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Stock World Weekly - The Anti-Crisis Bazooka & Other Bedtime Stories
Excerpt from Stock World Weekly - The Anti-Crisis Bazooka & Other Bedtime Stories.
Excerpt from the Week Ahead Section
The turmoil in the eurozone makes it easy to overlook positive signs in the U.S. economy, such as this week’s drop in Initial Claims for unemployment insurance, or Friday’s report showing consumer confidence climbing for the fourth month in a row. Financial blogger Scott Grannis argued, “No one can say for sure that the U.S. can avoid contagion, but so far the U.S. economy appears to be decoupling from Europe, as Europe slumps but conditions here continue to improve.” Others disagree. Charles Biderman of TrimTabs “dismisses the simple-minded decoupling perspective.” As Zero Hedge reported, Biderman believes, “U.S. growth will be in the doldrums as European de-leveraging drags global growth down with it. It's not all doom-and-gloom though...this collapse won't happen tomorrow, given balance sheet strength, although selling into rallies is the clear picture he is painting.”
Not everything is rosy. Monday’s Non-Manufacturing ISM report for November came in at 52.0%, down nearly a point from October, indicating slowing growth. The employment subindex contracted too, dropping to 48.9% from 53.3% in October. And China is facing serious problems. Slack demand in U.S. and European markets is weighing on China’s export-driven economy. Easing inflation and slowing growth in both imports and exports was pressuring Beijing to loosen its credit policy. However, on Friday, the Politburo issued a statement confirming its commitment to keeping a “prudent” monetary policy while adopting a “pro-active” fiscal policy. This means that rather than relying on massive stimulus, Chinese authorities are likely to rely on tax cuts and other administrative measures to help encourage consumer spending. (China’s exports weaken amid European troubles, import also slow)
Friday’s new deal from the European Union to create deeper financial integration between member nations, to save the struggling eurozone, sparked many responses. An exuberant ECB President Mario Draghi declared, “It’s a very good outcome for the euro area, very good. It’s going to be the bases for much more disciplined economic policy for euro-area members...certainly it is going to be helpful in the present situation.” German Chancellor Angela Merkel called it a “breakthrough to the stability union.”
At the other end of the spectrum, British Prime Minister David Cameron emphatically rejected the proposal. “What was on offer is not in Britain’s interest so I didn’t agree to it. We’re not in the euro, and I’m glad we’re not in the euro. We’re never going to join the euro and we’re never going to give up this kind of sovereignty that these countries are having to give up.” (U.K. to eurozone nations: We’re out, good luck)
Commenting on the turbulence in the eurozone, Research Professor of Economics at the University of Missouri, Michael Hudson wrote, “The kind of warfare now engulfing Europe is thus more than just economic in scope. It threatens to become a historic dividing line between the past half-century’s epoch of hope and technological potential to a new era of polarization as a financial oligarchy replaces democratic governments and reduces populations to debt peonage.
“For so bold an asset and power grab to succeed, it needs a crisis to suspend the normal political and democratic legislative processes that would oppose it. Political panic and anarchy create a vacuum into which grabbers can move quickly, using the rhetoric of financial deception and a junk economics to rationalize self-serving solutions by a false view of economic history – and in the case of today’s ECB, German history in particular.
“Governments do not need to borrow from commercial bankers or other lenders. Ever since the Bank of England was founded in 1694, central banks have printed money to finance public spending. Bankers also create credit freely – when they make a loan and credit the customer’s account, in exchange for a promissory note bearing interest. Today, these banks can borrow reserves from the government’s central bank at a low annual interest rate (0.25% in the United States) and lend it out at a higher rate. So banks are glad to see the government’s central bank create credit to lend to them. But when it comes to governments creating money to finance their budget deficits for spending in the rest of the economy, banks would prefer to have this market and its interest return for themselves.
“European commercial banks are especially adamant that the European Central Bank should not finance government budget deficits. But private credit creation is not necessarily less inflationary than governments monetizing their deficits (simply by printing the money needed)...
“It is mainly government that spends credit on the ‘real’ economy, to the extent that public budget deficits employ labor or are spent on goods and services. Governments avoid paying interest by having their central banks printing money on their own computer keyboards rather than borrowing from banks that do the same thing on their own keyboards...
“If the euro breaks up, it is because of the obligation of governments to pay bankers in money that must be borrowed rather than created through their own central bank. Unlike the United States and Britain which can create central bank credit on their own computer keyboards to keep their economy from shrinking or becoming insolvent, the German constitution and the Lisbon Treaty prevent the central bank from doing this.
“The effect is to oblige governments to borrow from commercial banks at interest. This gives bankers the ability to create a crisis – threatening to drive economies out of the Eurozone if they do not submit to ‘conditionalities’ being imposed in what quickly is becoming a new class war of finance against labor...
“Today’s economic crisis is a matter of policy choice, not necessity. As President Obama’s chief of staff Rahm Emanuel quipped: ‘A crisis is too good an opportunity to let go to waste.’ In such cases the most logical explanation is that some special interest must be benefiting. Depressions increase unemployment, helping to break the power of unionized as well as non-union labor. The United States is seeing a state and local budget squeeze (as bankruptcies begin to be announced), with the first cutbacks coming in the sphere of pension defaults. High finance is being paid – by not paying the working population for savings and promises made as part of labor contracts and employee retirement plans. Big fish are eating little fish.” (Europe’s Transition From Social Democracy to Oligarchy)
Heading into next week, Phil wrote in Income Portfolio – Year End (Almost) Review: “Next month will be busy, with plenty of adjustments to make. A Santa Claus rally would be nice but we’re not counting on it. Less than half of our VIRTUAL $1M buying power is in use. We’re not looking to add many new trades until we take others off the table. No matter what the market does, we’re going to want hedges over the holidays, but then we’ll see how things shake out in January.”
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Merkel is doing the extreme splits to defend her deflationary DICTAT. All the Euro countries scream for ECB to print but she says NEIN. If this policy leads to EUro disaster, she will go down in history. The question is which route is better for Euro zone in the geopolitical mega trend of current debt ponzi and possible banker's mayhem coupled with cheap energy crunch inhibiting old style growth : immediate Euro collapse and painful deflationary reset, which could involve world depression never seen before as contagion scenario OR kicking the can through ECB print, hoping that Euro QE does not lead to hyperinflation and fiat devaluation, and that fixed low intersts rates allow the debt to disappear over time through real growth? Time will tell...ZH has position that the global Math predicts western economies on unavoidable collision course with debt armageddon. Its to their credit to be clear on that. Not many in MSM buy that line on both sides of the pond.
Dsytopium or Keynesian hopium, which will win in end?
Merkel's face at last Euro zone meeting said it all...
Merkel is not alone - otherwise there would be no EZ at all.
The screaming you hear originate from the banks that cannot even contemplate having sovereigns with balanced budgets.
This is a short term but deadly crunch now spiralling; and by letting the banks borrow from market at hyped rates thanks to GS cabal, she has exposed the 30 T Euro banking sector to impossible catch-up ball; they, sovereigns and bankers, won't have the returns to pay back even interest let alone principal to US lenders. As the HFs cream them from the top all the while with CDSs, cruel insane cherry picking. This is a speculative position nobody can refuse as its taking candy from a clueless baby : the guilty, gullible Club Med sovereigns and their "drowning in the debt" banks.
Merkel decided to chip in so much, but no more, as the current EFSF shows, hoping the US would print in place of ECB, as they have as much if not more to lose than Euro zone. Very heavy gamble that...poker play of high risk magnitude. Just saying, if she loses, comes out of it ragged and bleeding and throws in the towel in six months or one year from now, she will go down in history, as the new von Hindenburg.
Mind you, I don't know what the answer is as this is a spill over from 2008, that should have been addressed in 2009, by clamping down hard on Euro zone; throwing out Brown's CIty THEN. Now, the damage has been deepened as those Euro banks weren't clamped down on and TRULY made to clean out their BS, shadow banking and CDS scams and all. Euro market should have been truly regulated to avoid anglo saxon shenanigans. We didn't learn from 2008!
Seriously, you are analyzing numbers processed and compiled by the government?
Who puts out these numbers, where do they come from?
Talkin the gov book...
Please spare me analysis of relative strength between Europe and the
US, with all due respect.
G
You display your ignorance, or deception. Neither the US or UK gummints own any money making keyboards. The RBOE and the US Fed are both private banks. The interest is still charged, and the fiat currency is still used to deprive the working class the benefits of their labour.
In fact the ECB is owned by the 17 nations governments, contrary to your version. What is the same all over the world is the fact that by law no Reserve Bank can buy government bonds directly from the government. The only entities that can buy these bonds are the private sector banks, Reserve Banks can only buy the bonds back off the private sector banks.
These stupid assholes make me want to bite a mule in the ass.
So we have sold out to China, and are in the underpants of Europe promising an end to ED and jock itch via U.S. taxpayer blood and suffering circa 2021.
What the fuck does the U.S. have to offer but taxpayer debt for generations to come to the assholes in Europe or Wall Street and "Warshington"?
Nothing.
Dumb fucking Wall Street cock-suckers!
End the FED.
Stop paying taxes.
Kill the Establishment!
If we keep losing jobs the way we are and continue to drop people ( like last month like 300K ) from the unemployment numbers Obama might be actually able to say we have 4 or 5% unemployment by the time the next election comes by. Even though millions more will be poor and destitute, by not counting all of the pople who lost their unemployment after 99 weeks like that 300K last month... can help the numbers.
Here's to the idiots in D.C. as they keep improving the unemployment rate and impoverishing the nation month after month. Eventually it is going to pop and as I see it Obama is desperate for this pop to happen after November of 2012.
I don't think the rest of the world is cooperating . The law of unintended consequences I guess. The worst of all for him is the 90 million patriots all over America that will not tolerate his BS and any kind of Marxist takeover.
Keynesian Klaptrap got us into this mess,
but the bigger picture I venture to guess,
is about the treasonous 535 that always yield
to the payola that comes from the psycho Red Shield
I think this notion that the USA is doing so much better than Europe is insane. The govt is spending almost TWICE what it collects - and even with that the economy is barely responding. I think the only thing saving the consumer right now is that banks are once again (with tacit approval from the Fed and government) is pushing easy credit (aka subprime) on the weakest consumers. So once again, we have poor people running out and buying new cars and spending on new credit cards. Believe me....this will come to an end really quick this time and then we are in for a major crash in the economy.
This news on shipping supports the notion that trade is slowing down, and China will be under increased pressure to "do something". Makes you wonder what is really going on...
http://www.ft.com/cms/s/0/8b1c6e4c-20ef-11e1-8a43-00144feabdc0.html#axzz...
The US is currently deficit spending around 10% of GDP at the Federal level. Then add in all the deficit spending at the state and local level.
Even with all that debt, we are barely eeking out 2% "growth."
Yeah how can one expand spending by 10 of GDP and get less than 10% growth out of that. Wierd.
2% "growth" is not even statistical noise, because the.methods used to compute GDP are as corrupt as the unemployment stats. If we had a stable money supply, and subtracted services industry jobs, and then established a benchmark way to actually track what we really produce, the drop in our "GDP" would be breathtaking.
The spook rally. Everyone poised to jump off because they understand that it is just a ride, an amusement ride. Not real, just risky entertainment. Deal is you can hang on but you need to jump off in time to save YOUR ASS and pray that you ditch before everyone else because the clowns still in the game after you are gunna get creamed.
It's all timing.
And the reason to choose to ride this rally is??????
This isn't about "timing" but about collective greed and insanity...etc etc,,,,
Unemployment statistics are becoming non-statistics. I've known many people over the years who went for long periods of time, without being employed or filing a claim for benefits. The longest was 17 years. The day is coming when we won't know anyone, who knows anyone, who has a traditional "job". The days of 40 hour work weeks, benefits and pensions are behind us.
http://georgesblogforum.wordpress.com/2011/11/02/the-daily-climb-2/
I fear you are right. The trend is the trend. When one competitor adopts this mode to cut labor cost, all must follow or die. Free trade will kill us all, but don't look to Washington to change anything. The next time you hear "it's a win win", start looking for the hook.
Yes. Government controlled trade is just where we want to be. BTW how much is a politician going for these days?