World Bank

Markets in positive territory this morning, despite mounting debt stress in Europe. MBA mortgage applications grew 2.7% v -0.7% the week prior. The increase exhibits a different trend than this week’s disappointing housing data which included a fall in February existing home sales and a -0.3% drop in the house price index v -0.2%E in January. The Portuguese government will vote on proposed fiscal austerity measures today. Given the country’s political divide, approval appears unlikely, which would further stress the debt-strapped nation and lead it quickly to an EFSF tap. It now appears EFSF expansion will take until the end of June to be resolved according to news reports, which will not bode well for those issuers trying to play hardball with the group of payers. SOVXWE traded 10bp wider yesterday and traded into 174bp this AM. Japan’s government announced yesterday that damage due to the recent earthquake will reach $185B to $308B, an amount equivalent to the damage of almost four Hurricane Katrinas. That makes it the most expensive natural disaster the world has ever seen. The government also indicated that the earthquake will take -¥2.75T hit on GDP for the fiscal year that begins on April 1.

The linear thinkers that dominate the mainstream media and the halls of power in Washington D.C. are assessing the series of disasters in Japan without connecting the dots of history. Their ideological desire to convince people that things will go back to normal in short order flies in the face of the facts. It makes me wonder whether these supposed thought leaders lack true intelligence or whether their ideological biases convince them to lie. At the end of the day it comes down to wealth, power and control. If those in power were to tell the truth about the true consequences of demographics, debt, disasters, and devaluation, their subjects would revolt and toss them out. Before the multiple disasters struck Japan last week, the sun was already setting on this empire. The recent tragic events will accelerate that descent.

• A Crisis That Markets Can’t Grasp (NYT)
• World Bank Says Japan Quake Rebuilding May Take Five Years (Bloomberg)
• Central Banks to Maintain Pressure on Yen (WSJ)
• Japan Faces Fresh Food Safety Crisis (FT)
• Coalition Air Strikes Rein in Gaddafi (FT)
• Geithner to Decide on Regulation of Foreign-Exchange Swaps (WaPo)
• Help Housing? Dump Uncle Sam (Forbes)
• Oil Companies Fear Nationalisation in Libya (FT)

While US stock futures continue doing their own thing, primarily on the back of JPMorgan's $20 billion financing for AT&T to buy T-Mobile (gotta love proximity to the discount window and/or excess reserves), with ES surging by 16 points overnight (but not Sprint - sorry guys, you are on your own) after the world apparently did not end, the black swan formation refuses to disperse. Here is the latest news update from Japan, Libya, and Yemen.

No one can predict exactly how this will all shake out, but Doug Casey has long said that a return to a gold standard, or some modern equivalent, is almost inevitable. That’s because, for the reasons Aristotle outlined 2,000 years ago (it’s durable, divisible, consistent, convenient, and has intrinsic value), gold is hands-down the world’s best money. Now, Gresham’s Law tells us that bad money drives out good, but that’s only true when legal tender laws hold sway (incentivizing people to hoard what’s perceived to be “good” money and spend the “bad” money as fast as they can). When people give up on the local legal tender, Gresham’s Law goes into reverse, and good money chases out bad. The dollarization of third-world economies is an example of this, the dollar being perceived as being good when compared to many shakier currencies.

The world's most (in)famous hacker group - Anonymous - known for effectively shutting down their hacking nemesis security firm (with clients such as Morgan Stanley and, unfortunately for them, Bank of America)- HBGary, advocating the cause of Wikileaks, and the threat made by one of its members that evidence of fraud by Bank of America will be released on Monday, has just launched communication #1 in its Operation "Empire State Rebellion." The goal - engage in "a relentless campaign of non-violent, peaceful, civil disobedience" until Ben Bernanke steps down and the "Primary Dealers within the Federal Reserve banking system be broken up and held accountable for rigging markets and destroying the global economy effective immediately."

"You put Lloyd Blankfein in pound-me-in-the-ass prison for one six-month term, and all this bullshit would stop, all over Wall Street," says a former congressional aide. "That's all it would take. Just once."

The lack of animal spirits in the gold and silver bullion markets is also seen in the decline of the gold ETF holdings (see chart above) and the Commitment of Traders open interest (see below). Neither show any signs of speculative fever whatsoever. This would suggest that the recent record prices are due to short covering on the COMEX (possibly by Wall Street banks with concentrated short positions as alleged by the Gold Anti-Trust Action Committee or GATA and being investigated by the CFTC) and buying of bullion in the Middle East and Asia, particularly in China. While all the focus is on the geopolitical risk in the Mediterranean, the not insignificant risks posed by the European sovereign crisis, the possibility of a US municipal and sovereign debt crisis and continuing currency debasement internationally are the prime drivers of gold today. Quantitative easing, debt monetisation and competitive currency devaluations have not gone away and are leading to deepening inflation which will likely result in much higher prices in 2011 and 2012.

Why choose to participate in a system that doesn’t work? A system that is designed to drain the people of wealth instead of enriching them and their lives? A system that is constructed upon irrational principles, faulty laws, and unstable values? A system on the verge of collapse? This is the question that the Alternative Market Movement (AMM) poses to the American citizen. Why continue living under an economic structure that is poised to erupt, threatening you, your family, and your ability to provide a meaningful future for them? Would anyone voluntarily choose to live under the barrel of a gun their entire lives?

• China says media must 'cooperate' after clampdown (AFP)
• Shirakawa Says Current Yen Level 'Not Working As An Additional Risk Factor' (WSJ)
• China Sees Drop in New Bank Loans (WSJ)
• EU Raises 2011 Growth Forecast, Sees Inflation Accelerating (Bloomberg)
• Europe Wary of Rethink Over Irish Bail-Out (FT)
• Charlie Sheen v Muammar Gaddafi: whose line is it anyway? (Guardian)
• BOE's King Says Raising Rate to Make a Gesture Is Self-Defeating (Bloomberg)
• Cameron Says UK Could Arm Rebels (FT)
• Bill Gross Gets `A' for Effort on Trader Greed (Bloomberg)

In previous Revolution Roundups, before we were knocked offline, we featured mass protests by the people of Ireland, Italy, Britain, Austria, Greece, France and Portugal, as the Global Insurrection contagion spread throughout Europe. And now, as we have seen over the past month, North African and Middle Eastern nations have joined the movement as the people of Egypt, Tunisia, Jordan, Morocco, Gabon, Mauritania, Yemen, Bahrain, Libya, Palestine, Iraq, Sudan and Algeria have taken to the streets en masse. The connection between this latest round of uprisings and the prior protests throughout Europe is one the mainstream media is not making. We are witnessing a decentralized global rebellion against Neo-Liberal economic imperialism. While each national uprising has its own internal characteristics, each one, at its core, is about the rising costs of living and lack of financial opportunity and security. Throughout the world the situation is the same: increasing levels of unemployment and poverty, as price inflation on food and basic necessities is soaring...The global banking cartel, centered at the IMF, World Bank and Federal Reserve, have paid off politicians and dictators the world over — from Washington to Greece to Egypt. In country after country, they have looted national economies at the expense of local populations, consolidating wealth in unprecedented fashion – the top economic one-tenth of one percent is currently holding over $40 trillion in investible wealth, not counting an equally significant amount of wealth hidden in offshore accounts. IMF imperial operations designed to extract wealth and suppress populations have been ongoing for decades. As anyone researching economic imperialism will know, a centrally planned Neo-Liberal aristocracy controls the global economy.

The Numbers Behind the Middle Eastern and North African Revolts

We were concerned that the video posted earlier of the slaughter of unarmed protesters in Bahrain would be too graphic. Alas, not even a few short hours later, we have received another video, this one far worse, of a Libyan boy shot in broad daylight by a sniper. Those who want to see the dire consequences of what the overflow of global discontent looks like, in no small part driven by Federal Reserve monetary policies which as the World Bank indicated have just made another 44 million people fall in the "extreme poverty" level, can do so here. It really is time to start keeping track of all the victims of Bernanke's monetary policies. At the rate things are going, within a few years Bernie Bernanke will have to defend himself (and his policies) before a tribunal.

A recently released report by the World Bank’s Food Price Watch confirms that rising agricultural products are sharply pushing up global food prices in lower-income nations (see “World food price uncertainty presents social risks,” in AsiaNews, 4 February 2011), especially among the poorest (where the poverty line is defined as US$ 1.25 per person per day). The WB’s global food price (GFP) index increased by 15 per cent between October 2010 and January 2011, 29 per cent above its level a year earlier. The global prices of wheat, maize, sugar and edible oils especially saw sharp increases. According to the WB estimates, an additional 44 million people fell into poverty. For some Asian nations, the price of wheat rose considerably: Kyrgyzstan (54 per cent), Bangladesh (45 per cent), Tajikistan (37 per cent), Mongolia (33 per cent), Sri Lanka (31 per cent), Azerbaijan (24 per cent), Afghanistan (19 per cent), Sudan (16 per cent), and Pakistan (16 per cent).

World Bank's Robert Zoellick, who has recently been on a truth-telling roll, suggesting a return to the gold standard, and also highlighting that surging food prices have suddenly pushed 44 million to extreme hunger around the world raising the likelihood for many more revolutions, penned an oped in yesterday's FT, sharing his vision for a "monetary regime for a multipolar world" in which, not surprisingly he warned that the current monetary system is perilous, and that China's Yuan should be added to the SDR, as well as other currencies "over time." This is yet another dig at the dollar's status as a reserve currency, yet without China taking proactive steps to indicate its interest at becoming the new de facto world currency, the status quo may be stuck with the greenback. Essentially, China is waiting until the right moment emerges, a time when it has stockpiled enough resources, when it can, unilaterally, or in collaboration with Russia and potentially a post-EUR Europe, make an announcement that the Yuan is the new reserve currency, backed by a basket of commodities. This is precisely the step-change that Zoellick is trying to avoid: "A framework to manage a monetary system in transition may be less headline-grabbing than sudden regime change, but it is a lot more realistic. Modernising the management of international monetary affairs could prove an important contribution to future growth. The time of powerful kings is long gone. But today’s leaders still have the chance to stamp their mark on the monetary framework of tomorrow." Unfortunately, the possibility of a gradual transition in which the US willingly cedes ever increasingly more of its reserve status is unthinkable: after all the bulk of the Fed's disastrous policy is dictated that no matter what the Chair does, the world has no choice but to continue using dollars. Which will work until it doesn't (and with total US debt at almost 100% of GDP, the "doesn't" part is approaching.