Corruption

With a week to go until the Italian elections, things are getting a little odd to say the least. The somewhat scandal prone Berlusconi, who self-declared himself leading in the polls just recently, has come out swinging in defense of his fellow business leaders' ethical egressions. The Bunga party banner-man defends bribery, "These are not crimes," he notes, as The FT reports, "bribes are a phenomenon that exists and it’s useless to deny the existence of these necessary situations..." This apparently on the heels of the Finmeccanica CEO's Indian helicopter deal bribes and Monte Paschi's derivative debacle. It would appear his argument lies somewhere betweeen, 'if everyone's doing it - then it's ok', and 'everyone's been doing it forever so why stop now?' One Italian paper, though, disgusted at the state of their nation, describes the entire political and elite establishment of 'guilty inertia' - calling for an end to what Berlusconi appears to be saying is corrupt business-as-usual. And yet we are to trust these technocrats when they say 'crisis over', all is well, recovery is here?

Confused by the latest scandal in Southern Europe? Unsure of which corruption claim is being denied in the Iberian Peninsula? Fear no longer, as the Corruptometer provides an at-a-glance map of which political party, encouraged by the actions of their leadership, is engaged in bribery, embezzlement, prevarication, falsehoods, scams, tax fraud, and money laundering. There are currently 314 of said politicians involved in 730 cases on the map and while the count is close, it appears Rajoy's Popular Party wins the overall cup for 'Most Corrupt'.

The price action in the foreign exchange market is choppy as short-term participants seem nervous after being whipsawed yesterday. Sterling fell nearly a cent to new multi-month lows following the BOE's inflation report that confirmed official expectations that price pressures will remain above target and King welcomed the recent depreciation of the point. Also of note the Australian dollar, which staged a sharp recovery off the year's lows yesterday and has seen follow through buying today, helped perhaps by gains in a consumer confidence measure.

The was nothing in the rogue G7 sourced comment yesterday that that Japanese Finance Minister Aso did not say prior to the G7 statement and before the weekend. The pace of the yen's depreciation was too fast. The market reacted to it at the time.

If you have not already taken steps to prepare for systemic failure, you NEED to do so NOW. We're literally at most a few months, and very likely just a few weeks from Europe's banks imploding, potentially taking down the financial system with them. Think I'm joking? The Fed is pumping hundreds of BILLIONS of dollars into EU banks right now trying to stop this from happening.

Just when you thought you had heard it all - from Spanish politicians to Italian bankers - along comes the CEO of Italy's Finmeccanica. Giuseppe Orsi has been arrested for his alleged involvement in a bribery to ensure the Italian aerospace company got the order for Indian military helicopters in 2010. The $750 million deal, as reported by the WSJ, is now under investigation by the Indian defense minister but is not the first such 'bribery scandal' for Finmeccanica - whose CEO generously offered to step down if the Italian government (which owns 30.2% of the firm) asks him to. The share price plunged over 8% and was halted as analysts suggested - rather remarkably - that this might make it harder for Finmeccanica to compete for contracts in an already difficult market in which governments are cutting back on military spending. The sad truth appears to be that, whether pandemic or recently driven by a tougher economic environment, fraud runs deep - and its just a matter of time before it comes out, especially with the election so close.

• The Man Who Killed Osama bin Laden... Is Screwed (Esquire)
• G7 fires currency warning shot, Japan sanguine (Reuters)
• North Korea Confirms It Conducted 3rd Nuclear Test (NYT)
• Italian Police Arrest Finmeccanica CEO (WSJ)
• Legacy, political calendar frame Obama's State of the Union address (Reuters)
• China joins U.S., Japan, EU in condemning North Korea nuclear test (Reuters)
• Wall Street Fading as Emerging-Market Banks Gain Share (BBG)
• Berlin Conference 2.0: Drugmakers eye Africa's middle classes as next growth market (Reuters)
• Barclays to Cut 3,700 Jobs After Full-Year Loss (BBG)
• US Treasury comment triggers fall in yen (FT)
• ECB Ready to Offset Banks’ Accelerated LTRO Payback (BBG)
• Fed's Yellen Supports Stimulus to Spur Jobs (WSJ)
• Libor Scrutiny Turns to Middlemen (WSJ)
• Samsung Girds for Life After Apple in Disruption Devotion (BBG)

Just like for Alice, Spain's farcical kickback and bribery scandal's rabbit hole just keeps getting deeper. This morning El Pais reports that the alleged providers of payments to the government (via the kickback fraud) - known as 'Gurtel' - received an unprecedented EUR115mm in government contracts. With more than 70 people facing charges ranging from money laundering to bribing a public official, Rajoy's efforts at coming clean have fallen on deaf ears as 79% of Spaniards are dissatisfied with the explanations. This follows a weekend of disclosures including the fact that Rajoy gave himself a 32% pay rise up to 2011 as he push austerity down the throats of his people. As El Pais notes, "...The only thing that is clear is that most of the recipients of payments on the former treasurer’s list have admitted that they accepted money in cash...." The sad political truth is, as Deutsche notes, the likeliest course of action at this stage, in our view, is that on the basis of the internal investigation, Rajoy may go as far as letting go some members of his cabinet, but we think that he will protect the “hard nucleus” of his administration and will not resign. It appears, as they note, that the Spanish government's room for maneuver (over further austerity) is significantly diminished.

• Pope steps down, citing frailty (Reuters)
• Japan’s economic minister wants Nikkei to surge 17% to 13,000 by March (Japan Times)
• Venezuelan devaluation sparks panic (FT)
• Rajoy releases tax returns, but fails to clear up doubts over Aznar years (El Pais)
• Companies Fret Over Uncertain Outlook (WSJ)
• Home Depot Dumps BlackBerry for iPhone (ATD)
• Kuroda favors Abe's inflation target, mum about BOJ role (Kyodo)
• A Cliff Congress May Go Over (WSJ)
• U.S., Europe Seek to Cool Currency Jitters (WSJ)
• Radical rescue proposed for Cyprus (FT)
• Franc Is Still Overvalued, SNB’s Zurbruegg Tells Aargauer (BBG)
• Northeast Crawls Back to Life After Crippling Blizzard (WSJ)

The following rather stunning documentary provides a critical insight into what Europe (and Argentina once again) could well be progressing towards. There is a reason we highlight the 'scariest chart in Europe' as that of youth unemployment and with the central banks printing money at ever increasing paces and the next round of global competitive devaluation beginning, the debt slaves will suffer ever more. In 2001, Argentina collapsed; after many years of apathy in the country, the insurrection exploded. As TopDocumentary notes, the spontaneous revolt of 'faceless' people meant saucepans were being banged in every neighborhood. What happened to Argentina? How was it possible that in so rich a country so many people were hungry? The country had been ransacked by a new form of aggression, committed in a time of peace and in a democracy. Ever since independence, almost 200 years ago, Argentina’s foreign debt has been a source of impoverishment and corruption and the biggest scandals. This foreign debt always went hand in hand with big business, and with the complicity of nearly every government. The policy of indebtedness gave rise in Argentina to generations of technocrats and bureaucrats, who favored banks and international corporations over their own country. It didn't end well then, and it won't end well this time...

Sometimes, it feels good to hope. But since last September, nothing has really changed. At least not fundamentally. The zero-interest rate policies were going to encourage share buybacks, dividend payments and any method to allow the extraction of whatever real value is still available to extract from corporations/businesses by their owners. This meant leverage was going to increase, unemployment would remain high, capital expenditures were going to decrease and the risk of defaults was to going to rise. A year later, all these symptoms are starting to surface. One more reason to avoid stocks and be long gold. But in my view, it will take longer than many believe, for these imbalances to burst "...As long as the people of the EU put up with this situation and the EU Council (…) effectively kills democracy at the national level AND as long as the Fed continues to extend US dollar swaps, this status quo will remain… Whenever the political sustainability of the EU is challenged, we will see a run for liquidity... The trend is for asset inflation, and will last as long as the people of the EU and the US do not challenge the political status quo..." Unemployment and the tolerance of those unemployed will tell us when the time has come.

Corruption only works as long as the benefits of being “on the take” outweigh the consequences of getting caught. As soon as the consequences become real (namely someone gets in major trouble), then everyone starts to talk. This process has now begun in Spain.

The list of public/private institutions that desperately need structural reform is long: the Pentagon, healthcare (a.k.a. sickcare), Social Security, the complex mish-mash of programs that make up the Welfare State, the 73,000 page tax code, public pensions and the financial sector, to name just the top few. Regardless of the need for reform, it isn't going to happen for these structural reasons.

Thus, we find that Europe’s primary political market props (EU leaders including ECB head Mario Draghi) are coming unraveled at the precise time that EU banks are showing warning signs and the most important EU economies are heading sharply south.

“Facts do not cease to exist because they are ignored.” – Aldous Huxley

The entire system is corrupt to its core. Both political parties, regulatory agencies, Wall Street, the Federal Reserve, and mainstream media are participants in this enormous fraud. They grow more desperate and bold by the day. The lies, misinformation and propaganda being spewed on a daily basis become more outrageous and audacious. They are using the Big Lie method on a grand scale. They frantically need to lure the muppets into the stock market and the housing market to keep the game going a little longer. You can sense we are reaching a tipping point. The system they have created is mathematically unsustainable. Therefore, it will not be sustained.

Some phrases are endowed with immediately recognizable symbolism.  When we hear them, we instantly know who and what the phrases are referring to, and can even gain a greater depth of understanding to a particular situation just by applying them. Throughout history there have always been people who were right, and usually a “majority” that were wrong, on any single issue.  Defenders of institutionalized ignorance argue constantly that truth is “relative”, and that they should not be criticized for having their own "opinions".  They use this relativism as a cover for their unwillingness to admit a lack of knowledge. What they fail to understand is that their “opinions” were never theirs to hold.  What they believe has merely been conditioned into them.  They are willing to embrace the system no matter how unjust, because their entire identity is predicated on its continued existence. We call them sheeple... Sheeple are puppets in the game of political reconstruction, and their job is to cheerlead the establishment and to drown out all honest voices.