United Kingdom

In the global war for energy supremacy, Russia has won another victory over the United States.

No surprises here: hours after we reported that youth unemployment in Spain soared to fresh record highs (surpassing the already nosebleeding number of jobless people under 25 in Greece), here comes Gallup with a poll showing the approval rating of the (unelected) EU Leadership across the peripheral countries. And while there was a slight uptick in approval among respondents in Italy - the country that has so far benefited the most from the Italian central banker at the helm of the ECB - the EU's lack of approval just rose to all time highs in the two countries that continue to see their youth employment hopes crushed by the European experiment, with approval in Spain sliding to 27% (from 55% in 2010), while Greece, plunged to only 19%, which makes one wonder: just who has an interest in keeping Greece in Europe?

Faced with dramatically declining demographics, sliding macro fundamentals, cost pressures on firm margins, slumping support among the people, and a recently rising JPY, Shinzo Abe, Japan's Prime Minister has decided an Op-Ed is the way to go to unveil his 'government knows better' concerted effort to raise Japanese worker's pay. The collective denial is strong among the leadership - no better expressed than this gem: "Abenomics, I am proud to say, has been successful in a more fundamental sense: we have rebooted Japan’s collective psyche." However, Abe's approval rating has never been lower - falling dramatically in the last month or two.

In September 1939, six days after the United Kingdom declared war on Germany, Charlie Chaplin began filming one of his most epic films ever... and the first “talkie” for the silent film star. It was a courageous project - the ‘Great Dictator’ directly poked fun at Adolf Hitler. At the end of the movie, Chaplin looked into the camera and gave a stirring speech about timeless principles– peace, mutual respect, freedom from evil men who aspire to lead nations. This did not win Chaplin any friends in Washington who were keen to maintain official neutrality. And he paid dearly for it; the Great Dictator was the beginning of an entire decade of turbulent trouble between Chaplin and the US government. His rousing speech at the end of the Great Dictator calls for a world free of violence, intimidation, and government control. Unfortunately, we don’t get to live in that world. This our reality. The world is beautiful. Life is beautiful. But the leaders of humankind surely make it all damned hard to appreciate sometimes.

Emergency resolutions and legislation would be likely in many countries in the event of another Lehman Brothers collapse and another global credit and financial crisis. 

Particularly vulnerable banks in each country are....

• EU Fines Financial Institutions Over Fixing Key Benchmarks (Reuters)
• Euro-Area Economic Growth Slows as Exports, Consumption Cool (BBG) - someone has a very loose definition of growth
• Ukraine Officials Scour Globe for Cash as Protests Build (BBG)
• Oops: Franklin Boosted Ukraine Bet to $6 Billion as Selloff Began (BBG)
• Japan Plans 18.6 Trillion Yen Economic Package to Support Growth (BBG) - or about 2 months of POMO
• How Peugeot and France ran out of gas (Reuters)
• Iran threatens to trigger oil price war (FT)
• Abe Vows to Pass Secrecy Law That Hurts Cabinet’s Popularity (BBG)
• Brazil economy turns in worst quarter for 5 years (FT)
• Australia’s Slowdown Suggests RBA May Need to Do More (BBG)
• Biden calls for trust with China amid airspace dispute (Reuters)

Is Low-Level Radiation Dangerous … Or Harmless?  How Much Radiation Will We Be Exposed To?  How Can We Protect Ourselves from Radiation?

The White House has released their (lengthy) fact sheet...

"During the six-month initial phase, the P5+1 will negotiate the contours of a comprehensive solution... Over the next six months, we will determine whether there is a solution that gives us sufficient confidence that the Iranian program is peaceful. If Iran cannot address our concerns, we are prepared to increase sanctions and pressure.

 

Suspend certain sanctions on gold and precious metals, Iran’s auto sector, and Iran’s petrochemical exports, potentially providing Iran approximately $1.5 billion in revenue

Israelis, Saudis, and Republicans are already questioning the decision...

• JPMorgan $13 Billion Mortgage Deal Seen as Lawsuit Shield (BBG)
• J.P. Morgan Is Haunted by a 2006 Decision on Mortgages (WSJ)
• World powers, Iran in new attempt to reach nuclear deal (Reuters)
• Keystone Foes Seek to Thwart Oil Sands Exports by Rail (BBG) - mostly Warren Buffet?
• How Would Fed Deal With Debt Ceiling Crisis? Look to Minutes for Clues  (Hilsenrath)
• Anything to prevent the loss of prop trading: 'Volcker Rule' Faces New Hurdles (WSJ)
• BOE Sees Case for Keeping Record-Low Rate Beyond 7% Jobless (BBG)
• Obama Backs Piecemeal Immigration Overhaul (WSJ)
• Abenomics Seen Cutting Japan Bad-Loan Costs to 2006 Low (BBG)

It would appear that the Horatio Alger myth - that hard work and pluck will lift a person from dire circumstances to enviable success - is not living up to expectations for Americans. As WSJ's Lauren Weber notes, 40% of Americans think it’s fairly common for someone to start off poor, work hard and eventually rise to the top of the economic heap but a new Pew study shows that in reality, only 4% of Americans travel the rags-to-riches path. Unfortunately, they discovered considerable “stickiness” at both ends of the income spectrum and that Americans attached to the rags-to-riches myth might be disappointed to know that other countries show greater mobility among have-nots - "this is what we call the 'parental penalty,' and it's really high in the U.S. - If you’re born in the bottom here, your likelihood of sticking in the bottom is much higher."

With an increasing focus in America on the ever growing entitlement society, we thought it might be useful to get some context of how the welfare states stack up across Europe. As Britain prepares to "test" immigrants in an effort to stymie "benefit tourists", The Telegraph's Ed Malnick, details what health care and child, unemployment and housing benefit a 30-year-old single EU migrant with a child but no job can access in each member state.

JPMorgan Chase has had a bad year. Not only has the bank just reported its first quarterly loss in more than a decade; it has also agreed to a tentative deal to pay $4 billion to settle claims that it misled the government-sponsored mortgage agencies Fannie Mae and Freddie Mac about the quality of billions of dollars of low-grade mortgages that it sold to them. Other big legal and regulatory costs loom. JPMorgan will bounce back, of course, but its travails have reopened the debate about what to do with banks that are “too big to fail.” We now have a global plan, of sorts, supplemented by various home-grown solutions in the US, the UK, and France, with the possibility of a European plan that would also differ from the others. In testimony to the UK Parliament, Volcker gently observed that “Internationalizing some of the basic regulations [would make] a level playing field. It is obviously not ideal that the US has the Volcker rule and [the UK has] Vickers…” He was surely right, but “too big to fail” is another area in which the initial post-crisis enthusiasm for global solutions has failed. The unfortunate result is an uneven playing field, with incentives for banks to relocate operations, whether geographically or in terms of legal entities. That is not the outcome that the G-20 – or anyone else – sought back in 2009.

While 20-year highs for the CNY may be enough for many to question the USD's ongoing reserve status, it is clear that there are many other plans afoot that undermine the dominance of the greenback. On the global financial stage, China is playing chess while the U.S. is playing checkers, and the Chinese are now accelerating their long-term plan to dethrone the U.S. dollar.  You see, the truth is that China does not plan to allow the U.S. financial system to dominate the world indefinitely. Unfortunately for us, the U.S. debt spiral cannot go on indefinitely.  Our debt is growing far, far more rapidly than our GDP is, and therefore our debt is completely and totally unsustainable. The Chinese understand what is going on, and when the dust settles they plan to be the last ones standing.

As Jim Grant recently recently noted, America's default is inevitable, as he confronts the implied message of the Federal Reserve’s pro-inflation policy: We will default in the future, though no lawyer will call it “default.” However, a glance back at the last 213 years of global history shows it is not that unusual for major sovereign nations to rapidly crumble and enter a state of default. As Global Financial Data's Ralph Dillon points out, all of this fear and rhetoric over a US default had him thinking about history and defaults. How have other countries that have defaulted faired over history? Some good and some bad for sure, but for the developed markets and global economic powerhouses, those that did default are still here alive and kicking. In fact, some have defaulted 8 times and are still a major player on the world stage.