World Trade

• The deeper agenda behind "Abenomics" (Reuters)
• BoJ governor Haruhiko Kuroda promises to stabilise bond market (FT)
• Obama Sees Sunset on Sept. 11 War Powers in Drone Limits (BBG)
• Lower CPMs for everyone: FTC Begins Probe of Google's Display-Ad Business (WSJ)
• Apple’s Tax Magic Leaves Irish Bondholders Unmoved (BBG)
• Asia Goes on a Debt Binge as Much of World Sobers Up (WSJ)
• All hail Gazpromia: UK gas supply six hours from running out in March (FT)
• Spain’s banks face €10bn more provisions (FT) ... and then more, and more, and more
• Truck strike may have caused Washington state bridge collapse, officials says (Reuters)
• P&G Says A.G. Lafley Rejoins as Chairman, CEO (BBG)
• Five Key Things About the SAC Insider Case (BBG)

One can read "The Lethal Presidency of Barack Obama" to get a true sense of Obama's "the best defense is a relentless drone everyone offense, ignore collateral damage and take out a few Americans in the process" policy. Or one can stare at rising stawks and enjoy their Obamaphones. Obe can't have both.

The mistake Abe is making is to think the same trick that worked for the US will work for them. The problem, as Shirakawa no doubt realizes, is that the two country’s situations are not at all analogous, because the yen isn’t really a reserve currency in the same way the dollar is. There is no population of natural sovereign buyers who will be forced to print their own currency to mop up excess yen, as there is for the dollar. No sovereign is going to want to dramatically increase the allocations of their country’s reserves to the yen, not when it’s in the middle of being deliberately devalued, or really ever. Russia and China and Saudi Arabia don’t need any more yen, they have plenty. Oil isn’t priced in yen. Japan isn’t the world’s largest economy, or even its second largest. World trade isn’t conducted in yen. The emerging economies will just let it collapse. There is no natural sovereign sink for yen to drain into, as there is for the dollar, no group of buyers of last resort with bottomless pockets and no choice but to buy.

For those vertiginously challenged, look away; for everyone else, the fastest trip up the new World Trade Center... (or is this what it feels like to be the Nikkei?)

In chapter 8 of David Stockman's new book The Great Deformation, the power-that-be-turned-anti-establishment-reality-seeker explains his perspective on the myths of the New Deal Recovery: "The new deal was a political gong show, not a golden era of enlightened economic policy. It shattered the foundation of sound money and inaugurated a régime of capricious fiscal and regulatory activism that inexorably fueled the growth of state power and the crony capitalism which thrives on it. But it did not end the Great Depression or save capitalism from the alleged shortcomings which led to the crash. In fact, the New Deal introduced a severe dose of economic nationalism and autarky at a time when the only hope for speedy recovery was a reopening of world trade and reestablishment of a stable international monetary régime.... in reality, the notion that the New Deal had pioneered a road map to recovery by means of countercyclical fiscal policy is mostly a postwar academic legend."

With equity valuations no longer levitating but in a different, 4th dimension altogether, and credit spreads compressing dramatically (and unreasonably)... It is in situations like these, when the crash comes, that the proverbial run for liquidity forces central banks to coordinate liquidity injections. However, something tells me that this time, the trick won’t work. Over almost a century, we have witnessed the slow and progressive destruction of the best global mechanism available to cooperate in the creation and allocation of resources. This process began with the loss of the ability to address flow imbalances (i.e. savings, trade). After the World Wars, it became clear that we had also lost the ability to address stock imbalances, and by 1971 we ensured that any price flexibility left to reset the system in the face of an adjustment would be wiped out too. From this moment, adjustments can only make way through a growing series of global systemic risk events with increasingly relevant consequences. Swaps, as a tool, will no longer be able to face the upcoming challenges. When this fact finally sets in, governments will be forced to resort directly to basic asset confiscation.

• U.S. Bulks Up to Combat Iran (WSJ)
• Taking sides in Syria is hard choice for Israel (Reuters)
• Gold Traders Most Bearish in Three Years After Drop (BBG)
• It's a Hard Job Predicting Payrolls Number  (WSJ)
• EU economies to breach deficit limits as economic picture darkens (FT)
• IBM Says U.S. Justice Investigating Bribery Allegations (BBG)
• At Texas fertilizer plant, a history of theft, tampering (Reuters)
• SAC Sets Plan to Dock Pay in Cases of Wrongdoing (WSJ) - "in case of"?
• EU to propose duties on Chinese solar panels (Reuters)
• Billionaire Kaiser Exploiting Charity Loophole With Boats (BBG)
• SEC Zeroing In on 'Prime' Funds (WSJ)
• Apple Avoids $9.2 Billion in Taxes With Debt Deal (BBG)
• China April official services PMI at 54.5 vs 55.6 in March (Reuters)

With any and every asset-gatherer capable of forming a sentence being trotted out on business media to proclaim victory and elucidate on why "there is no where else to invest but stocks" and "the US is the cleanest dirty shirt," we thought it might be useful to reflect on just how clean that shirt can remain as the rest of the world's growth slows down significantly. In the last decade, there has been particular growth in inter-regional trade, with a dramatic expansion in trade vis-à-vis Asia, reflecting globalization. At the same time, the deepening in global trade relationships means that the potential for a sudden shift in demand in one region can have a more significant impact on the rest of the world. This has been seen particularly in recent years, with the sharp retrenchment in domestic demand in southern Europe affecting the economy of Asia, particularly Japan. Looking at the rate of increase in regional imports (which we assume is what the 'heads' believe will power the US 'clean' shirt) and the picture is ugly. And while copper is enough of a tell for most, even the IMF (usually extraordinarily optimistic) sees World Trade slowing dramatically - and given these interconnections, perhaps being the cleanest shirt merely shows the stains even more clearly when they finally hit.

But "We Can’t Afford to Irritate the Saudis" By Actually Looking Into Who Backed 9/11 ...  "Especially with Oil Prices Going Up Now"

Over the years, Jim O'Neill, former Chairman of GSAM, rose to fame for pegging the BRIC acronym (no such luck for the guy who came up with the far more applicable and accurate PIIGS, or STUPIDS, monikers, but that's neither here nor there). O'Neill was correct in suggesting, about a decade ago, that the rise of the middle class in these countries and their purchasing power would prove to be a major driving force in the world economy. O'Neill was wrong in his conclusion as to what the ultimate driver of said purchasing power would be: as it has become all too clear with the entire world drowning in debt (and recently China), it was pure and simply debt. O'Neill was horribly wrong after the Great Financial Crisis when he suggested that it would be the BRIC nation that would push the world out of depression. To the contrary, not only is the world not out of depression as the fourth consecutive year of deteriorating economic data confirms (long since disconnected with the actual capital markets), but it is the wanton money (and bad debt) creation by the central banks of the developed world (as every instance of easing by China has led to an immediate surge of inflation in the domestic market) that has so far allowed the day of reckoning, and waterfall debt liquidations, to take place (and certainly don't look at the stock index performance of China, Brazil, India or Russia). Despite his errors, he has been a good chap having taken much of the abuse piled upon him here at Zero Hedge somewhat stoically, as well as a fervent ManU supporter, certainly at least somewhat of a redeeming quality. Attached please find his final, farewell letter as Chairman of the Goldman Asset Management division, as he moves on to less tentacular pastures.

Why Have We Lost Our Rights In The New "Post-9/11 World" If The Government Can't Keep Us Safe?  Trillions Of Dollars - And Thousands Of American Lives - Have Been Squandered On Boondoggles And Pork. What The Heck Are We Doing?

Cyberspace matters. We know this because governments and militaries around the world are scrambling to control the digital space even as they slash defense spending in other areas, rapidly building up cyber forces with which to defend their own virtual territories and attack those of their rivals. But we do not yet know how much cyberspace matters, at least in security terms. Is it merely warfare’s new periphery, the theatre for a 21st century Cold War that will be waged unseen, and with practically no real-world consequences? Or is it emerging as the most important battle-space of the information age, the critical domain in which future wars will be won and lost? China and the U.S. have both said that they would like to see a rules-based cyberspace, but they do not see eye to eye on how those rules should be established. A costly and potentially dangerous Cyber Cold War awaits if they cannot do better, and agree on some rules of engagement for their rapidly expanding online forces.

While expectations for global GDP growth are now expected to be +3.3% for 2013 against +3.2% for 2012, the IMF has just slashed the previously rosy 3.6% expectation as the global economy stalls. The US and Europe had significant cuts to their 2013 GDP growth expectations (though of course, this dip recovers hockey-stick-like in 2014). It will perhaps be surprising to learn that Japan had its growth expectation raised the most of all the major advanced and emerging nations. World Trade volume growth has also been cut notably - driven by a fall in the previously supposed driver of growth - emerging markets. The IMF's less sanguine forecasts, however, are caveated with hope-driven perspective such as expectations that Debt-to-GDP will drop for all nations from 2013 to 2018 and while energy remains a major downside risk to global growth, we were stunned to read that they cite S&P 500 option prices as an indicator of upside potential. It seems, even at the IMF, that the market is all that matters (oh and the Japanese printing press).

Cheney Caught In Another Major Lie

While chart analogs provide optically pleasing (and often far too shockingly correct) indications of the human herd tendencies towards fear and greed, a glance through the headlines and reporting of prior periods can provide just as much of a concerning 'analog' as any chart. In this case, while a picture can paint a thousand words; a thousand words may also paint the biggest picture of all. It seems, socially and empirically, it is never different this time as these 1936 Wall Street Journal archives read only too well... from devaluations lifting stocks to inflationary side-effects of money flow and from short-covering, money-on-the-sidelines, Jobs, Europe, low-volume ramps, BTFD, and profit-taking, to brokers advising stocks for the long-run before a 40% decline.