- U.S. Government Shut Down With No Quick Resolution Seen (BBG)
- 12 House Republicans now say they’d back a ‘clean’ CR (WaPo)
- Republicans’ 2014 Senate Edge Muddied by Shutdown Message (BBG)
- Obama Shortens Asia Trip Due to Government Shutdown (WSJ)
- Fed Said to Review Commodities at Goldman, Morgan Stanley (BBG)
- Foreign Firms Tap U.S. Gas Bonanza (WSJ)
- Behind Standoff, a Broken Process in Need of a Broker (WSJ)
- Japan Awaits Abe’s Third Arrow as Companies Urged to Invest (BBG)
- Microsoft investors push for chairman Gates to step down (Reuters)
Perhaps investors are becoming inured to the United States’ annual debt-ceiling debacle, now playing out for the third year in a row. But, as the short-term antics become more routine, the risks of long-term dysfunction become more apparent. At least for now, the rest of the world has seemingly unbounded confidence – reflected in very low borrowing rates – in America’s capacity to put its house (of representatives) in order. No one can imagine that a country with so many unique economic advantages would risk such a damaging self-inflicted wound as default would cause. But this time could be different. Obama needs to force his Republican opponents to blink, and there is no guarantee that they will.
In the upcoming week markets will continue to focus on these fiscal issues in the US, now that a temporary Government shutdown past Tuesday is assured. Still on the fiscal side but outside the US, look forward to Prime Minister Abe announcing his final decision on the VAT hike as well as unveiling a widely anticipated economic stimulus package. Finally, fiscal policy also played a role in the Italian political instability with four ministers resigning from the coalition Government. The backdrop to these events is a rapid deterioration of the political climate after former PM Berlusconi was convicted of tax evasion by a High Court.
Since the global economic crisis began in 2008, Italy’s GDP has declined by about 8%, nearly a million workers have lost their jobs, and real wages have come under increasing pressure. The most striking aspect of Italy’s recent turmoil is what has not happened: citizens have not poured into the streets demanding reform. Indeed, throughout the crisis, Italian society has remained uncharacteristically stable. Japan’s experience – characterized by more than 20 years of economic stagnation – offers important lessons for crisis-stricken democratic countries with aging populations. During Japan’s “lost decades,” successive Japanese governments allowed public debt to skyrocket and refused to confront the economy’s deep-rooted problems, allowing sclerosis to take hold. In fact, Japan’s leaders had little incentive to pursue bold reform, because voters consistently failed to demand it. The question now is what kind of shock would be required to motivate Italians to demand similar action.
"By late April 2012, JPMorgan senior management knew that the firm's Investment Banking unit used far more conservative prices when valuing the same kind of derivatives held in the CIO portfolio, and that applying the Investment Bank valuations would have led to approximately $750 million in additional losses for the CIO in the first quarter of 2012." Translated: Jamie Dimon lied to Congress.
First, Summers steps away; Second, Geithner politely declines; and now - just as his odds of becoming the next Fed Head begin to rise, Donald Kohn drops the following headline bomb-shells at a Brookings' event this morning
KOHN: BAIL-IN NEEDED TO PROTECT FINANCIAL SYSTEM FROM TOO BIG TO FAIL FIRMS
KOHN: VERY EASY MONETARY POLICY CAN CREATE DANGEROUS RISKS
Kohn: Problems can arise when one policy [monetary or financial regulation] is leaning so hard in one direction
That should be enough to effectively remove himself from the running... It seems we are back to the lowest common denominator Fed-head - so much for American exceptionalism again.
UPDATE 2: French draft UN security council resolution would give Syria 15 days to make complete declaration of entire chemical arms program
UPDATE 1: NASDAQ Futures are fading the Obama "Pause" spike after AAPL is not announcing a China Mobile deal
Starting just 1 minute late, the President begab by unapologetically conjuring images of WWI and WWII and stuck to the line that "we know" Assad was responsible for killing his own people with Sarin. Then moved to fear-mongery over what Iran might do, adding that he was very much for strikes. But, in giving Congress the hot potato he knew decision would be difficult. The US military does not do 'pin pricks' and a "targeted" strike will send a message to Assad. While recognizing the need for a diplomatic solution, Obama made it clear that those efforts would follow a military strike. But then, after all the angry banter, he then backed down and said, will work for peaceful solution by putting the strike on hold and will bring a resolution to UN. Ending on a more aggressive note, he warned Republican and Democrat lawmakers to rethink their opposition to the strikes should they be needed.
As the US Congress considers whether to authorize American military intervention in Syria, its members should bear in mind a basic truth: While Syrian President Bashar Al-Assad has repeatedly used extreme violence to retain power, the United States – and other governments in the Middle East and Europe – share responsibility for turning Syria into a killing field. The US government’s misguided move from potential mediator and problem solver to active backer of the Syrian insurrection was, predictably, a terrible mistake. It is time for the US to help stop the killing in Syria. That means abandoning the fantasy that it can or should determine who rules in the Middle East.
The conclusions I have come to are somewhat threatening in the short term, but even more disconcerting in the intermediate term, as the developing image is exposing a crystal clear picture of the ominous resource wars looming directly ahead. Equally dismaying, are the "honorable distinguished gentlemen" presiding over this Middle East mayhem, which are showing themselves to be either grossly incompetent cretins or dangerous duplicitous megalomaniacs
The Hippocratic Oath is one of the most widely known Greek medical texts. It requires a new physician to swear upon a number of healing gods that he will uphold a set of professional ethical standards. The premise of the original Oath, which supposedly started out like this is clear: First, do no harm. Over the last several years, a new oath has appeared in the world of finance as global investment banks have been hauled in front of Senate committees, Congressional panels, various regulatory bodies, and (what always used to be the harshest of judges) the public: the Hypocritic Oath. It begins thus: First, admit no wrong.
If there is one day when the pent up tensions on both sides resulting from the Egyptian coup over a month ago may boil over and lead to an all out civil war (still unclear how John Kerry would "define" that one) today may be that day, as Cairo is braced for what may be the most violent confrontations yet with supporters of the deposed president Mursi calling for “day of rage” protests after Friday prayers, and the Egyptian polic (now using live ammo) and army set to crush any such "illegal" protests. Since millions are set to hit the streets, there is no way this will have a peaceful outcome.
- This won't end well: Islamists call Cairo protest march as Egypt death toll mounts (Reuters)
- JPMorgan Said to Expect Multiple Fines for Whale Loss (BBG)
- Ex-bosses at JPMorgan unlikely to face charges in 'Whale' scandal (Reuters)
- China could target oil firms, telecoms, banks in price probes (Reuters)
- For once, it's not the weather's fault: U.K. Retail Sales Increase More Than Forecast on Heatwave (BBG)
- Japanese visits to shrine on war anniversary anger China (Reuters)
- India Fighting Worst Crisis Since ’91 Seeks to Buoy Rupee (BBG)
- Japan Signals Corporate Tax Cut a Long Shot as Deflation Eases (Reuters)
- Indonesia Tackles Graft in Energy Sector (Reuters)
- Merkel Touts Strength of German Economy (WSJ)
- and... British stuntman who parachuted into London Olympics opening ceremony as James Bond dies in fall (AP)
With all of the problems afflicting the world economy nowadays, inflation seems to be the least of our worries. In addressing the post-2008 economic malaise, which stems from over-indebtedness, policymakers are correct to focus on the threat of debt deflation, which can lead to depression. But dismissing inflation as “yesterday’s problem” could undermine central banks’ efforts to address today’s most pressing issues – and, ultimately, facilitate inflation’s resurgence. Understanding how the Great Inflation from the late 1960’s to the early 1980’s was tamed offers important lessons for addressing far-reaching economic problems, however different ours may be, and provides insight into the dangers that may lie ahead.
Evans, who is one of twelve Federal Reserve Presidents, believes that the economic indicators “are actually really better” and this signals a new, more firmer indication from the Fed that tapering is going to happen.