"By attempting to gratify their desires we have in the results of our legislation arrayed section against section, interest against interest, and man against man, in a fearful commotion which threatens to shake the foundations of our Union." -- Andrew Jackson, Veto Message to Congress regarding the Second Bank of the United States, 1832
Just in case there was still any lingering doubt that prices in the US are surging far above whatever the CPI may indicate, we present the MIT Billion Price Project. Unlike the CPI which is a gross misrepresentation of what is really happening on the ground in price terms, MIT actually compiles real time price data about a universe of products. From the methodology section: "our data are collected every day from online retailers using a software
that scans the underlying code in public webpages and stores the
relevant price information in a database. The resulting dataset contains
daily prices on the full array of products sold by these retailers. Our
data include information on product descriptions, package sizes,
brands, special characteristics (e.g. “organic”), and whether the item
is on sale or price control." The attached chart confirms what anyone (but not Ben Bernanke) who actually buys goods and services in the US knows all too well.
Treasury Announces $49.8 Billion January Deficit, $7.2 Billion Greater Than Year Prior, $21.1 Billion In Interest PaymentsSubmitted by Tyler Durden on 02/10/2011 14:34 -0500
The Treasury has released its monthly deficit numbers, and while revenues this January came at a robust $226.6 billion (compared to $205.2 billion a year earlier), the outlays exploded to $276.3 billion compared to just $247.9 billion a year ago. The net result was a deficit of $49.8 billion in January, $7.2 billion more than a year earlier. And the number that all are watching (increasingly more irrelevantly by the way, as the Fed now owns almost 15% of marketable debt) - interest on debt securities, was $21.1 billion, or 7.6% of all outlays. Since the Fed's holdings will never be reduced, and in fact will continue growing with QE3, 4, and so forth, soon all the interest on marketable debt will be paid to Ben Bernanke, who will promptly remit it back to the Treasury in the epitome of the biggest ponzi scheme ever conceived by man.
Markets down for a second day this morning. Look forward to the release of initial jobless claims this morning which may provide some additional insight into last week’s unemployment numbers. NYSE shares rallied yesterday off of Deutsche Boerse AG’s announcement of its negotiations to buy the exchange, which would make it the country’s largest market for derivatives. While speaking in front of the House Budget Committee yesterday, Fed Chairman Ben Bernanke reminded Congress that the Fed is not solely responsible for the U.S.’s overwhelming deficit. He defended QE2 but hinted that there is a limit to its effectiveness. The chairman acknowledged that fiscal adjustments "occur at some point." On a related note, today will see the release of the U.S.’s monthly budget deficit.
When a market escapes gravity – you will know it.
Guest Post: The Bernank, Frankie Pentangeli and a Ponzi Scheme - An Advance Look At Today's Von Bernankestein GrillingSubmitted by Tyler Durden on 02/09/2011 08:18 -0500
At 10am today, Ron Paul will convene a sub-committee hearing with the topic “Can Monetary Policy Really Create Jobs?“. It really is too bad that Ben Bernanke will not be at this hearing. But if he was, we have a feeling the hearing would be like a scene right out of “The Godfather II” with Bernanke playing the part of Frankie Pentangeli. In fact, we just happen to have a transcript of how that hearing would have sounded...
Futures appear sluggish this AM, bucking the trend from the recent sessions. US rail shipping data (AAR) reporting that intermodal traffic up 7.4% over 2010. Confidence numbers for small businesses and economic optimism printed better than expected yesterday while the weekly consumer confidence number disappointed. The market's shrugged off the PBOC rate hike initially, but with more speculation of actions to come and further price rises in commodities, it appears time for a breather. 11.3% gain last week. Fed Chairman Ben Bernanke will speak today at the House Budget Committee at 10AM. Expect comments focused on fiscal policy rather than on monetary concerns as he presented last week. We look ahead to tomorrow for initial jobless claims which may add a new perspective on last week's unemployment numbers.
It's all Fedspeak after this morning's news of a drop in mortgage applications...Today is the last POMO of the current schedule in which $6-8 billion of bonds due 02/15/2015 – 07/31/2016 will be monetized. Tomorrow, the new monthly POMO schedule will be released at 2:00pm. Look to see if the Fed will be buying more than the usual fare of 17-30 bonds due to ongoing massacre at the long-end or if, instead, Bernanke is happy with letting the 30 Year plunge.
Bruegel Think Tank Says Greece Should Restructure Debt Now, Claims Country Is Insolvent And Further Lending Is Not Viable StrategySubmitted by Tyler Durden on 02/08/2011 09:36 -0500
It has been a while since we were reminded just how bankrupt Europe continues to be. And while the market has put European solvency issues on the backburner now that some CDO is about to purchase 5 times its weight in toxic sovereign debt (which somehow means everything can be swept under the rug for at least 2-3 months), a Belgian think tank reminds us again that the "Greece Question" is still as open and festering as always, no matter how many lies G-Pap throws at anyone gullible enough to still listen to him. Greek paper Kathimerini cites Belgian think tank Bruegel which "has recommended that Greece should restructure its public debt as soon as possible, and that this should be one of the main elements of a comprehensive response to the eurozone crisis to be agreed by European Union leaders when they meet next month. In a policy brief published on Monday, the Bruegel think tank argues that Greece is “clearly on the verge of insolvency” and that the swift restructuring of its debt, with creditors accepting a 30 percent “haircut,” should form part of a three-pronged strategy that includes the strengthening of the eurozone banking system and policies to foster greater growth in member states with weak economies. “Our conclusion therefore, is that Greece has become insolvent and that further lending without a significant enough debt reduction is not a viable strategy,” the think tank argues." Of course, should Greek proceed with the inevitable impairments, the domino effect will promptly take out marginal banks across the continent leading to precisely the toxic spiral which Ben Bernanke and his European colleagues have been trying hard to avoid.
Dallas Fed's Richard Fisher, who despite his recent quite vocal disagreement with Fed policies (Dallas Fed's Fisher Stunner: Admits Worries Fed Has Created Nothing But Bubbles), yet who conveniently forgot to dissent with the decision to continue the status quo at the latest FOMC committee, thereby making the current batch of hawks even more useless than the previous one (at least back then Hoenig had the guts to put his dissent where his mouth was) is once more on the tape, and following last week's announcement by the Dallas Fed president, was once again caught stating that he will not support further Fed accommodation and he will dissent with further QE decisions. At this point it is mostly theatrics. Should there truly be more QE, as Ben Bernanke implied may be the case during last week's Press meeting, then watch oil, commodities and those pesky precious metals quickly ground any such ambitions.
One chart as usual does more to convey a simple message than all the Fed speeches equating the economy with the Russell 2000 ever could. Below we demonstrate the performance of three key market data points since the August Woods Hole speech: the performance of the S&P (via the ES), the price change in the 10 Year bond (TY1 inverse scale), and of course the change in non-farm payrolls (remember that old-school Fed mandate about full employment something something). Bottom line: the S&P is up over 30%, the 10 Year has plunged from over 126 to 118, while NFPs have added 392k, or 78.4 per month, nowhere near enough to even keep up with the natural growth of the labor force. So has QE been a success? We leave it up to you.
Bernanke tells the public and Congress that the reason we need low interest rates is to support housing prices. He doesn’t mention that $188 TRILLION of the $223 TRILLION in notional value of derivatives sitting on the Big Banks’ balance sheets is related to interest rates. Yes, $188 TRILLION. That’s thirteen times the US’s entire GDP and nearly four times WORLD GDP. If even 4% of this money is “at risk” and 10% of that 4% goes wrong, you’ve wiped out ALL of the equity at the top five bank
Though fundamentals may drive behavior in the long-term, fundamentals have had, at times, zero effect on the price discovery of assets in the short-term. At a time when everyone but the most naïve of the naïve understand how grossly distorted capital prices are both to the upside (in global stock markets) and to the downside (in gold and silver markets) due to massive manipulation schemes executed through collusive bullion-bank and government efforts, it makes zero sense to continue to put faith in technical analysis in a vacuum as well.
How Hank Paulson Broke The Law: "This Will Be A Disclosable Event And We Do Not Want A Disclosable Event" - Parsing The Ken Lewis "MAC" DepositionSubmitted by Tyler Durden on 02/06/2011 18:47 -0500
Among some of the discoveries of the financial crisis is that the entire financial system is now, following the Lehman bankruptcy, built entirely on fraud. And while Ken Lewis may spend the remainder of his days on some private island with stolen taxpayer money providing for his every last wish, it was he, in following the Fed's and the Treasury's orders to make a mockery of fiduciary responsibility, that was among the first people to confirm that there is no rule of low in America, or rather whatever law there is, it only applies to the less than immortal (i.e. the sub-banker class). Below, in an indication that Zero Hedge will never forget, we present the salient highlights from the Ken Lewis deposition on the MAC clause surrounding the Merrill transition, emphasizing the threats from Hank Paulson and Ben Bernanke. For as long as neither of these three is in jail for what is documented shareholder (and taxpayer) fraud, we fail to see why the remaining 300+ million Americans continue to diligently pay their share of taxes into a government that is now beyond (and in full documentation) corrupt. Also, how BofA's lawyer Wachtell was not at all present during the discussion of the MAC clause, makes a complete mockery of the US legal process in its entirety. We wonder just when the official scribe of the kleptocracy, Andrew R. Sorkin, will write a book disclosing the truth of what happened, including a listing of all the laws broken with full premeditation by every single player, and not the watered down, PG13 (and rather expensive)version that makes everyone come out like a law-abiding superman.
My fear is that another stock bubble is underway and despite lessons from the past, it will last a lot longer than we think...