Brazil

With the benefit of hindsight, the two-day devaluation of the yuan in mid-August might have been a masterstroke of strategy. China executed a financial move that appeared to undermine its own position but instead created trouble for the US; how much is still to be played out. So was the devaluation a well-executed move against the dollar, or are the Chinese authorities as clueless as any other government?

"Europe has seen nothing like this for 70 years – the visible expression of a world where order is collapsing. The millions of refugees fleeing from ceaseless Middle Eastern war and barbarism are voting with their feet, despairing of their futures. The catalyst for their despair – the shredding of state structures and grip of Islamic fundamentalism on young Muslim minds – shows no sign of disappearing. Yet there is a parallel collapse in the economic order that is less conspicuous: the hundreds of billions of dollars fleeing emerging economies, from Brazil to China, don’t come with images of women and children on capsizing boats."

Austerity: Also known as “sado-fiscalism”. A forlorn attempt to stave off government bankruptcy.

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Keynesians: Economists “who hear voices in the air (and) are distilling their frenzy from some academic scribbler of a few years back” (John Maynard Keynes).

Brazil's overdraft interest rates reached 12.28% in October, the highest since September 1995 when the rate was 12.58%, according to research conducted by consumer protection group Procon. Of the seven financial institutions included in the research, five increased their overdraft rates and one upped its rate for personal loans. The average overdraft rate of 12.28% per month was higher than that registered in September, 11.90%.

A few years ago, in response to national outcry, the government of Venezuela took steps to fix this problem. There was too much death, too much crime. So they imposed strict gun control laws to stop the murderers and thieves. The end result? Violent crime actually increased. And Caracas is now one of the most dangerous cities in the world. But across the Andes is another city that used to be one of the most dangerous in the world - Bogota.

The warnings are getting louder.  Is anybody listening?

Children living near the Fukushima nuclear meltdowns have been diagnosed with thyroid cancer at a rate 20 to 50 times that of children elsewhere, according to a new study. As AP reports, most of the 370,000 children in Fukushima prefecture have been given ultrasound checkups since the meltdown and thyroid cancer is suspected or confirmed in 137 of those children. "This is more than expected and emerging faster than expected," according to the lead author of the study, and raises doubts about the government's less fearful view.

"The BRL will continue to be under pressure. I think it will be a continuous and arduous political struggle from here and some will try to bring the impeachment proposal forward."

Just a day after no lesser world-renowned newsletter writer than Dennis Gartman went full bull-tard of crude oil (in $29.95 terms), Goldman Sachs has come out with a "lower for longer" warning about the crude complex noting that the gains have been exacerbated by still large short positioning and the break of key technical levels. Despite the magnitude of this rally, Goldman does not believe that data releases over the past week suggest a change in oil fundamentals. In fact, high frequency data continue to point to an oversupplied market despite a gradual decline in US production.

It was supposed to be the day China's triumphantly returned to the markets from its Golden Holiday week off, and with global stocks soaring over 5% in the past 7 days, hopes were that the Shanghai Composite would close at least that much higher and then some, especially with the "National Team" cheerleading on the side and arresting any sellers. Sure enough, in early trading Chinese futures did seem willing to go with the script, and then everything fell apart when a weak Shanghai Composite open tried to stage a feeble rebound into mid-session, and then closed near the day lows even as the PBOC injected another CNY120 bn via reverse repo earlier.

In what seems like a nervous populist move amid Bernie Sanders' gains, Hillary Clinton has flip-flopped rather stunningly to oppose President Obama's Trans-Pacific Partnership. Despite supporting the bill at least 45 times, as CNN's Jake Tapper points out, Clinton told PBS' Judy Woodruff Wednesday in Iowa that, "As of today, I am not in favor of what I have learned about it." It's also a departure from the Clinton legacy, as CNN notes, it was President Bill Clinton who, two decades ago, signed the first mega-regional pact: the North American Free Trade Agreement.

The US and world economies are drifting inexorably into the next recession owing to the deflationary collapse of commodities, capital spending and world trade. These are the inevitable “morning after” consequence of the 20-year global credit binge which has now reached its apogee. The apparent global boom during that period was actually a central bank driven excursion into the false economics of household borrowing to inflate consumption in the DM economies; and frenzied, uneconomic investing to inflate GDP in China and the EM. The common denominator was falsification of financial prices. By destroying honest price discovery in the financial markets, the world’s convoy of money-printing central banks led by the Fed elicited a huge excess of financialization relative to economic output.

Brazil, which is caught in a vicious recessionary spiral which is only set to get much worse before it gets better, tried to obtain some much needed cash when earlier today it conducted an auction to sell exploration rights for of its oil and gas. It was, in short,  a disaster. According to Reuters, by midday Brazil had only sold 17 of 119 blocks offered. A total of 36 companies from 17 countries - including Petrobras, ExxonMobil Corp, BP Plc and Royal Dutch Shell Plc - registered for the auction. None of the majors have bid so far. Only a handful of sold blocks were even contested.

Having government control over the levers of the economy can have advantages. For example, by taking prompt action, the Chinese government was able to pull the economy out of the recession remarkably fast, basically by fire-housing the stimulus package that was equivalent to 12% GDP. That’s the advantage. The only problem is that these kinds of short-term advantages come with long-term, painful consequences.

The takeaway is that to the extent the overnight relief rally in the ringgit and then subsequently in other Asia EM "assets" was catalyzed by a "better" than expected read on the situation in China, the market may be making a mistake because just like Chinese GDP prints, the headline figure on the PBoC's store of FX reserves should be taken with a grain (or perhaps a whole shaker) of salt when it comes to drawing conclusions about the pace of outflows from the world's second most important economy.