Israel in a more active way? Ultimately, Iran may have no choice, as Netanyahu is certain that they are on the nuclear threshold. The world is in motion. Israel is playing its cards. The intent? To create facts on the ground that cement Israel’s position as the dominant power in the middle east for the next century. Now, Iran’s move.
If the Fiscal Cliff negotiations are supposed to result in a bipartisan compromise, it is safe that the initial shots fired so far are about as extreme as can possibly be. As per our previous assessment of the status quo, with the GOP firmly against any tax hike, many were expecting the first olive branch to come from the generous victor - Barack Obama. Yet on the contrary, the WSJ reports, Obama's gambit will be to ask for double what the preliminary negotiations from the "debt deficit" summer of 2011 indicated would be the Democrats demand for tax revenue increase. To wit: "President Barack Obama will begin budget negotiations with congressional leaders Friday by calling for $1.6 trillion in additional tax revenue over the next decade, far more than Republicans are likely to accept and double the $800 billion discussed in talks with GOP leaders during the summer of 2011. Mr. Obama, in a meeting Tuesday with union leaders and other liberal activists, also pledged to hang tough in seeking tax increases on wealthy Americans." Granted, there was a tiny conciliation loophole still open, after he made no specific commitment to leave unscathed domestic programs such as Medicare, yet this is one program that the GOP will likely not find much solace in cutting. In other words, all the preliminary talk of one party being open to this or that, was, naturally, just that, with a whole lot of theatrics, politics and teleprompting thrown into the mix. The one hope is that the initial demands are so ludicrous on both sides, that some leeway may be seen as a victory by a given party's constituents. Yet that is unlikely: as we have noted on many occasions in the past, any compromise will result in swift condemnation in a congress that has never been as more polarized in history.
Well, my fellow Slope-a-Dopes, you may have noticed that I have been completely turned upside down by this week's developments. Let me be clear, my crazed compromised counter comportment has nothing to do with the fact that the sitting U.S. president was re-elected. After all, every single national poll, swing state survey, and comprehensive electoral college considerations, had the President as the winner by a cushy considerably comfortable count. In this age of definitive digital data mining, why anyone would have been surprised by the well known outcome entirely eludes even eye. The only truly shocking surprise, would have been if the dastardly dog delivery dirtbag had beaten the coy corrupt community creep. So what has utterly upset & upended your favorite Idiot Savant's uneven universe?