Brazil

Bloomberg viewers estimate that Ron Paul was the winner of the clash of the Pauls. But that is very much beside the point. This wasn’t really a debate. Other than the fascinating moment where Krugman denied defending the economic policies of Diocletian, very little new was said, and the two combatants mainly talked past each other.  The real debate happened early last decade.

One month later the purge is over: "Norway’s sovereign wealth fund sold all its Irish and Portuguese government bonds after rejecting the Greek debt swap and warned that Europe faces considerable challenges." Wait, what's that? The Eurozone's political strongarming (think Steve Rattner and GM) was unable to force the world's most powerful sovereign wealth fund into agreeing to what was essentially extortion when bank after bank noted how delighted they are to be bent over and take an 80% writedown on their Greek holdings. Stunning. But at least we now know who will be suing Greece shortly in an attempt to recoup par value of their strong law bonds: grab the popcorn - Norway vs Greece will be quite a spectacle. As for their dump of Irish and Portuguese bonds, no surprise there: fool me once (in perpetuity) shame on me, fool me twice, shame on Dan Loeb... who was buying everything Norway was selling. We wonder who ends up right.

Fraud ... What Fraud?

All you need to read.

Simultaneous Global Printing Is Failing Miserably

While the price of food to the American end consumers has been relatively flat over the past few months (at least according to official CPI data), behind the scenes another food inflationary storm for the "rest of the world" is quietly brewing. The reason: after creeping higher all year, soybean prices are just shy of record highs. And while that may not mean much for a population that is used to dining out on 99 cent meals, soy is one of the most highly prized and used broad spectrum use food commodities around the world. From the FT: "The price of soyabeans is heading towards the record high set during the 2007-08 food crisis, which is set to reignite fears of runaway global food inflation. The surge in prices is because of falling global production levels following dry weather in Latin America and increased China imports. Soya’s wide range of use as feed for cows, sheep, pigs and poultry – and as a source for oil used in foodstuffs such as biscuits and cakes – means its high price could trigger food inflation fears." Most importantly, soy is one of China's most important agricultural imports, with soy prices very closely linked to Chinese inflation. So for all those wondering why the great Chinese goal seek model continues to confound expectations and keep coming in stronger than expected (at least in a Schrodinger sense) despite the country's economy sputtering based on both electrical usage and net trade, that's the reason: the last thing China needs in a critical political election year (ahem Bo Xilai) is a sudden spike in food inflation which would be only exacerbated by more PBOC easing. Just recall how closely the media was following reports out of China last year as many thought a rerun of the Arabian spring in the streets of Beijing was virtually inevitable.

Goldman summarizes what to look forward to in the next few days, when once again fundamental will be ignored and all attention will be on the ECB. "The Week ahead will be dominated by global PMI and US labour market data as the two key releases. A few central banks meetings are on schedule, but market consensus suggests clearly that that ECB will not change its policy, while the RBA will likely cut interest rates by 25bp. There are also central bank meetings in Columbia, Thailand and the Czech Republic.  The impact of these events on the FX markets, in particular the key activity data, will mainly be driven by the usual risk-on/risk-off mechanics. Moreover, with cyclical data generally weakening, chances are that risk-off currencies could perform relatively better this week. Some additional Yen strength is therefore possible, as well some under-performance of pro-cyclical currencies. The AUD may be worth some particular attention with the RBA meeting this week and the Chinese PMI - both key drivers of the currency."

Thoughts on last and next week.

Forget Competing Theories … What Do the Facts Say about Quantitative Easing?

Why America is extremely vulnerable to BSE. At a steep cost to the beef industry.

All you need to read and more.

Update for those who don't see more easing - bad news:

BERNANKE SAYS FED PREPARED TO TAKE MORE BALANCE SHEET ACTIONS
BERNANKE SAYS `THOSE TOOLS REMAIN ON THE TABLE'

One hour ago, the Fed launched on a big stop hunt, sending gold first much lower, then much higher, even as it released no incremental data, but merely confirmed that with every other central bank still "easing" (by which we mean devaluing their currencies of course, most recently seen in India and Brazil, and shortly, in Japan and of course Europe, once again) it can delay injecting cash until after the president is reelected. So with everyone at least superficially pretending there may be a question about ultimate Fed strategy, Ben will take the podium shortly to answer Steve Liesman's and several other fawning 'journalists' questions on what the Fed sees for the future, which in turn will be driven by the just released revised Fed forecasts (see below). Our question is why does the Fed not sell one or more ad spots on its livestream? Each can sell for at least a few millions - the money could then be used to pay down the debt.

Forget Big Macs, the only ubiquitous commodity that counts now in the global purchasing-power-parity pyramid of currency-wars is the iPhone. Deutsche Bank has created a comprehensive set of tables on what costs how much and where around the world so whether it is soft-drinks in Brazil or Germany (over 690% of New York prices), Beer in Japan (192% of US prices), or exercise in Russia (sports shoes are 221% of US prices), it is perhaps evident that the impact of these overseas revenues in nominal USD may indeed be helping juice US corporates as they bow to Bernanke's debasement wisdom. But how much longer will Russians (or the Chinese for that sake) continue to pay around 50% more for their iGadgets than us lowly Americans.

All you need to read.

Here is the point; Bernanke thinks he can deal with this falling growth outlook and a deleveraging consumer by adding to QE to keep rates very low. I am not sure it will work and if it doesn’t yields could start to rise and the more he throws at it the more yields actually rise as vigilantes will fear pent up inflationary pressures. This is a potential disaster for central bankers and at some point the impact of QE may be proven limited. When it is the central banks will have shot the last bullet. Why is no one discussing this?