Is another major bank bailout event on the horizon? It appears so. And Italy may not be alone. In comments that were little noticed yesterday, Germany's Schauble said that Portugal may see another bailout too, saying "It would have to apply for a new program, which it would get. But the terms would be severe and it is not in Portugal's interests."
Alaska has long been one of the few U.S. states without an income tax. Thanks to its incredible bounty of natural resources, the state had more than enough cash coming in through oil company taxes and especially Prudhoe Bay production. All of that is starting to change. After a 40 year oil boom that transformed Alaska from a frozen tundra into one of the richest states in the country, the oil price crash is bringing reality back to bear.
In yet another twist in the Chicago pension saga, Illinois lawmakers voted to override a veto by Governor Bruce Rauner and allow the city to defer payments to fund pensions. Meanwhile, in order to fill Illinois' empty coffers, a bill is in its early stages that would target trades on the CME, CBOE, and other markets revisiting an old idea: a tax on trading
Saudi Arabia is planning to hit up the international bond markets for cash for the first time ever as the kingdom grapples with plunging oil revenue. The middle-eastern nation is planning to raise as much as $15 billion in the bond sale.
As we warned previously, the devaluation, or breaking of the Saudi Riyal peg to the dollar, could be the black swan event for crude oil and the recent weakness in SAR forwards - while not as violent as Nigeria's Naira - certainly signals a renewed market fear that breaking the peg is imminent. It appears Saudi officials are none too pleased with the free markets speculating on this devaluation and as Bloomberg reports, banks in Saudi Arabia are coming under fresh pressure over products that allow speculators to bet against the kingdom’s currency peg, according to people with knowledge of the matter, which were supposedly banned in January.
So far in May, base metals and Oil decoupled markedly. While the Oil price kept rising and moved closer to 50$, base metals fell off a cliff and descended below March lows. We believe that Oil is the errant outlier, helped by deep but temporary supply outages in Canada and Nigeria and all-time record speculative flows, and is more likely to catch down to other commodities going forward rather than the other way round. We look at Oil gyrations as short-term heavy volatility, within a long-term downward trend.
The last phase in all cases of hyperinflation is currency stabilization. This phase is inevitable whether it be because of changes introduced by the government or due to complete rejection of local currency by the population. In order for such a monetary reform to be successful, it is essential that the government first eliminate the main cause of the inflation (the budget deficit). Unfortunately, it does not seem as though the Venezuelan government has any plans to decrease spending, nor does it appear that revenue from oil will be recovering any time soon, meaning that any attempts at currency stabilization will surely fail (just as it did the last time when the bolivar fuerte was introduced in 2008). In light of this situation, it seems that Thiers’ Law is inevitable.
You have to love it when one of Donald Trump’s wild pitches sends the beltway hypocrites into high dudgeon. But his rumination about negotiating a discount on the Federal debt was priceless. No sooner did the 'unschooled' Trump mention out loud what is already the official policy of the US government than a beltway chorus of fiscal house wreckers commenced screaming like banshees about the sanctity of Uncle Sam’s credit promises.