Brazil

Despite closed US stock markets today, FaceBook stock still managed to decline, while Europe dipped yet once again on all the same fears: Greece, Spain, bank runs, contagion, etc. Shortly Europe will reopen, this time to be followed by the US stock market as well. While in turn will direct market participants' attention to a shortened week full of economic data, which as Goldman says, will likely shape the direction of markets for the near future. US payrolls and global PMI/ISM numbers are expected to show a mixed picture with some additional weakness already fully anticipated outside the US. On the other hand, consensus does expect a moderate improvement in most US numbers in the upcoming week, including labour market data and business surveys. As a reminder, should the Fed wish to ease policy at its regular June meeting, this Friday's NFP print will be the last chance for an aggressive data-driven push for more QE. As such to Zero Hedge it is far more likely that we will see a big disappointment in this week's consensus NFP print of +150,000. Otherwise the Fed and other central banks will have to scramble with an impromptu multi-trillion coordinated intervention a la November 30, 2011 as things in Europe spiral out of control over the next several weeks. Either way, risk volatility is most likely to spike in the coming days.

We all know that the National Defense Authorization Act (NDAA) signed by President Obama on New Year’s Eve contained a now-struck-down provision to authorise the indefinite detention of American citizens on US soil. But did you know that the NDAA also paves the way for war with Iran? From Dennis Kucinich:

Section (6) rejects any United States policy that would rely on efforts to contain a nuclear weapons-capable Iran. Section (7) urges the President to reaffirm the unacceptability of an Iran with nuclear-weapons capability and opposition to any policy that would rely on containment as an option in response to Iranian enrichment. This language represents a significant shift in U.S. policy and would guarantee that talks with Iran, currently scheduled for May 23, would fail. Current U.S. policy is that Iran cannot acquire nuclear weapons. Instead, H. Res. 568 draws the “redline” for military action at Iran achieving a nuclear weapons “capability,” a nebulous and undefined term that could include a civilian nuclear program. Indeed, it is likely that a negotiated deal to prevent a nuclear-armed Iran and to prevent war would provide for Iranian enrichment for peaceful purposes under the framework of the Non-Proliferation of Nuclear Weapons Treaty with strict safeguards and inspections. This language makes such a negotiated solution impossible. At the same time, the language lowers the threshold for attacking Iran. Countries with nuclear weapons “capability” could include many other countries like Japan or Brazil. It is an unrealistic threshold.

The notion of a “nuclear weapons capability” seems like a dangerously low standard. Let us not forget that Mossad, the CIA and the IAEA agree  that Iran does not have a bomb, is not building one, has no plans to build one.

Europe continues to fight the wrong battle, and continues to spread contagion risk. It is clear that Greece has had a solvency issue now for over 2 years.  The ECB and Troika chose to treat it as a liquidity problem.  Maybe, they could have argued that in early 2010, but by the summer of 2011 it was obvious to any credit observer that the problem was solvency, yet they continued to treat it as one of liquidity.  That is scary because if they fail to see the problem correctly now, they will fail miserably.  Not only is the problem clearly solvency, but now forced currency conversion has been added to the mix. Any "solution" from the EU must now address that risk, and it is not the same as solvency.  Programs that can protect against solvency may do nothing for the redenomination risk. We keep playing with scenarios and find it hard to find out where a Greek exit doesn't result in a steep sharp decline in the market.  We could go through more ideas of ECB intervention, but in the end most will have flaws.  Dealing with currency conversion risk is huge.  Dealing with the contagion risk that has been created by the EFSF is huge. Will Europe force Greece out thinking they have a plan; that fails miserably and sparks the miserable series of consequences we’ve outlined?  Sadly, yes.

In twenty or thrity years, I expect future monetary historians looking back on this period of history to frequently misquote Ernest Hemingway:

How did the dollar die? First it died slowly — then all at once.

The slow death began with the dollar’s birth as a global reserve currency. America was creditor and manufacturer to the world, and the capitalist superpower. People around the globe transacted overwhelmingly in dollars. Above all else, people needed dollars to conduct trade, and they were willing to pay richly for them, and for dollar-denominated debt

All yu need to read.

All you need to read.

Just when one thought it was safe to come out of hiding from under the school desk after the latest nuclear bomb drill (because Europe once again plans on recycling the Euro bond gambit - just like it did in 2011 - so all shall be well), here comes David Rosenberg carrying the launch codes, and setting off the mushroom cloud.

This week we bring back Alasdair Macleod, publisher of Finance and economics.org, because, as he puts it "every horror that we discussed last time we spoke is coming about". Especially scary since our previous conversation with him was less than three weeks ago... Today's interview continues building on his excellent synopsis from last month that detailed the origins of the Eurozone crisis. The fundamental shortcomings warned of at the Euro's creation in 1997, combined with the excessive sovereign debts run up since then, have finally expressed themselves at a scale too large to be contained any longer. Today, Alasdair details in-depth the huge and serious challenges facing Greece and the major Eurozone countries, and the likely impacts of the fast-dwindling options left remaining.  He sees no happy ending to this story, no outcome in which serious pain and permanent behavior change can be avoided. And for those looking for shelter from the unfolding economic storm, he sees few options besides the precious metals (which he believes are severely under priced at the moment):

The problem with self-reported economic data by various countries, especially those which are supposed to be at the forefront of economic growth, now that the "developed" world is groaning under consolidated debt/GDP ratios which will soon be the 4 digits, is just that - that they are self-reported: a main reason for the development of such governmental offshoot programs as the "Ministry of Truth." Which means that when the investing public hears of an updated Chinese GDP, or Brazilian inflation, or Russian industrial production, most roll their eyes but go with it, as this is the data that the greater fool down the street will also be using for investment decisions. Luckily, there are secondary indicators which present a much more realistic picture of what is truly happening in this fringe growth markets. A few days ago, we presented the "stock" view of the world's two biggest housing bubbles: China and Saudi Arabia, when demonstrating the epic outlier nature of these two countries in the context of cement consumption relative to GDP per capita: a snapshot which showed just how unsustainable the regional construction bubble in these two countries is. But since this is a snapshot in time, and hence "stock", how about the "flow", or the perspective of the economy from a continuous basis. For that we once again go to Goldman, which has conveniently compiled two alternative yet very critical data sets which go to the core of the BRIC economies: Chinese electricity consumption, as well as Brazilian toll road traffic. The picture(s) is (are) not pretty.

When Mr. Market ultimately becomes disenchanted with the fiscal excesses of the sovereign deadbeats, he can express his ire most energetically. When the current bond bubble here in the US ultimately bursts, as it must, it's going to be a bloodbath.  Of course, there is much, much more at stake to coming to the correct answer on the recovery, or lack thereof, than that. For instance, poor economies make for poor reelection odds for political incumbents. And when it comes to maintaining a civil society, the lack of jobs inherent in poor economies often leads to a breakdown in civility. On that note, overall unemployment in Spain is now running at depression levels of almost 25%, and youth unemployment at close to 50%. How long do you think it will be before the citizens of this prominent member of the PIIGS will refuse being led to the slaughter and start taking out their anger on the swine (governmental and private) seen as bearing some responsibility for the malaise? Meanwhile, back here in the United States, the commander-in-chief is striding around the deck of the ship of state trying to look like the right man for the job in the upcoming election, despite the gaping hole of unemployment just under the economic water line. His future prospects are very much entangled with this question of recovery.

So, what's it going to be? Recovery… no recovery… or worse, maybe even a crash?

All you need to know.

Former US Republican presidential candidate Michelle Bachmann receives the Sovereign Man dumbest person of the week award for obtaining… then almost immediately renouncing… Swiss citizenship. I’ll explain: Bachmann’s husband is a Swiss national; they’ve been married since 1978, and as a result, Bachmann eventually became qualified for Swiss citizenship as well. She recently received confirmation of her citizenship from the Swiss authorities, a fact that was reported in some mainstream media outlets. Bachmann was subsequently criticized by her political opponents for engaging in such ‘un-American’ activities.

We can only guess at his reasons. Perhaps it is the cost of real estate in Palo Alto, the price of Starbucks in Silicon Valley, or the lack of Bugatti dealerships but Eduardo Saverin - co-founder of Facebook - just renounced his US citizenship. Via Bloomberg,

FACEBOOK CO-FOUNDER SAVERIN GIVES UP U.S. CITIZENSHIP PRE-IPO

Or maybe the always pioneering entrepreneurs from Facebook just gave us a preview of US tax policy, or rather the popular response to it, in 2013. Like!

When most people think of Brazil, it’s the incredible beaches that come to mind. Or the crazy parties of Carnival. Or the spectacular vistas and great weather. Or how indescribably gorgeous (and welcoming) the locals are. But here’s a little known fact, and it’s something that sets Brazil apart from most other places: Brazil’s constitution prohibits the extradition of Brazilian citizens to other countries. This is a rare gem in the world… I’ll explain.

All yopu need to read.