8.5%

File this one away in the "when populism backfires" folder. A little over a month after announcing that the Zimbabwean dollar - which, you’re reminded, was phased out in 2009 after inflation rose modestly to 500 billion percent - would be demonetized and exchanged at a generous rate of $5 for every 175 quadrillion, Zimbabwe will for the first time rethink the sweeping land grabs which began in 2000 and subsequently crippled the country’s economy.

Innovation in technology reduces the need for labor. More individuals are sitting outside the labor force increase the demand for available jobs. Increased competition for available jobs suppresses wage growth. It is a virtual spiral that continues to apply downward pressure on an economy based nearly 70% on consumption. Importantly, what small increases there have been in unit labor costs have primarily come at the expense of higher benefit and healthcare costs rather than an increase in wages. As discussed previoulsy, for roughly 80% of the working labor force, wages have declined over the last five years. Janet Yellen is right that wages will have a hard time increasing without a pick up in productivity. The issue is that innovation IS the problem, not the solution. That is unless we begin to include the productivity of robots.

• Back Greek talks or face chaos, Merkel tells German lawmakers (Reuters)
• Fear of the Unknown Binds a Greek Deal With Few Believers (WSJ)
• Grexit Still on the Table Even With EU’s Latest Band-Aid (BBG)
• Donald Tusk warns of extremist political contagion (FT)
• Germany, Not Greece, Should Exit the Euro (BBG)
• Sabine Files Bankruptcy in New York as Oil Prices Fall (BBG)
• Markets Bow to Central Bankers as Bonds Rise, Pound Strengthens (BBG)

When Warren Buffet put $5 billion in Berkshire Hathaway funds into Goldman Sachs the week after Lehman failed, amidst total turmoil and panic, it appeared from the outside a high risk bet. Buffet had long tried to portray himself as a folksy engine of traditional stability, investing only in things he could understand, so jumping into a wholesale run of chained liabilities may have seemed more than slightly out of character. We have no particular issue with Buffet making those investments, only the pretense of intentional mysticism that surrounds them. The reason the criticism of crony-capitalism sticks is because this was not Buffet's first intervention to "save" a famed institution on Wall Street. If Buffet's convention is to stick with "things you know" then he has been right there through the whole of the full-scale wholesale/eurodollar revolution.

The one undeniable truth about the debt drama in Greece is that each of the conventional narratives - financial, political and historical - has some claim of legitimacy. These facts matter not only because contagion from Greek debt defaults may ripple in dangerous ways through the financial system, but because they are also true for many other members of the Eurozone. The Euro is a fatally-flawed monetary concept and what we now seeing playing out was eminently predictable from the start.

Corruption has been the coveted jewel in everybody’s crown since antiquity. Aristotelian philosophy believed that everybody who had power could become corrupt.

The US Federal Reserve has been universally lauded for the apparent success of its extreme monetary policy of recent years. With key world stock markets near record highs, traders universally love the Fed’s zero-interest-rate and quantitative-easing campaigns. But this celebration is terribly premature. The full impact of these wildly-unprecedented policies won’t become apparent until they are fully normalized. The most-extreme monetary experiment by far in US history is just at half-time now, the fat lady hasn’t even taken the stage. The full normalization of ZIRP and QE is likely to be as negative for stock and bond prices as its ramping up proved positive for them.

People are already freaking out that Greece is just days away from defaulting on a $1.72 billion loan payment.  Just wait till the margin call on the $370 billion margin debt in China's stock markets. 

Prepare to laugh. A lot.

Just a few months ago, we warned Brazil's economy was on the verge of collapse as the fiscal situation was deteriorating rapidly. It appears, judging by the most recent data from the oil-rich nation, that we were right. Broad retail sales have now declined for five consecutive months with the seasonally adjusted broad retail sales index now at the same level as early 2012. Core retail sales declined 3.5% YoY during April (weakest print since Aug 2003) and broad retail sales declined by an even larger 8.5% YoY (lowest on record), and as Goldman warns, the outlook for private consumption and retail sales in the near term remains very weak.

Welcome to the Recovery! Food banks across the US state of New York are running out of food (37% of food pantries say they have had to turn away needy people because they ran out of food), amid falling funds and rising demand from people that have trouble affording food. About 2.6 million people have trouble affording food across New York with about 1.4 million New York City residents relying on food pantries to feed themselves, according to the Food Bank For New York City. But as PressTV reports, contrary to the belief that people visiting food pantries are homeless and jobless, most customers are employed, but are not paid enough money to put food on the table without help.

In what looks like the latest threat to the US taxpayer stemming from the government's trillion-dollar student loan portfolio, VC-backed tech startups are using attractive refi offers to siphon off the best loans, leaving taxpayers with a book full of IBR enrollees and severely delinquent borrowers who aren't even thinking about making payments.

If it is indeed deja vu, all over again, look for bond yields to tumble over the next 6 months.

After a Chinese session which following the MSCI failure to include Chinese stocks in its EM index, if only for the time being, was largely a dud with Shanghai stocks actually dropping by 0.1% after a late day selloff, eyes turned to Europe, which once again did not disappoint and where the bond rout continued apace, with the 10Y Bund yield spiking just after the European open, and rising above 1.05%, the widest level since September 19, before recouping some losses and trading just around 1.00% at last check.

The financial pundits gushing over "The China Story" - that the Middle Kingdom's industrialization is a permanent boon to the global economy and China's poor - never calculate the human cost of that runaway industrialization and the vast inequalities it has unleashed. The human cost is staggering...