Ireland

The EU may have many worries and woes that are slapping it around its face right now (and it could be said for a number of years), but there is one thing that is worrying economists more than the sovereign-debt crisis and that’s the fact that prices are not increasing enough.

Irish citizens can invest in gold bullion in their pension funds since 2007 

European monetary policy/monetary conditions are too tight and, Citi's FX Technical group explains, the EURO is too strong thereby exacerbating the effects of the internal devaluation in Europe (as we noted here). Looser monetary policy and a weaker currency are becoming increasingly necessary conditions for the Eurozone to recover/survive. The present period in the Eurozone, Citi adds, where the financial architecture is coming apart at the seams is not remotely unprecedented and in fact offers a very compelling historical perspective for significant devaluation of the EUR in the years ahead.

Endo Health Solutions just announced a big acquisition. The company’s rationale is to take advantage of a stunning tax loop hole. There are a couple of implications to highlight: 1. Endo’s shareholders are the clear winners; and 2. The USA is the big loser. Extrapolating beyond Endo, if one accepts the premise that companies are obligated to use legal means to minimize tax costs, and if one then takes this precedent to the logical conclusion, this transaction could/should be a road map for other companies to follow.  Is Congress paying attention?

With only 3 of 70 economists surveyed by Bloomberg expecting a rate cut at tomorrow's ECB press conference, Credit Agricole's Frederik Ducorzet suggests seven signals to watch for from Draghi that could signal ECB easing ahead. Crucially, as BofAML puts it, "further euro appreciation is a problem, particularly for the periphery," and with empirical Phillips curves in hand, there is little room for further compensation via wage reduction. In other words, if Draghi stands pat (or doesn't offer up some sacrificial forward guidance hint of easing being likely), the drumbeat of social unrest in the periphery will grow ever louder.

... but for those who can, and wish to see beyond the propaganda of the Eurozone's unelected leaders, here is Natixis with a candid, honest summary of Europe's sad, "unsustainable" predicament.

The German election is over and the confrontation over the US debt ceiling has ended, so event risk should be minimal, right? Not so fast, UBS' Mike Schumacher warns - plenty of pitfalls could trip markets. Forward-looking measures of 'risk' are beginning to show some signs of less-than-exuberance reflected in all-time-highs across all US equity indices and if previous episodes of 'low-vol' are any guide, the current complacency is long in the tooth... no matter how 'top-heavy' stocks become; bloated by the flow of heads-bulls-win-tails-bears-lose ambivalence...

The two leading economic of the developed world are now engaged in an open pissing contest. Will anyone win, or will everyone lose? And will Germany offer Edward Snowden asylum as a result? Can US foreign policy be even more screwed up? Find out inside.

We recently noted that, despite all the hot money flows and self-congratulatory extrapolation, European macro data is collapsing (as opposed to supporting ideas of recovery). In fact, it is falling at the fastest pace in over a year as the prospect of the euro area falling into deflation may be increasing; as Bloomberg's Niraj Shah notes the single currency rises, growth loses momentum, money-supply expansion slows and bank lending stagnates. As Shah fears, that may push the region into a debt spiral as the real value of debt increases, marking a new phase in the crisis.

• U.S. spy chiefs face Congress amid spying rift with Europe (Reuters)
• Deutsche Bank income hit by €1.2bn of legal provisions (FT)
• China's second tapering attempt fails: China central bank seeks to reassure money markets after rate spike (Reuters)
• UBS Takes Action Against Staff in Foreign-Exchange Probe (WSJ)
• Saudi Arabia frees man jailed for Mohammad tweets (Reuters)
• Tax Revolts Hit Hollande as Farmers, Soccer Clubs Protest (BBG)
• German parliament to meet over U.S. spying scandal (Reuters)
• Google Nears Smartwatch Launch (WSJ)
• How to end gridlock in DC? Pork projects (Reuters)
• UBS ordered to increase capital reserves (FT)

One of the great ironies of the Obama presidency is that it has been a disaster for the young people who form the core of his political coalition. High unemployment is paired with exploding debt that they will have to finance whenever they eventually find jobs, and as Stan Druckenmiller explains in his WSJ interview, the "rat through the python theory," (that fiscal disaster will only be temporary while the baby-boom generation moves through the benefit pipeline and then entitlement costs will become bearable) is simply wrong; since, by then Druck exclaims, "you have so much debt on the books that it's too late." Unfortunately for taxpayers, "the debt accumulates while the rat's going through the python." The hedge fund billionaire adds that he "did not think it would be nutty to tie entitlements to the debt ceiling because there's a massive long-term problem. And this president, despite what he says, has shown time and time again that he needs a gun at his head to negotiate in good faith." The interview goes much, much further...

With an increasing focus in America on the ever growing entitlement society, we thought it might be useful to get some context of how the welfare states stack up across Europe. As Britain prepares to "test" immigrants in an effort to stymie "benefit tourists", The Telegraph's Ed Malnick, details what health care and child, unemployment and housing benefit a 30-year-old single EU migrant with a child but no job can access in each member state.

If mere hope of an "imminent" deal starting on Thursday and continuing through Monday, with no actual deal but who cares about details, was enough to push the DJIA up by 600 points, then all it would take to set a new record market high today, is for another day to pass - one day before the October 17 X-Date when one Senator can filibuster the US through the deadline on their own, and when the House still has to have a voice on what the Senate has been doing - without an actual debt deal. After all, the market is so "centrally-planned" all that is needed is knowledge that Bernanke will get to work, and is getting to work to the tune of $85 billion a month, mixed in with some hope. And with today's "market for idiots" facilitating POMO of over $5 billion which guarantees a green close, all that is needed is a complete failure in talks for the SPX to go limit up on even more hopes things will be fine any second now... if not right now.

In a world devoid for the past two weeks and certainly for foreseeable future of most US economic data (this week we get no CPI, Industrial Production and New Home Sales among others), markets are now reliant on China for an indication of how the economy is doing, which is why this weekend's weaker than expected Chinese exports (ignoring the fact that China trade data is largely made up) and higher than expected consumer price inflation (driven by higher vegetable prices), even as new yuan loans soared to CNY787 billion, well above the CNY675 billion estimate despite broader M2 slowing from 14.7% in August to 14.2% in September, means the Chinese economy is once again in a vice and following the summer's liquidity driven boost, is set to roll over. Which in turn means that once again the PBOC is flying blind: unable to inject more liquidity without risking broader inflation, while most indicators are already rolling over. In short, ugly and certainly rolling over Chinese economic indicators for the market to mull over on Columbus day, even though all this will be promptly forgotten once the Washington debt ceiling song and dance resumes and the now traditional 10:30 am surge grips the algotrons as the latest set of "imminent deal" rumors is unleashed.

The study is called the Program for the International Assessment of Adult Competencies and it tested 166,000 people aged 16 to 65 in more than 20 countries.  It found that in math, reading and problem solving, American adults scored below the international average. We can’t say this is surprising, after all, the public allowed the big banks that destroyed the economy to gift themselves trillions in the aftermath of the financial crisis with barely a peep in response. You don’t have to be a problem solving genius to figure that one out.