The Economist

When it comes to provocative financial magazine covers, until now this has been the domain mostly of the Economist and Barrons. Which is why we were not surprised to see Bloomberg do all it can (and it sure can afford to do a lot) to steal the spotlight. With this week's cover page of "The Great American Housing Rebound" it may have done just that, for obvious reasons, or rather one politically uncomfortable reason. And just as expected, the blistering critique is already quite fast and certainly furious - precisely as had been intended all along.

A listless overnight session with just the previously noted first disappointing LTRO-2 repayment and the now traditional big beat out of the "other" German confidence indicator, IFO, which beat expectations of 104.9, rising to a 10 month high of 107.4 to attempt to push the economy out of the recessionary slump (just don't mention yesterday's PMI), and nothing on today's US calendar is a fitting way to end the week, and further shows that markets are once more completely oblivious to the risks of the Hung Parliament outcome that this weekend may bring in Italy should the Berlusconi juggernaut maintain its momentum. The EURUSD and the US futures have disconnected once more, with almost all of yesterday's market weakness filled in the overnight session as the good old low-volume levitation returns. Here are the few news items worth reporting.

The chart below, from the Economist, takes a look at how long it would take an individual from any given country to become a millionaire based on "how much the main breadwinner in an average household makes each year (before tax)." No major surprises here: the fastest spawning place for a budding millionaire, a term that has long ago lost its one-time cachet thanks to the world's central banks who have pumped some $14 trillion into the market, is the US, while those hoping to hit the vaunted seven figures in Bulgaria, Mexico and Romania would need to wait about 2-3 average lifetimes before they hit their monetary goal.

Governments Move to Destroy Online Anonymity ... Google Helps

In a surprise announcement, BoJ Governor Shirakawa announced that he will step down on 3/19 (a month ahead of schedule) and while Barclays notes that there had been talk at one point that Mr Shirakawa might step down in a bid to protect the BoJ’s independence in response to Mr Abe’s threats to revise the BoJ Act; the decision, however, appears to have been motivated by policy considerations (the desire to have the governor and deputies start together). At a time when Japan’s stockmarkets are celebrating JPY weakness, Mr Shirakawa’s move provided yet more bounce as the new BoJ leader is expected to be even more dovish. Abe's push for a new governor, however, is meeting resistance from his own cabinet and financial bureaucrats, who fear extreme measures from the central bank may trigger a damaging rise in bond yields. The tussle, which Reuters notes, is testing Abe's resolve, but lies between a slightly less dovish bureaucrat in Toshiro Muto (favored by the opposition) and a banker, Haruhiko Kuroda, who is a front-runner in Abe's camp. With Draghi's comments today, we suspect Abe will err on the side of uber-dovish to fight the currency wars alongside him.

• Tunisian opposition politician shot dead, protests erupt (Reuters)
• China says extremely concerned after latest North Korea threats (Reuters)
• Postal Service to cut Saturday mail to trim costs (AP)
• Debt Rise Colors Budget Talks (WSJ)
• Obama proposes short-term budget fix, Republicans swiftly object (Reuters)
• S&P Analyst Joked of Bringing Down the House Before Crash (BBG)
• Dell’s Bigger Challenge Ahead in Turnaround After Buyout (BBG)
• Some of the Mark Carney Gloss Is Coming Off (WSJ)
• Japan Official Says BOJ Tools Sufficient as Shake-Up Looms (BBG)
• S&P Lawsuit Undermined by SEC Rules That Impede Competition (BBG)
• Heavy Clashes Erupt in Syrian Capital (WSJ)

This year, China is set to burn more coal than the rest of the world combined!

• Fed Pushes Into ‘Uncharted Territory’ With Record Assets (BBG)
• Next up in the currency wars: Korea - Samsung Drops on $2.8 Billion Won Profit-Cut Prediction (BBG)
• China Warns ‘Hot Money’ Inflows Possible on Easing From Abroad (Bloomberg)
• BOJ Shirakawa affirms easy policy pledge but warns of costs (Reuters)
• Merkel Takes a Swipe at Japan Over Yen (WSJ)
• Wages in way of Abe’s war on deflation (FT)
• Italian PM under fire over bank crisis (FT)
• Senior officials urge calm over islands dispute (China Daily)
• Spain tries to peel back business rules (FT)
• Rifts Over Cyprus Bailout Feed Broader Fears (WSJ)
• Soros Says the Euro Is Here to Stay as Currency War Looms (BBG)

In an increasingly globalised economy, we need more global data measurement. The Economist presents a new attempt to measure global GDP. Globally, there was a big and swift return to strong GDP growth, built on the backs of emerging countries and particularly the BRICs. Since early 2010, rather than getting stronger and stronger, global growth has actually become weaker and weaker. This is quite a departure from certain narratives popular today.

As initially reported here yesterday, in what is the biggest news of the week, and possibly the year, the Bundesbank has broken away from its "all is well" posturing exhibited as recently as three months ago, and in a dramatic reversal of its diplomatic position, has demanded repatriation of some of its NY Fed and all of its Paris-domiciled gold. We applaud Herr Wiedmann for this move, although we hope that the German people are allowed to witness, and verify, the arrival of the actual gold as opposed to simply empty crates. Of course, at the end of the day the actual delivery is irrelevant: what matters is this first shot across the bow of the current monetary system - one which juxtaposes sound money versus infinitely dilutable electronic fiat more than ever before - by a major conservative central bank, one in possession of the second largest official gold reserve, second only to the Fed itself. That said, we can only hope that the German request for gold repatriation is not met with the same enthusiastic response that France encountered when it too attempted to repatriate its gold held by London back in the 1930s, just before a whole lot of things in the global economy went horribly wrong...

Presenting two covers to commemorate what may be the most dysfunctional Congress in the history of the US: the 112th, whose final official day is today. The only Congress that will be worse is the 113th, then the 114th and so on.

Leaving the highly sensitive topic of "gun-control" aside for the time being, one can't help but wonder if it isn't time that the US government, seemingly hell-bent on regulating virtually everything in its quest to prove (to itself?) that America's population can no longer be trusted with making any responsible decisions on it own (and in the process becoming even bigger), shouldn't be more focused on "fat-control" instead. Why? Because while guns may or may not kill people, the bottom line is that of the 32K or so death attributed to firearms, roughly 20K, or two thirds were suicides, meaning firearm-based homicides were 11,015 in 2010. Putting this number in perspective, every year some 935,000 Americans suffer a heart attack, and 600,000 people die from some form heart disease: 1 in every 4 deaths. Net result to society: the cost of coronary heart disease borne by everyone is $108.9 billion each year. And of all proximal factors contributing to heart disease, obesity and overweight is the main one. But of course one can't make a media spectacle out of 600,000 hospital wards where people quietly pass away, in many cases due to a lifetime of ill decisions relating primarily to food consumption. In fact, some estimate that obesity now accounts for one fifth of the total US health-care bill (the part of the budget which no amount of tax increase can offset). Which is why if the topic of gun-control has managed to promptly tear the country into two (or three, or more), just wait until fat-control (far more than the recent tepid overtures into this field such as Bloomberg's NYC sugary soda ban) rears its ugly head and sends the already polarized (and weaponized) US society into a state of agitated hyperflux.

Presenting Dave Collum's now ubiquitous and all-encompassing annual review of markets and much, much more. From Baptists, Bankers, and Bootleggers to Capitalism, Corporate Debt, Government Corruption, and the Constitution, Dave provides a one-stop-shop summary of everything relevant this year (and how it will affect next year and beyond).

As we pointed out earlier today, Japan's new Prime Minister Shinzo Abe, is really Japan's old Prime Minister Shinzo Abe, who in September 2007 quit after precisly one year in the PM post, despite having been groomed his entire life for the position. His tenure was, in short, a sheer disaster. The Economist summarizes it as follows: "Mr Abe's government was initially very popular. Yet the tide in Mr Abe's affairs only ebbed. True, early on he made a notable opening towards China, with whom relations had been strained under Mr Koizumi. Other than that, Mr Abe proved unable to impose discipline upon a cabinet of the corrupt and incompetent.... Mr Abe's inert response to a bureaucratic scandal involving 50m missing pensions records underscored how out-of-touch he was. In late July voters punished his government in elections for the Diet's upper house: for the first time in its half-century life, the LDP and allies lost the upper-house majority, to the opposition Democratic Party of Japan (DPJ). Not just the opposition but LDP heavyweights too began calling for Mr Abe's resignation." And thus began the slide of the LDP, which soon thereafter saw its uninterrupted run of 50 years at the helm of Japan end, with power handed over to the DPJ. Yet what was the gracious "exit" pretext that Abe used to evacuate his leadership spot without admitting defeat? Diarrhea. Yup: diarrhea.

"They say this is not massive money printing, but first they are wrong; and second, monetary authorities in the United States did not see the crash coming and the unsoundness of the financial system. In fact, right up until the crash they were saying that nothing like what happened could ever happen... This monetary policy, $3 trillion of bond buying in the United States, $3 trillion in Europe and another $2.5 trillion to $3 trillion in Japan, is unprecedented. ... If and when people lose confidence in paper money because of repeated bouts of quantitative easing and zero-percent interest rates—it could happen suddenly and in a ferocious manner in the commodity markets, in gold, possibly in real estate—interest rates could go up at the long end by hundreds of basis points in a very short time. I’m quite concerned as a money manager that we have to manage money, not just for the boundaries of what’s in front of our faces—maybe we’ll have a little tax increase or not, the fiscal cliff, or the stock market might go up or down 10% or 15%—but for a basic shift. The thing that scares me most is significant inflation, which could destroy our society."