Archive for September, 2011

Stocks Stabilize As German Legislature Approves EFSF Contribution … Is A European Coup D Etat Underway?

September 29, 2011

Financial Market report for September 29, 2011

1) … The Associated Press reports lawmakers in Europe’s largest economy voted overwhelmingly on Thursday in favor of expanding the powers of the eurozone’s bailout fund.
The Bundestag vote strengthened Chancellor Angela Merkel’s center-right coalition, which had struggled to win support from a bloc of rebellious members, and could bolster her ability to negotiate new European crisis measures. “It was a strong statement of Angela Merkel’s position. She has the backing and the support of the coalition and she is able to negotiate on the European level,” Peter Altmeier, the parliamentary whip for Merkel’s Christian Democrats, said after the tally was announced.

In an interview with the Spectator, Foreign Secretary William Hague criticised the creation of the euro saying, “It will be written about for centuries as a kind of historical monument to collective folly,” ….“I described the euro as a burning building with no exits and so it has proved for some of the countries in it.” …..  “Greeks or Italians or Portuguese have to accept some very big changes in what happens in their country…and Germans will have to accept that they are going to subsidise those countries for a long time to come, really for the rest of their lifetimes.”

The Express reports that French MEP Jean-Marie Cavada has put forward a proposal to teach children in primary schools about the benefits of EU citizenship, which would involve lessons on the EU institutions and the history of the EU becoming part of member states’ national curricula.

Financial Times reports Greece creditors in bail out backlash. Greece’s private creditors have reacted angrily to suggestions that some eurozone countries want bondholders to suffer bigger losses than those agreed in the second bail-out of Athens. Banks and other bondholders are resisting the idea by lobbying countries such as Germany and the Netherlands, where hardliners are pushing for private creditors to write down more than the current 21 per cent agreed in July’s €109bn Greek rescue, according to people close to the deal.

World stocks, ACWI, and World Small Cap stocks, VSS, rose slightly today.

I encourage acquisition of gold bullion to preserve wealth; but for those not so inclined Liquidity Services, LQDT, is a short selling opportuntiy. Oppenheimer on Sep 2 upgraded LQDT to Outperform from Perform and raised the target to $38 from $28 citing the acquisition of the consumer goods unit of Jacobs Trading Company. Liquidity Services, with a market cap of $840 million, is a leading online auction marketplace for wholesale, surplus and salvage assets.

Another short selling opportunity is RZV, which rose today on rising world currencies and emerging market currencies as the US Dollar, $USD, traded lower. Banks, KRE, also rising are a short selling opportunity opportunity, as in a bull market one buys on dips, but in a bear market one sells into rallies. Thor Industries, THOR, and Centerpoint Industries, CNP, manifested as short selling opportunities today.

The chart shows that the Chinese stocks, YAO, HAO, and CAF, along with the Shipping stocks, SEA, were the first to loose their seigniorage from the US Federal Reserve Quantitative Easing. And now, Bloomberg reports China Stocks sink to 14 month low as investors predict slowdown. China’s stocks fell, sending the benchmark index to a 14-month low, on concern economic growth will slow as the government maintains measures to curb inflation and demand for exports falters in Europe and the U.S. PetroChina Co. and Jiangxi Copper Co. paced declines by commodity producers after oil and metal prices dropped. China Vanke Co. and Gemdale Corp. retreated among developers after Vice Premier Li Keqiang said the top priority will continue to be stabilizing prices. Most global investors predict Chinese growth will slow to less than 5 percent by 2016, a Bloomberg poll showed. “The European debt problem will remain hanging over the market as there’s no possibility of solving it in the near future,” said Zhang Ling, general manager at Shanghai River Fund Management Co. “That’ll continue to bring turmoil to global financial markets as the appetite for risky assets is falling.” The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, dropped 13.11 points, or 0.6 percent, to 2,378.95 at 9:36 a.m. local time, set for its lowest close since July 5, 2010.

And Bloomberg reports Commodities head for biggest quarterly drop since 2008 on economy’s woes. Commodities fell, heading for the biggest quarterly slump since 2008, as Europe’s sovereign debt crisis threatened to derail the global economy, slashing raw material demand. The Standard & Poor’s GSCI index of 24 raw materials slid 2.7 percent to settle at 603.55 at 3:46 p.m. New York time. Since June 30, the gauge has slumped 9.8 percent, the most since the last quarter of 2008 during the most-severe recession since the 1930s. Copper closed at the lowest price in 13 months, and crude oil fell almost 4 percent. And the WSJ reports Copper fall hints at broader pains. In little more than a month, copper has careened into a bear market, catching commodities traders off guard and triggering alarm bells across financial markets. Copper prices have plunged 23% this month, a decline of 20% or more is commonly considered a bear market

Macro Business reports CDS signaling trouble for Chinese banks. There is a widespread belief that Chinese banks are a safe investment because they can’t possibly go bankrupt. After all, the government will be there to back-stop. I don’t disagree with the judgment, but have often joked that we will probably see an outcome similar to RBS, with Chinese banks still around but equity holders wiped out. Credit markets are also now showing distrust in Chinese banks. Credit default swaps spreads for Bank of China and China Development Bank have surged according to Société Générale, and they are rising at much faster rates than the rest of Asia ex. Japan. (Hat Tip to Between The Hedges)

In The Age of Deleveraging, love grows cold: David F. Ruccio writes on the United States of growing child poverty.

LA Times reports New York Fed to monitor Facebook and Twitter. The Federal Reserve Bank of New York wants to see what’s being said about it on social networks. But critics say it wants to keep tabs on them. Two bloggers who have incessantly criticized the Fed are Doug Noland and Elaine Meinel Supkis. The first has written extensively on moneyness, that is seigniorage, and the latter on carry trade investing and prepared the insightful article History of Seigniorage Wealth.

2) … A Eurozone Coup d Etat is underway.
Ambrose Evans Pritchard writes correctly The dangerous subversion of Germany’s democracy.  Eurozone leaders are effecting a broad based economic and political coup d etat.

While Bloomberg reports Former ECB chief economist Issing says Greece will exit the Euro, no one knows if Greece will withdraw from the Euro, or will be pushed out and exist as an exiled nation. German people are 180 degrees opposed to Angela Merkel position for a true European economic government, as The Wall Street Journal reports Germans Reconsider Ties to Europe. “A poll for national German broadcaster ZDF earlier this month shows three-quarters of Germans are against the expanded European rescue fund that’s subject to Thursday’s vote. The measures before German parliament today would nearly double the main euro-zone’s bailout fund’s lending capacity to €440 billion ($595 billion) and allow the fund to buy sovereign bonds in the open market. Germany’s contribution to the new, expanded rescue loan package is €211 billion, still less than half the €500 billion it pledged to bail out its banks in 2008. But many see the European Central Bank’s moves to buy billions of euros in low-grade government bonds of southern European countries as another sign that European institutions are slipping away from them.”

Angela Merkel, Nicolas Sarkozy, and José Manuel Barroso, are apostles and ambassadors of the 1974 Clarion Call of the Club of Rome, which is compelling them to effect a Eurozone economic and political coup d etat, to establish regional economic government. The Club’s 300 visionaries foresaw that the engine of growth that came from Milton Friedman’s Free To Choose Floating Currency Regime, would sputter as currencies sink, as sovereign debt fails, and as credit evaporates, and that a new regime of state corporatism should rule in all of the world’s ten regions.

Zero Hedge reports Deputy PM says tax limits of Greek Society exhausted. As G-Pap goes from meeting to meeting with his hand held out making promises to asset strip and tax his country into oblivion, AP is reporting that Deputy PM Theodore Pangalos that the country’s tax-ability is exhausted. And Zero Hedge reports “A panorama of the European Debt System” – The definitive primer of the Eurozone.

Soon, out of the EU sovereign debt and banking crisis, European leaders will waive national sovereignty, announce regional framework agreements to establish a Fiscal Union as well as call for the appointment of a President of the EU.  He must have the quality of fierceness, as he will have a whole spectrum of angry to deal with. A leading individual for this position is Herman Van Rompuy, as he orchestrated the original Greek bailout, and as who the Daily Mail reports as saying, the age of the nation state is over and the idea that countries can stand alone is an ‘illusion’ and a ‘lie’.  When the sovereign comes to rule in Europe, he will exact more austerity out of the Greeks, and put an end to the state worker system, which has resulted in a situation where in every household, at least one member has a state job, which is currently protected by Constitution from being eliminated. The sovereign’s word, will, and way will be the law of the land replacing Treaty and Constitutional law. Diktat will replace democracy; there will be debt servitude for all.

Business Insider reports Herman Cain vaults to top tier: Romney and Perry lead, but not by much. Mr.  Cain campaigns on the platform “that the United States of America will mot become the United States of Europe. Evidently he has not heard off either the Club of Rome or the coming North American Union.

Herman Cain, former Godfathers Pizza CEO, is a Tea Party hero, who believes the people must return to the principles of the Anti Federalist Constitution. Freedom’s Lighthouse relates Cain proclaimed the battle in Wisconsin as “ground zero for taking back our nation one state at a time.” He ended with his refrain that, “We the people of the United States of America are not going to let the United States of America become the United States of Europe – not on our watch!

NoisyRoom also provides coverage of Mr Cain in article Ground Zero For Taking Our Nation Back  as does ConservativeDailyNews in CPAC Rocks On Day 2 as does USAPOL in CPAC 2011 – Part 26: Herman Cain

The North American Continent was announced as a region of global governance at Baylor Baptist University by the leaders, Vincent Fox, Paul Martin and George Bush, with the Security and Prosperity Partnership of North America on March 23, 2005, with documentation as follows: ..…. Baylor TV Coverage Of The Trilateral Summit News Conference …… President Meets With President Fox and Prime Minister Martin At Baylor University Waco, Texas  …… Baylor Has a Proven Record of Hosting White House Events.

Thus, Baylor served as host for President Bush’s historic “Security and Prosperity Partnership for North America” meeting with Mexican President Vicente Fox and Canadian Prime Minister Paul Martin. The Armstrong Browning Library was the venue for the leaders’ meeting, which was followed by a news conference in the Bill Daniel Student Center’s Barfield Drawing Room.

Now, Keith Jones in WSWS.org article Canada And US Launch Continental Security Perimeter Talks documents how Canada’s Prime Minister and the United States’ President have further waived national sovereignty of their respective nations, by announcement of a Framework Agreement, at the North American Security Perimeter talks in early February 2011; and they have appointed two bodies of stakeholders, that is task groups, to effect their integration plans, the Beyond the Border Working Group, and the United States Canada Regulatory Cooperation Council.  

“Canadian Prime Minister Stephen Harper and US President Barack Obama announced, at the conclusion of a White House meeting earlier this month, the launching of bilateral North American Security Perimeter talks.”

“The stated aim of the negotiations is to greatly enhance the integration of Canadian and US border security and the harmonization of the two countries’ national security, immigration, refugee and regulatory regimes, so as to strengthen continental security, facilitate the cross-border movement of goods and people, and promote “economic competitiveness.”

“The negotiations are to be based on a joint declaration Harper and Obama issued following their February 4 meeting. “Beyond the Border: a shared vision for perimeter security and economic competitiveness” calls for the longstanding across-the-board security cooperation between the Canadian and US militaries, police forces, and border protection agencies, including through NATO and the North American Aerospace Defence Command (NORAD), o be taken to a new level. “We intend,” states the joint declaration, “to pursue a perimeter approach to security, working together within, at, and away from the borders of our two countries to enhance our security and the legitimate flow of people, goods and services.”

“The statement pledges the two countries will work together “to develop, implement, manage and monitor security initiatives, standards and practices” in the air, land, sea, space, and cyberspace and otherwise “enhance the security of our integrated transportation and communications networks.” This will include “improved intelligence and information sharing” and other forms of enhanced cooperation with the aim of identifying, preventing, and countering “violent extremism” and verifying the identity of travelers. The two countries will develop common standards for the collection and transmission of travelers’ biometrics and a common system for tracking persons entering and leaving Canada and the US. The statement also says that the two countries will “build on existing bilateral law enforcement programs to develop the next generation of integrated cross-border law enforcement operations.”

“Harper and Obama have established a bilateral Beyond the Border Working Group to develop a “joint Plan of Action” to realize the goals outlined in their declaration. They have also established a United States Canada Regulatory Cooperation Council with a two-year mandate to harmonize and streamline public health and safety and environmental regulations to improve “economic competitiveness”—that is, corporate profits. Harper, in a separate statement, emphasized the Canadian elite’s commitment to its strategic-military partnership with Washington and Wall Street, declaring “a threat to the Unites States is a threat to Canada, to our trade, to our interests, to our values, and to our common civilization. “Canada,” continued Harper, “has no friends among America’s enemies. And America has no better friend than Canada.”

“Powerful sections of the Canadian ruling elite have long been pressing for the creation of a North American security perimeter so as to underpin and deepen the economic partnership and continental economic integration fostered by the 1989 Canada-US Free Trade Agreement and its successor NAFTA. Represented by such organizations as the Canadian Council of Chief Executives and the Canadian Manufacturers’ Association, these sections of the ruling class view closer economic and security integration with the US as an essential element in their response to the emergence of new powers in Asia, the division of the world market into regional trading blocs, the growth of geopolitical tensions among the great powers, and the ever-diminishing share of global trade and investment that falls to Canadian capital. They also view closer integration with the US as providing them with a lever to press for regressive changes in socioeconomic and national security policy that have hitherto been resisted by the populace.”

Fate is operating that out of the dislocations of quantitative easing, competitive currency devaluations at the hands of the currency traders, as well as the unresolved sovereign debt crisis in Europe, a Gotterdammerung, that is an investment flameout. And from the ashes, a Chancellor, a Sovereign, and a Banker, a Seignior, will arise to establish global order and a new seigniorage. And that the United States, Canada and Mexico will be integrated together into a North American Union of state corporatism overseen by a troika of the President of the United States, the President of Mexico and the Prime Minister of Canada.  

Chart of VSS
Chart of ACWI
Chart of SEA
Chart of YAO
Chart of LQDT

European Leaders Call For A Collective Future

September 28, 2011

Financial Market report for September 28, 2011

1) .. Charles Stockdale in 24/7 Wall Street article 9 cities going broke relates tales of municipal debt  travail.
Municipal Debt was a leading factor in the Depression; the securitization of municipal bonds has soared since then.

Harrison, NJ which has a credit rating of  Ba3; 2009 revenues: $32,763,000; 2009 debt ($000s): $92,613,000; Median household income: $49,596; Harrison “issued a significant amount of debt to foster redevelopment, and continues to collect substantially less revenue from those developments than projected,” Moody’s explains. One of the largest projects is the $200 million Red Bull Arena, which was opened in March 2010 and cost the city $39 million in debt but has yet failed to have the expected returns. To help solve its debt problem, the city, which has a population of 13,620, plans to fire some police officers and firefighters

Strafford County, NH has a credit rating of Ba2; 2009 revenues: $36,204,000; 2009 debt ($000s): $23,866,000; Median household income: $58,363; Strafford County’s low rating is largely due to a money-losing nursing home, on which the county spends two-fifths of its budget. Just under 85% of the patients at the Riverside Rest Home are eligible for Medicaid, yet state reimbursements to the county continue to decrease, according to Moody’s. Between 2004 and 2009, the nursing home lost $36 million. The county does not expect to recover much of the money it used to cover these deficits.

Camden, NJ has a credit rating of Ba2; 2009 revenues: $181,257,000; 2009 debt ($000s): $103,284,000; Median household income: $25,418; Camden suffers from high unemployment, high poverty, and a weak tax base. The city’s median household income is less than half that of the national median income and is the lowest of all the municipalities on this list. Moody’s notes that “more than half of Camden’s real estate is tax-exempt, hampering already weak tax collections.” The city has had a speculative grade credit rating since 1998.

2) … As US Federal Reserve quantitative easing exhausts, credit is evaporating; lending is drying up.
Bloomberg reports that the risk trade that came with the US Federal Reserve’s Quantitative Easing is off causing the evaporation of credit globally.  Emerging-Nation Bond Rout Reduces Sales by 72%: Credit Markets. Emerging-market companies are selling the fewest bonds in 2 1/2 years as investors drive borrowing costs higher amid a global economic slowdown. Borrowers in developing nations issued $16 billion of fixed-income securities since the end of June, a 72 percent decrease from $58 billion in the previous quarter and the least since the first three months of 2009, according to data compiled by Bloomberg. Prices of emerging-market corporate notes are down 4.7 percent, the biggest drop since the 20 percent rout after Lehman Brothers Holdings Inc. collapsed in September 2008, JPMorgan Chase & Co.’s Composite Corporate EMBI Index shows. “For emerging-market borrowers, access to international markets is hugely important because they aren’t able to fund on domestic markets in the scale they want,” said Stuart Culverhouse, the chief economist of broker Exotix Ltd. in London. “There’s been a massive retreat from risk.”  

LBO-Burdened European Firms Face $272 Billion of Refinancings, Fitch Says. European companies acquired by private-equity firms will struggle to refinance more than 200 billion euros ($272 billion) of leveraged buyout debt as investors eschew risky securities, Fitch Ratings said. “A raft of lower-rated issuers still must find ways to address looming refinancings in 2013 and 2014,” according to the report by Edward Eyerman, the London-based head of European leveraged finance at Fitch Ratings. The deepening sovereign crisis in Europe is closing avenues for the most vulnerable borrowers to replace maturing debt after a record 36.8 billion euros of sales in the first half, Fitch said. Sales of high-yield bonds have dried up as concern that Greece will default prompts investors to favor larger, less- indebted companies that can withstand a slowing economy. “Prolonged uncertainty over refinancing and the macroeconomic outlook will keep many of these companies in operational limbo, potentially threatening their competitiveness,” according to Eyerman. LBOs are traded by the ETF PSP.

3) …Stocks fell in advance of German vote on  EFSF Monetary Authority.
XME -7.0
ALUM -6.0
GDXJ -6.0
SIL -6.0
COPX -5.6
URA -5.4
OIH -5.2
LATM -4.4
KOL -5.0
KRE -4.8
SLX.-4.6
KCE -4.2
IWM -4.1
EMT -3.9
CVCO -3.7
RZV -3.2
EEM -3.0
SEA -3.0
VGK -2.2
EUFN -1.7
ACWI  -2.0

4) … Mainline Economists and Austrian Economists argue for default and the rise of sovereign nations; but European leaders are calling for a collective future.
Martin Feldstein, proposes a default, devalue, leave and borrow anew strategy in Europe’s High Risk Gamble. The Greek government needs to escape from an otherwise impossible situation. It has an unmanageable level of government debt (150% of GDP, rising this year by ten percentage points), a collapsing economy (with GDP down by more than 7% this year, pushing the unemployment rate up to 16%), a chronic balance-of-payments deficit (now at 8% of GDP), and insolvent banks that are rapidly losing deposits.

The only way out is for Greece to default on its sovereign debt. When it does, it must write down the principal value of that debt by at least 50%. The current plan to reduce the present value of privately held bonds by 20% is just a first small step toward this outcome.

If Greece leaves the euro after it defaults, it can devalue its new currency, thereby stimulating demand and shifting eventually to a trade surplus. Such a strategy of “default and devalue” has been standard fare for countries in other parts of the world when they were faced with unmanageably large government debt and a chronic current-account deficit. It hasn’t happened in Greece only because Greece is trapped in the single currency.

The markets are fully aware that Greece, being insolvent, will eventually default. That’s why the interest rate on Greek three-year government debt recently soared past 100% and the yield on ten-year bonds is 22%, implying that a €100 principal payable in ten years is worth less than €14 today.

Why, then, are political leaders in France and Germany trying so hard to prevent – or, more accurately, to postpone – the inevitable? There are two reasons.

First, the banks and other financial institutions in Germany and France have large exposures to Greek government debt, both directly and through the credit that they have extended to Greek and other eurozone banks. Postponing a default gives the French and German financial institutions time to build up their capital, reduce their exposure to Greek banks by not renewing credit when loans come due, and sell Greek bonds to the European Central Bank.

The second, and more important, reason for the Franco-German struggle to postpone a Greek default is the risk that a Greek default would induce sovereign defaults in other countries and runs on other banking systems, particularly in Spain and Italy. This risk was highlighted by the recent downgrade of Italy’s credit rating by Standard & Poor’s.

A default by either of those large countries would have disastrous implications for the banks and other financial institutions in France and Germany. The European Financial Stability Fund is large enough to cover Greece’s financing needs but not large enough to finance Italy and Spain if they lose access to private markets. So European politicians hope that by showing that even Greece can avoid default, private markets will gain enough confidence in the viability of Italy and Spain to continue lending to their governments at reasonable rates and financing their banks.

If Greece is allowed to default in the coming weeks, financial markets will indeed regard defaults by Spain and Italy as much more likely. That could cause their interest rates to spike upward and their national debts to rise rapidly, thus making them effectively insolvent. By postponing a Greek default for two years, Europe’s politicians hope to give Spain and Italy time to prove that they are financially viable.

Two years could allow markets to see whether Spain’s banks can handle the decline of local real-estate prices, or whether mortgage defaults will lead to widespread bank failures, requiring the Spanish government to finance large deposit guarantees. The next two years would also disclose the financial conditions of Spain’s regional governments, which have incurred debts that are ultimately guaranteed by the central government.

Likewise, two years could provide time for Italy to demonstrate whether it can achieve a balanced budget. The Berlusconi government recently passed a budget bill designed to raise tax revenue and to bring the economy to a balanced budget by 2013. That will be hard to achieve, because fiscal tightening will reduce Italian GDP, which is now barely growing, in turn shrinking tax revenue. So, in two years, we can expect a debate about whether budget balance has then been achieved on a cyclically adjusted basis. Those two years would also indicate whether Italian banks are in better shape than many now fear.

If Spain and Italy do look sound enough at the end of two years, European political leaders can allow Greece to default without fear of dangerous contagion. Portugal might follow Greece in a sovereign default and in leaving the eurozone. But the larger countries would be able to fund themselves at reasonable interest rates, and the current eurozone system could continue.

If, however, Spain or Italy does not persuade markets over the next two years that they are financially sound, interest rates for their governments and banks will rise sharply, and it will be clear that they are insolvent. At that point, they will default. They would also be at least temporarily unable to borrow and would be strongly tempted to leave the single currency.

But there is a greater and more immediate danger: Even if Spain and Italy are fundamentally sound, there may not be two years to find out. The level of Greek interest rates shows that markets believe that Greece will default very soon. And even before that default occurs, interest rates on Spanish or Italian debt could rise sharply, putting these countries on a financially impossible path. The eurozone’s politicians may learn the hard way that trying to fool markets is a dangerous strategy.

No one knows if Greece will leave or be forced out of the EU. But I question, would anyone lend to them? One thing is for sure, history repeats itself, Greece is going to default, and out of the chaos will come a new order, that being authoritarian rule through regional economic government, as leaders are calling for a collective future.

Open Europe reports Barroso calls for pooling of debt at the eurozone level.  The President of the European Commission, José Manuel Barroso, delivered his annual ‘State of the Union’ address to the European Parliament this morning in which he said the EU faced the biggest challenges in its history. He insisted that: “Greece is, and will remain, a member of the euro area”, argued that monetary union needed to be completed with an economic union, and announced that the Commission will present proposals for a “single, coherent framework to deepen economic co-ordination and integration, in particular in the euro area” in the coming weeks. And he called for more integration between EU member states, including greater political union and more pooling of efforts in the defence sector, and urged national governments across the EU “to show a bit more pride in Europe. I want to see and hear that pride in being European”.

Open Europe reports On the WSJ’s Real Time Brussels blog, Stephen Fidler in article EFSF Leverage: A Rundown notes, “It appears that the only way to bulk up the EFSF convincingly through leverage is for it to gain access to ECB funding, directly or indirectly. That leads to the question now being asked by some analysts in Brussels: Why, if the expansion of the EFSF depends entirely on the ECB’s balance sheet, wouldn’t it make more sense for that balance sheet be used to buy government bonds directly, cutting out the middle man?” … And Open Europe reports In the Irish Independent, David McWilliams argues, “Expect the Greeks to be allowed to default in some form in the next few days. if Greece can default on its debts, why not the Irish banks on their bondholders? This would save us tens of billions of euro. After all, the ECB is on the hook in Greece, and it is also on the hook here. What is good for the Grecian goose must also be good for the Celtic gander.”

Steven Erlanger of the NYT writes on the engine of depression: Everyone agrees that countries like Greece need to cut their deficits. But if everyone is cutting at the same time, and in an uncoordinated way, the result may be a fierce economic contraction for Europe as a whole. And without growth, there is very little hope of getting out of the “debt trap,” whereby more cuts in government spending result in recession, lower tax receipts and larger deficits. “If there is austerity everywhere, where is the engine for growth?” said Jean-Paul Fitoussi, professor of economics at the Institute of Political Studies in Paris. “If there is no consumption, no reason to invest, difficulty in accessing the credit market, where is the growth? The only engine that is functioning in this view is the engine of depression, and this will worsen the sovereign debt and deficit problem.” The Germans and northerners, Mr. Fitoussi said, still believe that austerity and recession eventually will lead to stability, confidence and growth. “But there is no way what the Germans are saying can be true without divine intervention or a belief in miracles,” he said. “No austerity program can lead to growth in a period of discontinuity in the global economy and slowing economic activity everywhere.” Mr. Fitoussi has just done a study of economic growth in France, which is currently nearly flat, and which will have a growth rate of about 0.8 percent in 2012 if little changes, he said. “But if all the countries in Europe follow this austerity program,” Mr. Fitoussi said, France also will fall into recession, and its economy will shrink by 1 percent.  

Authoritarian rule has been the way through out history. Authoritarian rule in a collective is the future.

Authoritarians have ruled throughout history. These have included Nebuchadnezzar ruling Babylon; Cyrus and Cyrus and Darius ruling Merdo Persia; Charlemagne ruling Rome; Tony Blair ruling Great Britain, and George Bush, The Decider, ruling America with Unilateral Authority.

Authoritarian rule in a collective, is the future. A Tsunami of collectivism is coming. The Clarion Call of the 300 elite of Club of Rome is compelling for regional economic government. The visionaries foresaw that the engine of growth that came from Milton Friedman’s Free To Choose Floating Currency Regime, would sputter as currencies sink, as sovereign debt fails, and as credit evaporates, and that a new regime of state corporatism should rule in all of the world’s ten regions.

Obviously the writings of Austrian Economists and  mainline economists, like Mr. Feldstein, reveal they are in denial or blind, to the fact that Neoliberalism died and Neoauthoritarianism is rising.

Rebeca Wilder in EconoMonitor relates It’s a sovereign coordination crisis. Eroding implicit government guarantees on the liabilities side of bank balance sheets and ability to recapitalize writedowns on the asset side of bank balance sheets. This is big; and in my view, the driving force of bank risk at this time. As policy makers debate about what cannot be done, they’re missing a glowing opportunity to prevent a banking crisis (see Munchau’s article in the FT). Essentially, bond investors do not ‘believe’ that policy makers can individually address their own banks’ capital needs and imminent deleveraging (see my previous post on bank leverage) a joint euro-wide effort is needed. Lack of credible coordination among the sovereigns has left banks wide open to speculative attack.The pressure’s on. We’ll see if policy makers can understand what I see: this is not a liquidity crisis, this is a sovereign coordination crisis.

Under Neoauthoritarianism, there are no sovereign individuals, as there are only sovereign leaders, who will put an end to any free enterprise, as economic life will exist for the security and prosperity of the regional government. Choice is the epitaph on the tombstone on the former regime of Neoliberalism. And Freedom is a simply a mirage on the Neoauthoritarian Desert of the Real.

As The Oracle said, Were all here to do what we are her to do. Milton Friedman was a libertarian, he came to set investors and bankers free. He was just one many libertarians; those given to the belief that they are sovereign individuals; this group of individuals includes: individualist anarchists, (Lysander Spooner), anarcho-capitalists (Murray Rothbard, John Locke), constitutionalists (Chuck Baldwin), fiscal libertarians (Kristin Davis), objectivists (Ayn Rand), libertarian economists (Milton Friedman), left-libertarians (Noam Chomsky), and anarcho surrealists (Andre Breton). In contrast, The Call of The Club Of Rome, is a terminator; it can’t be argued with, it can bargained with; it can’t be reasoned with; it is coming to terminate liberty. Collectivism is abhorrent to Austrian Economists just as sin is to Christians. Collectivism is viewed by Ludwig von MIses, and Murray Rothbard, as tantamount to death.

Neoliberalism was fathered by Milton Friedman, as he suggested floating currencies, and featured wildcat governance, a Doug Noland term. Neoauthoritarianism was fathered by the August 2011 Angela Merkel and Nicolas Sarkozy Joint Communique for a true European Economic Government, and features wildcat governance, where leaders bite, rip, and tear one another.

Out of the EU sovereign debt and banking crisis, European leaders will waive national sovereignty, announce regional framework agreements, which supplant and transcend state Constitutional law and Euro Treaty Law, as well as call for the appointment of a President of the EU.  He must have the quality of fierceness, as he will have a whole spectrum of angry to deal with. A leading individual for this position is Herman Van Rompuy, as he orchestrated the original Greek bailout, and as who the Daily Mail reports as saying, the age of the nation state is over and the idea that countries can stand alone is an ‘illusion’ and a ‘lie’.

Commodities, Oil, Metals, Currencies, And Stocks Pop On Euro Hope … US Treasuries Tumble On Expiration Of Operation Twist … The Age of The Bond Vigilantes Is At Hand … The Clarion Call Has Sounded And It Can Not Be Resisted

September 27, 2011

Financial market report for September 27, 2011

1) … Commodities, DBC, oil, USO, metals, DBB, and stocks popped on Europe hope.
The yenguy news service reports stocks soared on a wave of hope that euro zone officials were working to add measures to cut Greece’s debt and shore up the region’s banks. While S&P warns that a leveraged EFSF would endanger Germany’s credit rating, and that the rating agency says the limit of what can countries can guarantee without damaging their positions, has been reached.   

Stocks rising included the following: ACWI 1.9%, VSS 2.8, with European Shares, VGK 2.7, EWI 3.2, EWG 3.7, EWO 3.8, EWQ 4.0, GERJ 4.4.

Emerging Markets, EEM 3.1

Financials rising included EUFN 3.8, CHIX 7.2, KRE 1.5, BRAF 5.2, EMFN 5.7, EPI 3.2, PSP 2.7

China YAO 2.7, and HAO 3.1

CHIM 8.4, COPX 5.6, BARN 4.7 and CRBA 6.8, CRBI 5.5, ALUM 7.8, PSCE 3.1, URA 4.6, KOL 2.8,
SIL 2.5, PSCT 4.3, XME 2.7, SLX 2.8, FLM 3.2, PSCI 3.2

RZV rose 2.2 on soaring world currencies,DBV, and emerging market currencies, CEW, both of which took country stocks higher on a risk trade. The Yen, FXE, fell, and the whole spectrum of currencies, FXA, FXE, FXM, FXC, ICN, FXB, FXS, SZR, FXF, BZF, FXY, BNZ, DBV, CEW, CCX, rose as the US Dollar closed lower at 77.51. Countries rising strongly included SKOR, IDX, EWD, EWW, ECH, EWY, KROO, EWA, THD, EWT, CNDA, INP, THD, RSX, TUR and ARGT.

2) … The age of bond vigilantes is at hand as US Treasuries tumbled on exhaustion of Operation Twist, as well as exhaustion of Quantitative Easing.
It’s been theyenguy’s long standing contention  that out of Gotterdammerung, a clash of the Gods, specifically European leaders and the rating agencies, a global economic collapse will emerge. Only time will tell if this assertion is correct.

The bond vigilantes started their call of interest rates higher, causing SBND to rise 6.5% rose and TMV to rise 4.6%.

Treasuries fell as follows: LBND -3.6%, TMF -4.8, ZROZ -2.4, EDV -2.4, TLT -1.5

Bonds, BND, fell 0.2% with BLV -0.8, and LQD -0.3%

3) … In today’s news
Peter Spiegel in FT article Europe thinks the unthinkable to solve crisis reports Once-unthinkable proposals for fiscal union and shared responsibility for sovereign debt are now being hurriedly readied for ministerial discussion. Senior European officials hope that by the time of a summit of European Union leaders in October, they will have: put in place powers for the eurozone’s €440bn rescue fund; agreed on the need to expand the fund’s firepower; and presented plans for further economic integration. But policymakers still have to work out countless disagreements that could doom the process. Eurozone leaders will also start debating wider-ranging reforms to establish more centralised EU authority over national economies. Herman Van Rompuy, the European Council president, will outline proposals at the October summit, including ideas for an EU finance minister and new bonds collectively backed by all 17 eurozone countries.

Zero Hedge reports UBS’ Euro doom and gloom.:The Eurozone Sovereign Crisis has entered a more dangerous phase”.

Associated Press reports Israel approves 1,100 new homes in east Jerusalem.  Israel’s government on Tuesday granted the go-ahead for construction of 1,100 new housing units in occupied east Jerusalem, raising already heightened tensions fueled by last week’s Palestinian move to seek U.N. membership.

The WSJ reports Welcome to the Boardroom: Chelsea Clinton Joins Diller. She’s 31. She’s still a graduate student. And she’s held many different jobs in different industries over the last five years. But those factors didn’t prevent Chelsea Clinton from landing a plum assignment: joining the board of Barry Diller’s Internet media holding company. In her new role, the daughter of former President Bill Clinton and U.S. Secretary of State Hillary Clinton will be the youngest member of IAC’s board by seven years.

Joseph Koshore of WSWS relates Democrats agree to no additional disaster aid in US budget dispute  The Democratic Party-controlled Senate passed a measure that includes no additional emergency aid to victims of natural disaster, a complete capitulation to Republican demands that additional spending be tied to cuts in other government programs. And Walter Gilberti of WSWS relates Governor-appointed official moves to dismantle Detroit public schools  September 26 was the first day of work for John Covington, the former Kansas City schools superintendent who was selected by Michigan Governor Rick Snyder to head a proposed new school district in Detroit that will encompass so-called failed schools.

The AP reports Wife of Mexican drug lord gives birth in California. And Holly Bailey of The The Ticket relates Obama’s Wall Street donors shift support to Mitt Romney

4) … The Club of Rome’s Clarion Call can not be resisted … A EU fiscal union and a European economic government is Europe’s Fate.
Ambrose Evans Pritchard reports German turmoil over EU bail-outs as top judge calls for referendum. “Germany’s top judge has issued a blunt warning that no further fiscal powers may be surrendered to Europe without a new constitution and a popular referendum, vastly complicating plans to boost the EU’s rescue machinery to €2 trillion (£1.7 trillion).”

“Andreas Vosskuhle, head of the constitutional court, said politicians do not have the legal authority to sign away the birthright of the German people without their explicit consent.” … “The sovereignty of the German state is inviolate and anchored in perpetuity by basic law. It may not be abandoned by the legislature (even with its powers to amend the constitution),” he said.

“There is little leeway left for giving up core powers to the EU. If one wants to go beyond this limit  which might be politically legitimate and desirable – then Germany must give itself a new constitution. A referendum would be necessary. This cannot be done without the people,” he told newspaper Frankfurter Allgemeine.

“The extraordinary interview comes just days before the Bundestag votes on a bill to revamp the EU’s €440bn bail-out fund (EFSF), enabling it to purchase EMU bonds pre-emptively and recapitalise banks.”

“Carsten Schneider, finance spokesman for the Social Democrats, demanded that Chancellor Angela Merkel and finance minister Wolfgang Schäuble clarify their “true intentions ” before the vote on Thursday.” … “A new multi-trillion programme is being cooked up in Washington and Brussels, while the wool is being pulled over the eyes of Bundestag and German public. This is unacceptable,” he said.

“Prince Hermann Otto zu Solms-Hohensolms-Lich, the Bundestag’s deputy president and finance chief for the Free Democrats (FDP) in the ruling coalition, expressed outrage over the secret plans.”

“Unless the German finance minister can give an immediate assurance that there will be no leveraged formula, I will not vote for this law. We might as well dispense with months of negotiations if all this means is that the Bundestag will be circumvented and served cold left-overs,” he said.

“The accusation that German leaders are conspiring with EU officials to emasculate the Bundestag is highly sensitive, going to the core of the raging debate in recent months over EU encroachments on German democracy.”

The top judge’s call will not stand, eventually, a global economic collapse will occur as a result of the European Sovereign Debt Crisis, that is Eurocalypse, a Reggie Middleton term, possibly combined with a failed US Treasury auction and soaring US Treasury interest rates.  European Leaders will soon announce regional framework agreements, waive national sovereignty, and through a EU wide coup d etat, form a Super European Government, as well as call for a President of the EU, who together with a European Banker, provide a new moneyness, that is a new seigniorage, based upon diktat, austerity and debt servitude. Their word, will, and way, will be the EU’s Common Vision, and the people will marvel, and follow after it, giving it their full allegiance as foretold in Bible prophecy of Revelation 13:3.     

No secret plan exists. there is no conspiracy, Just the Sovereign Lord God described in Isaiah 4:9-14, exercising His Sovereign Will, Ephesian 1:1, to destroy all economic life, such as Greek Socialism, as well as sovereign nation states, such as Greece, so as to announce the rule of God’s Son Jesus, as is presented in Revelation 2:27.

There is only fateful working of the 1974 Call of the Club of Rome for regional economic government in all of the world’s ten regions, in response to the death of the Milton Friedman, free to choose, regime, which will come out of ongoing deleveraging, derisking, and disinvesting.    

Neoliberalism was fathered by Milton Friedman, as he suggested floating currencies, and featured wildcat governance, a Doug Noland term. Neoauthoritarianism was fathered by the August 2011 Angela Merkel and Nicolas Sarkozy Joint Communique for a true European Economic Government, and features wildcat governance, where leaders bite, rip, and tear one another.

Bible prophecy of Daniel 2:32-42 communicates that God has operated to provide great leaders throughout history. These have included Nebuchadnezzar ruling Babylon; Cyrus and Cyrus and Darius ruling Merdo Persia; Charlemagne ruling Rome; Tony Blair ruling Great Britain, and George Bush, The Decider, ruling America with Unilateral Authority.

And Bible prophecy of Revelation 17:12-14, reveals that ten kings will come to rule, each in his own regional power base. Daniel 8:22-23 foretells that the coming President of the EU will be one knowledgeable with the scheme of framework agreements; he must have the quality of fierceness as he will have a whole spectrum of angry to deal with. A leading individual for this position is Herman Van Rompuy, as he orchestrated the original Greek bailout, and as who the Daily Mail reports as saying, the age of the nation state is over and the idea that countries can stand alone is an ‘illusion’ and a ‘lie’   

Under Neoauthoritarianism, there are no sovereign individuals, as there are only sovereign leaders. God has ordained in Revelation 13:1-4, that Neoauthoritarianism manifest as a Beast Regime of state corporatism, that is statism, to govern mankind, putting an end to any free enterprise. Economic life will exist for the security and prosperity of the regional government.

Choice is the epitaph on the tombstone on the former regime of Neoliberalism. Freedom is a mirage on the Neoauthoritarian Desert of the Real.

Today’s rally base upon hope for the involvement of leaders to provide a solution to the sovereign crisis, is Neoliberalism last gasp and last stand as the traders rallied on the Spirit of the Cat In The Hat. The bond vigilantes and the short sellers, stand at the door enlivened with Neoauthoritarianism’s Spirit of Wilding as The Automatic Earth in Leveraged stability? Excuse me?  which relates Marc Jones for Reuters, who writes ECB fights to avoid role in euro zone rescue fund. And relates Jeff Randall of the Telegraph writes There are no miracles in Greek tragedies, Lending ever greater sums to a mismanaged and corrupt economy won’t make it solvent. The bail-out of Greece began with a 100-billion-euro package. Very soon a second deal of the same order was required. Now we learn that the 440-billion-euro European Financial Stability Facility may need to be five times bigger to beat back the Debt Beast, which, having gobbled up Greece, is turning its attention to Italy, where Silvio Berlusconi is in a 1.9-trillion-euro hole. Finally, if you’re outraged by Greece and Greek Socialism, now, wait till you read Michael Lewis’ new book.

Top German Central Banker Slams Debt Crisis Steps As Angela Merkel Fights For The EFSF And Her Career … S&P Warns EFSF Expansion Will Lead to More Sovereign Downgrades, Rendering EFSF Itself Useless … French, German And Belgian CDS Hit All Time Wides

September 26, 2011

Financial market report for September 26, 2011

1) … The Associated Press reports Germany’s top central banker warns that efforts to halt the debt crisis in Europe could give countries incentives to run up deficits in the future. The statements by Bundesbank president Jens Weidmann underline his differences with German Chancellor Angela Merkel and his fellow board members of the European Central Bank. Weidmann said in the text of a speech to be delivered in Washington, DC that measures aimed at making financial support from other eurozone governments available to indebted countries means “we risk seeing the propensity for excessive deficits rise even further in the future.” European leaders agreed on the measures July 21 and they are now before national parliaments. The German parliament is expected to vote yes on Thursday.

Christian Lindner, the general secretary of the Free Democrats, Merkel’s junior coalition partner, called on the chancellor to provide clarity and stressed that his party opposes allowing the fund to tap ECB loans. A prominent opposition lawmaker, center-left Social Democrat Carsten Schneider, said the government should come clean on its “real intentions.” “In Washington and Brussels they are already planning new programs in the billions, and in Germany the parliament and public are having the wool pulled over their eyes,” Schneider was quoted as telling Der Spiegel magazine. Merkel’s spokesman rejected that accusation sharply. “The true intentions of the government and the chancellor are on the table,” Steffen Seibert said. “They will be decided on in parliament Thursday.”

2) … Open Europe reports President of German Constitutional Court warns against transferring more competences to the EU. Süddeutsche Zeitung reports that the leader of the German Social-Democrats Sigmar Gabriel has demanded a referendum on fundamental changes to the EU Treaties, saying, “On fundamental questions of European policy, the people should decide themselves directly in the future. We need again the consent of our citizens on Europe.”

3) … Open Europe reports following yesterday’s senatorial elections in France, with half of the French Senate’s 348 seats up for re-election, centre-left parties now hold a majority for the first time since the foundation of the Fifth Republic in 1958, reports Le Monde Le Figaro El País Les Echos FT

4) … Euro Intelligence, provides the most comprehensive reporting in its for fee news service which relates Paul Krugman and Kash Mansori say the origin of the eurozone crisis is not fiscal deficits, but current account imbalance. The eurozone crisis is becoming increasingly prominent in Paul Krugman’s blog. Over the weekend, he had a very interesting comment on the origins of the eurozone crisis disputing the assertion by Wolfgang Schäuble and other European policy makers, who keep on saying that this is a fiscal crisis at heart. He reproduced a table from Kash Mansori, which listed the eurozone countries in terms of current account deficits and budget deficits. The list shows a perfect correlation between a country’s current account deficits and its vulnerability in the crisis, Portugal, Greece, Spain and Ireland all had large current account deficits while the relationship between fiscal deficits and the crisis is much less clear.

5) … And Euro intelligence reports Merkel fights for the EFSF and her political survival in crucial Bundestag vote week. Angela Merkel is fighting for her political survival this week with the EFSF vote coming up and uncertainties remaining if she will be able to have her coalition provide her with the necessary majority. For that reason she appeared in the most regarded political talk show to explain her support for Greece. “ We buy time for Greece and other countries so that the Euro remains stable, Europe is worth any investment”, she said according to mass circulation daily Bild. The coalition has 19 more votes than a majority requires  but everybody agrees but in recent test votes 25 voted against. Domestic policy commentators agree that not getting her own majority would very likely to Merkel’s downfall.

6) … NYT reports  Worried Greeks fear collapse of middle class welfare state

7) … Bloomberg reports Deutsche Bank CEO says Euro-Fund crucially important. Deutsche Bank AG Chief Executive Officer Josef Ackermann said it was “crucially important” for euro-area governments to implement a July 21 agreement to beef up the rescue fund for their common currency. Ackermann, speaking as chairman of the Institute of International Finance at the group’s annual meeting in Washington today, called upon euro-area governments to quickly approve the 440 billion-euro ($593 billion) European Financial Stability Facility and measures to enhance greater economic policies discipline, according to an e-mailed statement from the IIF, a global association of financial institutions. “The euro is an essential and stable pillar of the international monetary system and has brought stability and growth to its members,” Ackermann said. “Its central role in the global monetary system makes it all the more important that any doubt about the workability of its institutional foundations be removed.”

8) … Zero Hedge reports S&P warns EFSF expansion will lead to more sovereign downgrades, rendering EFSF itself  useless.

9) … Tyler Durden reports French, German And Belgian CDS Hit All Time Wides

10) … Bloomberg reports Copper fell for a seventh day, the longest losing streak since December 2008. Copper has the most significant fundamental risk of declining out of the industrial metals because prices are well above the marginal cost of production, Macquarie Group Ltd. said.

11) … The WSJ reports Congress forced to stay as a Goverment Shutdown looms. Congress was scheduled to be off this week, but lawmakers must stay in Washington because they made no progress over the weekend in settling a dispute over spending that threatens a possible government shutdown. Despite promises to work together following a public backlash against the bickering that consumed much of the summer, Republicans and Democrats face the reality that disaster aid could run out Tuesday and the government could partially shut down beginning this weekend unless they strike a deal quickly.

12) … Between The Hedges reports Rasmussen Reports Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Sunday shows that 20% of the nation’s voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-three percent (43%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -23.

13)  … Bonds, BND, traded lower today.The world is passing through peak credit.  Mortgage rates hit record low of 4.0% as other interest rates rose on steeping of yield curves. Irvine Renter relates Mortgage interest rates continue to drop to record lows with recent rates dipping below 4%. This as speculation on Operation Twist unwound today. Ben Bernanke’s Operation Twist, in addition to driving the interest rate on the 10 Year US Government Note, $TNX, to a record low, and sending the US Government Note, TLT soaring, had flattened the 10 30 yield curve, $TNX:$TYX, and skewed investment to the longer duration bonds such as BLV, ZROZ, and the 30 Year US Government Bond, EDV, which have risen vertically. But today, this action unwound, as yield curves steepened, as is seen in STPP rising and FLAT falling. Those owning TMV, and using margin to short TMF profited today. Mortgage Backed Bonds, MBB, and Municipal Bonds, MUB, and one Year US Treasuries, SHY, fell the least of any traded bonds.

The chart of $TNX:$TYX shows that the 10 30 Yield curve is steepening.

The chart of Bonds, BND, shows peak credit has been achieved.

The chart of world government bonds, BWX, shows that the global government finance bubble has burst.

The chart of world stocks, ACWI, relative to world government bonds, BWX, communicates that the seigniorage, that is the moneyness, of the world central banks has failed.

14) … The Precious Metal Mining Shares, GDX, and 30 Year US Treasuries, EDV, always make market turns lower together. The precious metal mining shares fell strongly lower last week. US Government Bonds will now be turning lower, and can be followed in the chart of GDX relative to EDV, GDX:EDV.

15) …Bloomerg reports Emerging market stocks plunge, posting biggest weekly decline since 2008. Emerging market stocks dropped, with the benchmark index posting its biggest weekly loss since 2008, as concern deepened that the global economic slowdown will overwhelm government efforts to support growth. The MSCI Emerging Markets Index fell 2.2 percent to 861.53 at 5:11 p.m. in New York, extending this week’s retreat to 12 percent. The MSCI emerging stock gauge has tumbled 29 percent from this year’s high on May 2. The chart of the emerging market shares relative to emerging market currencies, EEM:CEW, suggests that the fall in stock value came from an unwinding of yen carry trade investing.

16) … Business Insider reports Soros: Failing to resolve the Euro debt crisis will trigger a breakdown of the global financial system.
Finally, we have a report along the lines that I have been communicating for quite some time. The recent waterfall loss in world currencies, DBV, and emerging market currencies, along with the rise in the US Dollar, $USD, marks the end of the Milton Friedman Free To Choose Floating Currency Regime. In 1974, the 300 elites of the Club of Rome called for regional economic government in all of the world’s ten regions, as a solution to the political and economic chaos, which will come from the derisking, disinvesting and deleveraging, that are seeing. The chart of the US Dollar, $USD, for this year, communicates that the US Dollar is now rising, and world currencies and emerging market currencies are sinking terminating the Neoliberal regime of the last 40 years.

While Angela Merkel and Nicolas Sarkozy may be losing their political careers, they are nevertheless ambassadors of the Club of Rome’s Ten Toed Kingdom of Regional Economic Government, as witnessed in their August Joint Communique, where they called for a “true European Economic Government”.  Christine Lagarde has the same vision, as Liz Alderman of the NYT her saying: “Europe needs a common vision for its future,” she wrote via e-mail. “Put simply, it needs more Europe, not less.” The new regime is rising to rule in all of mankind’s seven institutions and ten world regions. The Club of Rome’s Call is clarion, that is clear, ringing and distinctive. It carries an authoritarian imperative.

Just as the one man regime, that is Milton Friedman’s Regime, was global and spanned the world’s two leading kingdoms, those being being Britain’s post colonial rule, and US hegemony, it is reasonable that another man’s regime, will eventually be global. Neoliberalism was characterized by wildcat finance, a Doug Noland term. Neoauthoritarianism, will be characterized by wildcat governance, where leaders bite, claw, and tear one another. A top dog leader, the sovereign, and a top dog banker, the seignior, will rise above all the others.

17) … Gold, $GOLD, is a currency; it has fallen strongly with the rest of the other world’s currencies. The gold ETF, GLD, closed at 157 today; it could easily fall lower to $155, before moving higher again.
18) … Bloomberg reports Thai stocks drop most in almost three years on economic concern. Thailand’s benchmark stock index slumped the most in almost three years after the central bank said it may trim its economic growth projections as the global recovery falters. The SET Index fell the most among Asian benchmark gauges today, declining 6 percent to 900.75 as of 3:30 p.m. local time, poised for the biggest drop since Oct. 27, 2008. PTT Pcl, whose shares account for 10 percent of the index, slumped as much as 12 percent as crude fell for a fourth day. Global investors have cut holdings in Thailand’s equities and currency this month on expectation exports, which account for about 60 percent of the economy, will slow amid the European debt crisis and weakening U.S. recovery.
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Money Market Fund Exposure To French Banks Will Be A Leading Factor In The Soon Coming Global Economic Collapse. … Derivative Exposure By Large Banks Will Send The Global Economy Into The Dark Ages

September 24, 2011

Money Market Funds and Derivative Report for September 23, 2011

Doug Noland reports Total Money Fund assets fell $11.8bn last week to $2.621 TN.  Money Fund assets were down $189bn y-t-d, with a decline of $182bn over the past year, or 6.5%.  

Money Market Funds are between a rock and a hard place. Their over exposure to money market funds will be a leading factor in the soon coming global economic collapse, as there will be a run on these investments when they break the buck and fail to provide their constant one dollar base.

Alex Gloy of Lighthouse Investment Management relates in Zero Hedge, “What were US Money Market Funds, MMF, going to do? US Treasury yields are 0.09% for 12 months, 0.02% for 6 and negative 0.01% for 3 months.You can’t deliver negative yields to investors (that would empty the fund pretty quickly) and you still want to charge some management fees. Enter funding-hungry European banks. You might be surprised to learn the following: the world’s largest bank (by assets) is French: According to Fitch Ratings, French banks were the single largest recipient of funds from US MMF.”  Mr. Gloy continues, “ZIRP is likely to have been an important trigger for a USD funding crisis at French banks.”  And Mr. Gloy adds, “I am not sure what possessed MS to increase their exposure to French banks by 300% within a year (I suspect same dearth of lending opportunities given trillions of excess reserves parked at the Fed). The French engagement ($39bn) exceeds MS’s market capitalization ($26bn) by far. Morgan Stanley’s share price has been cut in half since the beginning of the year and is now trading at less than 50% of book value. In other words: the market does not trust it’s books, or believes MS will destroy value going forward (or both).”  Dingleberry comments: “ZIRP has caused all us to become maverick gamblers.” Business Insider relates Signs of an Institutional run on French Banks, El-Erian says and Wall Street Journal reports UK Companies Seen Pulling Cash From European Banks, Governments.

Tyler Durden reports that the latest quarterly report from the Office Of the Currency Comptroller is out and as usual it presents in a crisp, clear and very much glaring format the fact that the top 4 banks in the US now account for a massively disproportionate amount of the derivative risk in the financial system. Specifically, of the $250 trillion in gross notional amount of derivative contracts outstanding (consisting of Interest Rate, FX, Equity Contracts, Commodity and CDS) among the Top 25 commercial banks (a number that swells to $333 trillion when looking at the Top 25 Bank Holding Companies), a mere 5 banks (and really 4) account for 95.9% of all derivative exposure (HSBC replaced Wells as the Top 5th bank, which at $3.9 trillion in derivative exposure is a distant place from #4 Goldman with $47.7 trillion). The top 4 banks: JPM with $78.1 trillion in exposure, Citi with $56 trillion, Bank of America with $53 trillion and Goldman with $48 trillion, account for 94.4% of total exposure. As historically has been the case, the bulk of consolidated exposure is in Interest Rate swaps ($204.6 trillion), followed by FX ($26.5TR), CDS ($15.2 trillion), and Equity and Commodity with $1.6 and $1.4 trillion, respectively. And that’s your definition of Too Big To Fail right there: the biggest banks are not only getting bigger, but their risk exposure is now at a new all time high and up $5.3 trillion from Q1.

Competitive Currency Devaluation Heralds The End Of The Milton Free To Choose Floating Currency Regime … A Sovereign Leader Will Come To Rule The Eurozone.

September 24, 2011

Financial Market Report for the week ending September, 23, 2011

1) … Competitive currency deflation heralds the end of the Milton Free To Choose Floating Currency Regime
Doug Noland reports that the US Dollar, $USD, rose 2.5%. The Japanese yen, FXY,  increased 0.3% unwinding carry trade investment as well as causing disinvestment from country stocks.  On the downside,
the South African rand declined, SZR, 7.7%,
the New Zealand dollar, BNZ, 6.3%,
the Australian dollar, FXA, 5.6%,
the Brazilian real, BZF,  5.5%,
the Canadian dollar, FXC, 4.9%,
the South Korean won 4.7%,
the Norwegian krone 4.7%,
the Swedish krona, FXS, 4.6%,
the Singapore dollar 4.4%,
the Mexican peso, FXM,  3.8%,
the Swiss franc, FXF, 3.3%,
the Taiwanese dollar 2.7%,
the euro, FXE, 2.1%,
and the Danish krone 2.1%.

Bloomberg reports Worst Asia Currency Drop Since ’97 Spoils Debt: The biggest monthly drop in Asian currencies since 1997 is prompting overseas investors to pull out of regional bonds, driving up yields. “Asia was considered a safe haven but recent foreign-exchange performance has caught the majority offside, both traders and corporates,” Patrick Perret-Green, head of rates and foreign exchange at Citigroup Inc. in Singapore, said in an interview. “The risk remains for further redemptions.” The Bloomberg-JPMorgan Asian Dollar Index slumped 4.3% this month, heading for its biggest loss since December, 1997, led by a 9.6% decline in South Korea’s won.

Ben Bernanke’s Operation Twist, in addition to driving the interest rate on the 10 Year US Government Note, $TNX, to a record low, and sending the US Government Note, TLT soaring, has flattened the yield curve, and skewed investment to the longer duration bonds such as BLV, ZROZ, and the 30 Year US Government Bond, EDV, which have risen vertically. Corporate investors might consider investing in STPP and using margin to buy sell TMF short.

Doug Noland relates For going on three years now, the global leveraged speculating community has been positioning for ongoing dollar devaluation. The Washington policy playbook ensured massive Treasury issuance, zero rates, and unprecedented central bank monetization.  

(This has caused gold to soar and M2 to rise M2 money supply declined $7.5bn to $9.584TN. Narrow money has expanded at a 11.9% pace y-t-d and 10.3% over the past year).  

Chairman Bernanke essentially signaled to the hedge funds to go short the dollar and take the proceeds and acquire any higher-returning asset anywhere in the world.  A strong case can be made that never in history has policymaking so incentivized global leveraged speculation.  The leveraged players anticipated riding QE1 to QE15, not a policy course that would abruptly stop at QE2 and do a twist – especially not in the midst of a global crisis and de-risking environment. Anyway, post-2008 reflation stoked a massive flow of “hot money” that inundated the “developing” world, where domestic Credit systems were already firing on all cylinders.  It was a historic boom – as well as a fundamental facet of my “global government finance bubble” thesis.

In a week when ECB President Trichet and Pimco’s El-Erian both referred to a global sovereign debt crisis, the scope of market tumult broadened meaningfully.  Importantly, de-risking/de-leveraging dynamics intensified, and “developing” bond markets started to come unglued.  Emerging debt spreads widened dramatically.  In the (dislocating) In the Credit default swap market (CDS), for example, the cost to protect against default in Brazil surged 53 bps to 211, in Mexico 58 bps to 216, Argentina 185 bps to 1,052, South Korea 40 bps to 187, Poland 74 bps to 312, Hungary 79 bps to 531 and Russia 93 bps to 310.  Commodities were also crushed, with silver down 26.3%, copper 16.6%, coffee 12.4%, crude oil 9.4%, sugar 9.7%, cotton 8.3%, and gasoline 8.2%.  In “developing” currencies, the South African rand dropped 7.7%, the Chilean peso 7.2%, the Brazilian real 5.5%, the Mexican peso 3.8%, the Russian ruble 4.8%, the South Korean won 4.7%, the Singapore dollar 4.4%, the Indian rupee 4.4%, and the Polish zloty 3.9%.   Basically, it was a slaughter, especially if you were leveraged.

The focus remains the unfolding Greek and European debt crisis.  But there were further indications this week that the global leveraged players now face a heightened state of duress.  You were absolutely hammered this week if you were short Treasurys (or U.S. dollar securities) against long positions in global risk assets.  And there seems to be evidence of forced liquidations everywhere, as a 2008-like scenario comes into clearer view.  The bursting of Bubbles in global leveraged speculation and the associated reversal of finance away from the “developing” world portends tightened financial conditions and growth headwinds for the post-2008 crisis global growth “locomotive.”  This more than justifies the pounding that global cyclical stocks suffered this week.

I’ve been really worrying about the European banks; about global derivatives; about the unwind of leveraged trades throughout global markets.  This week’s policy and market developments only added to my anxiety, while confirming my view that risks are greater today than in 2008

The WSJ reports Trichet: Sovereign debt crisis is global, Europe at epicenter. The chart of world government bonds, BWX, and EMB, shows the global government finance bubble has been priced.

2) … World stocks, ACWI , and VSS, together with commodities, DJP, fell terrifically lower on lack of growth prospects and opposition to the US Federal Reserve’s Operation Twist.  
The 11.1% fall in the Morgan Stanley Cyclicals Index, $CYC, heralds the end to economic growth.  
Fallers of the week included:
IYT, -10.1
MOO, -12.0
GDX -11.20
ALUM, -14.7
SIL -15.7
OIH, -16.3
SLX -16.4
CRBI, -17.1
KOL, -19.9
COPX, -22.9
Some of the worst performing stocks over the last week have been natural resource stocks, ANR, HAL, FCX, CLF, all falling on the failure of growth prospects and exhaustion of quantitative easing. Natural Resource Mutual Funds such as Fidelity Select Mutual Fund, FSDPX, suffered a huge loss this week.

Base Metals, DBB, -11.75%, Oil, USO, -8.9%,and Agricultural Commodities, JJA, -8.2%

3) …. Bonds, BND, rose on a flight to percieved safety and on announcement of Operation Twist to buy longer maturity debts.
Sapna Maheshwari of Bloomberg reports: “The Federal Reserve’s ‘Operation Twist’ is failing to ignite the corporate bond market as its second round of quantitative easing did in November, showing the central bank may be running out of tools to revive the economy.  Relative yields widened to a two-year high, a benchmark index of credit-default swaps rose and new sales ground to a halt after the Fed said it will buy $400 billion of long-term debt to cut borrowing costs and avert a recession.”

4) …. Gold, GLD, perceived by many to be the best long term storehouse of wealth fell 9.2%. Reasons for its drop include, it had risen parabolically, it is a currency, margin calls at hedge funds,

5) … Indicators courtesy of Between The Hedges evidence a growing risk trade.
The ECRI Weekly Leading Economic Index Growth Rate -6.70% -60 basis points.
The Emerging Markets Sovereign CDS Index is surging 21.0 bps today to a record 285.9 bps
The 3-Month Euribor-OIS Spread is rising +4 bps to the highest since March 2009. The TED spread is at the highest level since July 2010 despite Europe’s recent efforts

6) … A Sovereign will come to rule the Eurozone and provide a new moneyness, based upon diktat
The Associated Press reports Global leaders struggle to calm recession fears. The world’s economic powers struggled on Friday to get on top of a European debt crisis that is threatening to dump the global economy back into recession.

WSWS reports El-Erian described Europe’s banking system as a “rapidly burning fuse” and warned that “Europe is getting very close to yet another tipping point.” He wrote that all signs point to “an institutional run on French banks” that threatens to see Europe “thrown into a full-blown banking crisis that aggravates the sovereign debt trap, renders certain another economic recession and significantly worsens the outlook for the global economy

Bloomberg reports Greece on edge of biggest insolvency 24 centuries after first city default. History’s first sovereign default came in the 4th century BC, committed by 10 Greek municipalities. There was one creditor: the temple of Delos, Apollo’s mythical birthplace. Twenty-four centuries later, Greece is at the edge of the biggest sovereign default and policy makers are worried about global shock waves of a insolvency by a government with 353 billion euros ($483 billion) of debt,five times the size of Argentina’s $95 billion default in 2001. “There is a monstrously large amount of uncertainty and a massive range of possibilities,” said David Mackie, chief European economist at JPMorgan Chase & Co. in London.

Bloomberg reports Constancio Says Sustained ECB Bond Buying Would Delay Fiscal Fix. European Central Bank Vice President Vitor Constancio said sustained bond purchases by the central bank would only delay the fiscal adjustments that euro- area governments need to make. “The secondary market purchases are not, and cannot be used to circumvent the principle of budgetary discipline as a pillar of Economic and Monetary Union,” Constancio said at an event in Frankfurt last night, according to a text of his speech published by the ECB. “Sustained buying of government paper by the central bank would only postpone problems and delay the necessary fiscal adjustments, ultimately resulting in a build-up of inflationary pressures.” The comments underscore the ECB’s reluctance to continue buying the bonds of distressed euro-area governments to contain a sovereign debt crisis that’s now threatening to engulf Italy and Spain. He said the tensions are “in some respects” more broad- based than those seen in May last year, when Greece’s fiscal meltdown prompted the ECB to enter bond markets for the first time. “It is clear that sovereign debt challenges in individual euro-area countries, no matter their size, can undermine the stability of the euro area as a whole,” Constancio said.

Bloomberg reports France’s BNP, SocGen Beat Retreat as Europe Debt Crisis Deepens. BNP Paribas (BNP) SA and Societe Generale SA, France’s two largest banks, are trimming about 300 billion euros ($405 billion) off their balance sheets as Europe’s deepening debt crisis threatens to make them too big to save. At the end of March, French financial firms had $672 billion in public and private debt in Greece, Portugal, Ireland, Italy and Spain, according to Basel, Switzerland-based Bank for International Settlements. That’s the biggest exposure to the euro-area’s troubled countries and almost a third more than German lenders. The four largest French banks have 5.9 trillion euros in total assets, including loans and bond holdings, or about three times France’s gross domestic product. “The banks are entering a slimming cure, which is forced by the sovereign crisis,” said Jerome Forneris, who helps manage $10 billion, including the two French lenders, at Banque Martin Maurel in Marseille, France

Bloomberg reports French, German bank credit default wagers soar. Also Breakout reports Awaiting the inevitable defaults & fireworks in eurozone crisis.

Seigniorage, which has been based upon carry traded investing, ZIRP credit liquidity, and securitization of GSE Debt, as well as sovereign debt has failed. Doug Noland provides the following Bloomberg reports.

September 20  –  Dow Jones:  “Sovereign debt woes rocking world financial markets are a global phenomenon and not just a European one, even though tensions are the most acute in the euro area now, European Central Bank President Jean-Claude Trichet said Friday.  ‘What we are seeing now is the illustration of a global phenomenon, the global crisis of sovereign risk,” Trichet told a conference in Washington on the sidelines of the annual meetings of the International Monetary Fund.  ‘Forgetting that the euro zone is at the epicenter would be a mistake, but forgetting that this is a global phenomenon would also be a mistake.’”

September 20 – Bloomberg (Jeffrey Donovan):  “Italy’s credit rating was cut by Standard & Poor’s, the country’s first downgrade in five years, as Greece’s worsening fiscal crisis fans concern that contagion will engulf countries such as Spain and Italy.  S&P lowered its rating last night to A from A+, saying weak economic growth, a ‘fragile’ government and rising borrowing costs would make it difficult to reduce Europe’s second-biggest debt. The yield on Italy’s 10-year bond rose 8 basis points to 5.662%, 385 bps more than similar German debt.  The cost of insuring Italy against default rose to a record.”

September 19 – Bloomberg (Emma Ross-Thomas): “Spanish debt is more expensive to insure than Baa2-rated Bulgaria, signaling the euro region’s fourth-biggest economy may not warrant its Aa2 credit status.  Moody’s rates Spain two levels below AAA as does Standard & Poor’s at AA. Fitch has Spain at AA+, one from the top, even after the European Central Bank stepped in to buy its bonds to bring yields down from euro-era records. While Spain is ranked the same as Slovenia by Moody’s and S&P, costs to insure its debt against default are twice as much.  ‘The rating agencies have got their head in the sand,’ Harvinder Sian, a strategist at Royal Bank of Scotland/ ‘Any country where you need the central bank in there supporting the bond market, and a AA rating, suggests something is very badly wrong with the ratings process.’”

September 20 – Bloomberg (Tony Czuczka):  “A ‘wrong philosophy’ of economic growth at all costs has spurred countries to take on debt and must end if policy makers want to leave the crisis behind, German Chancellor Angela Merkel said.  ‘If we understand the crisis properly, we have an historic chance to anchor a new culture of sustainable financial policy in Europe,’ Merkel said… That’s why Germany wrote debt reduction into its constitution and why ‘we are talking about budget consolidation’ as a crisis solution.  ‘I’m convinced that what we are seeing is partly the result of a wrong philosophy over decades — growth first, regardless of the cost… We can’t go on like that. This has to end.’”

September 21 – Bloomberg (Sandrine Rastello):  “The European debt crisis has generated as much as 300 billion euros ($410bn) in credit risk for European banks, the International Monetary Fund said, calling for capital injections to reassure investors and support lending.”  And  September 22 – Bloomberg (John Glover and Ben Martin):  “It’s been 2 1/2 months since a bank managed to sell a conventional bond in Europe’s public markets, the longest period without a deal ever and another example of the sovereign crisis choking off funding.”

Bible prophecy foretells the rise of a sovereign leader to rule the Eurozone.

Austrian Economist Mike Mish Shedlock wrote, “Germany, Austria, Finland, and the Netherlands, can break away”, continuing a theme of breakup of the Eurozone, from many recent blog articles. His thinking is based upon a libertarian precept of sovereign individuals and free enterprise.

Christoph Dreier of WSWS writes the political implications of a Greek default on its debts are also being aired. In a summary of various scenarios for the eventuality of Greece failing to pay its debts, the BBC puts forward two alternatives. The first envisions Greece staying in the euro, with the following result: “Political turmoil: The Greek economy may face total collapse, with banks closed and the government unable to pay for basic public services. This is likely to cause massive civil unrest and a collapse of the government. Greece has already seen rioting and the takeover of government offices. The CIA has warned of a possible military coup.” The second alternative put forward in the BBC report deals with the eventuality of Greece exiting the euro. The consequence: global financial meltdown.

The ideas of a end to the EU, and the hope for national sovereignty, is in direct contrast to God’s Word, the Bible, which reveals that God alone is sovereign, Isaiah 4:9-14, and according to Ephesian 1:1, is exercising His sovereign will, to destroy all economic life, such as Greek Socialism, as well as sovereign nation states, such as Greece, as is presented in Revelation 2:27.

Greece is a socialist utopia which came via falling Greek sovereign debt interest rates between 1998, with the abandonment of the Drachma, and the use of the Euro, and the beginning of the European Sovereign Debt Crisis in 2009. Greece had a pony and cart economy before the use of the common currency.  Its standard of living rose the most of all the Eurozone members, as investment in Greece and Greek Banks such as the National Bank of Greece, NBG, soared. At least one member of each household is employed by the government, and the Greek Constitution prohibits firing of state workers. Patronage and pork abound. Many occupations are unionized. There are for all practical purposes only socialist and communist parties. It’s a state worker system, a vote for jobs economy. Meritocracy is non existent. It is considered to patriotic to under report income and forgo paying taxes. There sees little legislative resolve for more austerity measures as Mike Shedlock reports Greek parliament vote on austerity postponed due to insufficient votes.     

Associated Press reportgs Moody’s downgrades 8 Greek banks Moody’s downgraded eight Greek banks Friday, citing their exposure to their government’s bonds and the deteriorating economic situation in the country as it struggles to convince creditors it’s doing enough to get more bailout cash. Moody’s Investors Service downgraded National Bank of Greece, EFG Eurobank Ergasias, Alpha Bank, Piraeus Bank, Agricultural Bank of Greece and Attica Bank by two notches from B3 to CAA2. Though downgrading Emporiki Bank of Greece and General Bank of Greece, which are majority-owned by France’s Credit Agricole and Societe Generale respectively, to B3 from B1, Moody’s said their parents continue to provide strong support. As a result, their ratings are three notches higher than the others. The agency also warned that further downgrades were possible by slapping a negative outlook on their ratings. National Bank of Greece, NBG, closed 2.7% lower for the week at $0.80.    

God has two leading ambassadors, Angela Merkel and Nicolas Sarkozy, who called for true European Economic Government.in their joint Communique of August 2011.  This soon coming Super European Government, is part of the ten toed kingdom of regional economic government, as foretold in bible prophecy of Daniel 2:42, where according to Revelation 17:12-14, ten kings will rule in each of the ten toes, that is the world’s ten regions. This kingdom is confirmed in Revelation 13:1-4, where a beast regime of state corporatism and authoritarianism, will rise from the sea of humanity, to occupy in all of mankind’s seven institutions, and in all of the world’s ten regions.

God is exercising His sovereign will to dissolve national sovereignty through the 1974 Call of the Club of Rome, which is clarion, that is, clear, distinctive, and ringing, and which is also trumpeting an authoritarian imperative for regional economic government, which in the case of the Eurozone, implies that out of its sovereign debt and banking crisis, Revelation 13:3, leaders will announce regional framework agreements, waive national sovereignty, disregaredful of any declaration by national supreme courts and constitutional law, and establish a fiscal union with authority over fiscal spending, as well as appoint a President of the EU, a sovereign ruler, Revelation 13:5-10, who will be accompanied by a seignior, Revelation 13:11-18, the word meaning a top dog banker who takes a cut, as presented by Elaine Meinel Supkis in History of seigniorage wealth.

The Iron Lady, Angela Merkel, is simply a herald and precursor of one greater, the Iron Chancellor, who will rise to power and rule in a type of revived roman empire.  Daniel 8:22-23 relates that He will be one familiar with the scheme of regional framework agreements, which waive national sovereignty. His way must be fierce, as he will face a broad spectrum of angry people.  He will speak for, and to, the Eurozone, and will provide seigniorage, that is moneyness, based upon diktat of austerity and debt servitude. The people will be amazed and give their allegiance to this new seigniorage,Revelation 13:3.

Not only will moneyness come diktat, but credit as well. Lending will come from government to corporations deemed necessary to the prosperity and security of governments as well as regional groups. Bloomberg reports credit evaporation: “Companies in China face record interest rates on short-term debt as curbs on lending force them to rely on commercial paper to pay back loans.  The average yield on top-rated, one-year corporate notes has risen 101 bps since June 30 to 5.9%, and is poised for the biggest quarterly increase in China bond data going back to 2007.” And Theophilos Argitis and Andrew Mayeda of Bloomberg report “Indian companies may turn to Hong Kong’s yuan bond market to raise funds at 40% the cost of top-rated companies at home after the South Asian nation eased borrowing rules.  The government agreed for the first time last week to allow Indian companies raise as much as $1 billion of debt in the Chinese currency, bolstering the yuan’s challenge to the dollar as a funding currency.”

A leading candidate for the position of sovereign is Herman Van Rompuy, as he orchestrated the original Greek bailout, and who the Daily Mail reports as saying, the age of the nation state is over and the idea that countries can stand alone is an ‘illusion’ and a ‘lie’. By God’s will, State corporatism, that is statism, will rule in all of mankind’s seven intuitions and through out all the world’s ten regions. God has unleashed The Four Horsemen of The Apocalypse to ride with intensifying vigor over mankind.

As for freedom and choice, they are epitaphs on tombstones, of the former regime of Neoliberalism, aka the Milton Friedman Free To Choose Floating Currency Regime. God has ordained in Revelation 13:1-4, that it be replaced by the beast system of Neoauthoritarianism. Eventually, the Beast Regime, as foretold in Daniel 2:42, being mired in the ten toes of clay of democracy, and the iron of diktat, will crumble. Then, the sovereign will gain the upper hand, and install a one world government, a one world bank, and provide global seigniorage, as prophesied in Revelation 13:11-18.

CBS Dallas relates that the new age, is characterized by wilding and thievery: Hay the latest target for thieves as prices skyrocket 

God Is Speaking, Which Broadcast Channel Are You Tuned To?

September 22, 2011

Financial Market Report for September 22, 2011
1) … Ben Bernanke called for Operation Twist; but the market retorted with a shout of deleveraging, derisking, and disinvesting: a deflationary collapse is underway.
Yes, the Fed disappointed and the great collapse is here. Definitely, a global bear market is underway, as Bespoke Investment Blog writes The Bloomberg World Index, which is a capitalization weighted index of all equities tracked by Bloomberg, is down nearly 4% today, and it is down 21% from its closing high on May 2nd. The threshold we’re using here for a bear market is a 20% decline.

The Banks, KBE, IAT, and KRE, experienced a capital run again today, with Bespoke Investment Group Blog reporting  Bank of America (BAC) is now down 52% year to date, Morgan Stanley (MS) is down 49%, Citigroup (C) is down 46%, and Goldman (GS) is down 42%.  

Tyler Durden reports, This week is the 3rd largest weekly downswing in the Dow ever (9/11 and Lehman the others). The Dow, DIA, lost 3.7% today, as Wall Street tumbled on recession fears.  Major stock indexes fell sharply Thursday as a grim outlook from the Federal Reserve and as Manufacturing PMI reports from China and the Eurozone came out worse than expected  Oil, USO, fell near $80, as the Fed warned of economic risks. Commodities, DJP, and base metals, DBB, fell strongly lower on lowered growth prospects and on competitive currency devaluation, which caused a fall in world government bonds, BWX, to near its 200 day moving average. Mortgage Backed Bonds, MBB, and Municipal Bonds, MUB, rose strongly and long duration bonds, BLV, jumped to a likely evening star pattern. Bonds, BND, jumped, but Junk Bonds, JNK, collapsed. Yield curves flattened across the board again today as is communicated in the rise of FLAT and the fall of STPP.

Only the Yen, FXY, rose today as Bespoke Investment Group Blog relates Non Dollar Currencies Tank with FXA, FXE, FXM, FXC, ICN, FXB, FXS, SZR, FXF, BZF,BNZ, CEW, CCX, sinking terribly, causing country shares to plummet while the US Dollar, $USD, broke out to close at 78.38. Gold, GLD, is a currency, which often trades inversely of the dollar; fell 2.6%.

The fall in the interest rate on the 10 Year US note, $TNX, fell to a record low at 1.715; this together with the  dramatic rise in US Treasuries, TLT, EDV, and ZROZ, foretells a recession. And the fall in stocks, ACWI, and commodities, DJP,and base metals, DBB, as well as the major currencies, DBV, and emerging market currencies, CEW, along with a rise in the US Dollar, traded by UUP, communicates not only a recession, but a depression with Associated Press reporting The IMF director Christine Lagarde says that the world economy is entering a dangerous phase. Mike Mish Shedlock, in chart article Hello Global Recession, relates that today’s yield curves are not synonymous with growth and goes on to note in particular the bleak picture in the hard currencies of Australia and Canada. There is no reason to believe the Loonie or the Australian Dollar will be a safe haven. When China slows (and it will), it will hit the commodity currencies hard.

An inquiring mind asks, will those investment banks that have written Credit Default Swaps, live to pay on their contracts? Zero Hedge writes Morgan Stanley’s exposure to French Banks is 60% greater than its market cap … and more than half its book value.

2) … The derisking, deleveraging, accompanied by political turmoil, communicates that the economic, investment and political tectonic plates have shifted, causing a regime change, from the Milton Friedman Free To Choose Regime, to the Ten Toed Kingdom Regime presented by the Club of Rome in 1974.
God is speaking, which broadcast channel are you tuned to? Bible prophecy is being fulfilled in the news daily. I perceive that God is Sovereign, Isaiah 4:9-14, and according to Ephesian 1:1 is exercising His Sovereign Will, to destroy economic life, as well as sovereign nation states, such as Greece Revelation 2:27. In contrast, others, such as Libertarians, Austrian Economists, and Free Will Baptists, see themselves as sovereign individuals, exercising their own will, and cutting their own path. The latter are under a strong delusion, as God has sent them a lie, which they should believe, and be condemned, in disbelieving the truth 2 Thessalonians 2:11-12. Their bitter pill, the disbelief in the sovereignty of God and the action of God in all things, is that their belief system came from God. Like Neo, who took the red pill, I am a red pill kind of guy.

There be only two types of people: the saints and the aints. God alone has will, and he exercises His Will to save the elect, who come of faith and have a will, which they can use to serve God. Whereas, the lost, being dead in Adam, have no will, and can do nothing except exist and persist, in their sin, that is doubt, and are like waves, being moved about in the sea by ever changing winds.

OfTwoMinds relates the eurozone’s three fatal flaws and CreditWriteDowns relates Munchau: we are moving closer towards an involuntary eurozone break-up and the NYT reports the political patronage and economic pork of European Socialism, relating that under the Greek Constitution, public sector workers cannot be fired. The Greek people know a state worker system, where in every household, at least one worker is employed by the government. Free enterprise and meritocracy is non existent. For all practical purposes, the only political parties are socialist or communist. An inquiring mind asks, just who and what, will provide for the fiscal spending of the Greeks, when Greece defaults on its debts? Greek socialism, just like freedom and choice, are epitaphs on the tombstones of Neoliberalism, as the 1974 Clarion Call of the Rome is coming across loud and clear to introduce Neoauthoritarianism, providing austerity and debt servitude for all, in a Ten Toed Kingdom of regional economic government, whose footprint will occupy in all of the world’s ten regions, with a king, that is a sovereign, to rule over all. Angela Merkel and Nicholas Sarkozy are ambassadors of the Beast Regime, as they have called for a true European economic government in their August 2011 Joint Communique. A European Chancellor, the Sovereign, will be called to the office of the President of the EU. Might Herman Van Rompuy, be the One to head up a Eurozone Fiscal Union? He is one who is familiar with the scheme of regional framework agreements. The Slovak Spectator reports Radičová meets Van Rompuy, warns of Slovak political deadlock over the EFSF monetary authority.

Open Europe reports Bundestag Budget Committee approves EFSF changes. FAZ reports that the Bundestag budget committee yesterday approved the expanded role of the EFSF, the eurozone’s bailout fund, and supported the proposals to give the Bundestag a greater say over the use of the EFSF, however, both issues still need to be approved by the Bundestag as a whole. In an interview with the paper, German Finance Minister Wolfgang Schäuble criticised the German Constitutional Court, saying, it is “absurd” that the Court adheres to “the old regulatory monopoly of nation states dating back to the 19 century”, adding “now the challenge is to make our Europe more capable and stronger through limited transfers of competences.” Speaking at a New Direction Debate in Brussels, German Professor Markus Kerber, who challenged the eurozone bailouts at the German Constitutional Court said, “it is crystal clear that with his daily buying of government bonds, [ECB President] Jean-Claude Trichet is overstepping his powers,” adding, “the fact that the European Parliament has applauded Trichet shows that it is completely disoriented from its voters, who are weary of the ECB’s actions.” FAZ Berliner FAZ 2

I recommend a subscription to Euro Intelligence which reports Wolfgang Schäuble criticises the Constitutional Court and calls its views of the nation state old-fashioned, Schäuble calls constitutional court’s insistence on the nation state an “absurdity” In an interview about the German Constitutional Court Wolfgang Schäuble, who is a lawyer by training, calls on the court to exercise restraint and openness when it rules on European matters. “We cannot stick to the old regulation monopoly of the 19th century nation state”, Schäuble said talking to Frankfurter Allgemeine Zeitung. “This has proven to be an absurdity a long time ago. It is obviously right if the Constitutional Court rules that we will one day reach a limit with the European unity where we will have to think about a new constitution. But at the moment the issue is merely to make Europe more capable of acting and stronger by transferring competencies in a limited manner.” Schäuble is referring to sentences in past Karlsruhe rulings that defined core competencies for the Bundestag like budgetary matters where there can be no durable transfer of sovereignty to the European level within the present German constitution implying that it would have to be changed potentially by referendum.

3) …  In today’s news
Tyler Durden writes another massive 103,000 people dropped off extended benefit claims in one week. Just as troubling is that 1.7 million people have dropped off the government’s dole in the past year as can be seen in the chart below: these are people that haven’t gotten a job, they have just stopped being counted by the govt.

The damned dam, now destroyed, frees river, the NYT writes in article The Return of the Elwha River.

Love is growing cold in the age of deleveraging. Charity won’t be found at the red brick Baptist Church on the outskirts of former textile mill town, Greenwood, SC, as the marquee reads: “Have your tools ready and God will find you work” reports Sabrina Tavernise in NYT article Data show County’s pain as economy plummeted. The manufacturing plant closed in 2007. “It’s what held this town together, all the mills,” Ms. Flaherty said, watching another thinly attended lunch hour go by. According to an analysis of Census Bureau figures made public on Thursday, its poverty rate more than doubled to 24 percent from 2007 to 2010, the largest increase for any county in the nation. The decline also engulfed the middle class. Median household income plunged by 28 percent over the same period, shaving nearly $12,000 off the annual earnings of families here during the recession, according to the analysis, by Andrew A. Beveridge, a demographer at Queens College. The numbers tell the story of a painful decade in Greenwood, which began with poverty levels that were close to the nation’s, and ended far above, after layoffs in textile mills, a foundry, restaurants and construction companies pummeled the county’s residents. “There just aren’t any jobs in Greenwood anymore,” said James Freeman, 58, a former textile mill worker. “My son can’t even get a job flipping burgers.” Mr. Freeman worked for years in the textile mills, including the Matthews plant. He lost his last mill job in 2007 and was unable to find another. The work at one of the mills that employed him went to Argentina, he said, because the fabric was cheaper to produce there. Those workers were paid less, he was told, and got no benefits. “That made me feel kind of bad,” said Mr. Freeman, who now collects disability. The mill’s closing “hurt a lot of people here in Greenwood.”

4) … Between The Hedges relates Bloomberg reports
Banks Denied Senior Bond Funding as Crisis Deepens: Euro Credit. It’s been 2 1/2 months since a bank managed to sell a conventional bond in Europe’s public markets, the longest period without a deal ever and another example of the sovereign crisis choking off funding. UniCredit SpA was the last non state-owned bank to issue senior, unsecured benchmark notes in Europe with a 1 billion- euro ($1.3 billion) sale on July 13, according to data compiled by Bloomberg. That compares with deals worth 41.9 billion euros in the third quarter of last year. Banks are the biggest buyers of other lenders’ bonds as well as debt sold by euro-region nations, and are being hurt by Greece’s flirtation with default and proposed laws that would force their creditors to take losses before taxpayers. That’s pushed the cost of selling bonds to within three basis points of the record reached in the aftermath of Lehman Brothers Holdings Inc.’s failure three years ago. “Senior unsecured at these levels is unsustainable,” said Ben Bennett, a credit strategist at Legal & General Investment Management in London which oversees about $500 billion. “The real economy is being put under too much pressure. Every day things are getting wound tighter and tighter.” The extra yield investors demand to hold banks’ senior bonds instead of benchmark government debt has soared to 322 basis points, from 202 at the end of July, according to Barclays Capital’s Euro Aggregate Banking Senior Index. The gauge reached an all-time high 325 basis points on Dec. 30, 2008.

German, French Bond Risk Climb to Records on Slowdown Concern. The cost of insuring sovereign bonds jumped across Europe with credit-default swaps on France and Germany surging to records as the global economy slows. Contracts on Germany rose 13 basis points to 109, swaps on France jumped 16 to 205 basis points and Belgium, Italy and Spain also reached records, according to CMA prices at 5 p.m. in London. The Markit iTraxx SovX Western Europe Index of debt swaps on 15 governments climbed eight basis points to an all- time high of 362 based on closing prices. Credit-default swaps on Germany have almost tripled from 39 basis points in July, while France is up from 80, CMA prices show. Contracts on Belgium surged 26 basis points today to 304, while Italy rose 14 to 536 and contracts on Spain climbed 7 basis points to 437, according to CMA. Swaps on Ireland increased 14 basis points to 817 and Portugal rose 46 to 1,184. The Markit iTraxx Crossover Index of swaps on 50 companies with mostly high-yield credit ratings rose for a fourth day, climbing 41.5 basis points to 846.5, according to JPMorgan Chase & Co. That’s the highest since April 2009 and the biggest daily increase since Sept. 9, when the previous series of the index increased 59 basis points. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings climbed 12.5 basis points to 199.5, near the highest since March 2009. Bank bond risk also soared, with the Markit iTraxx Financial Index of swaps on the senior debt of 25 lenders and insurers rising as much as 29 basis points a record 318, before paring the advance to 302. The subordinated-note gauge increased as much as 53 basis points to an all-time high of 555.

Euribor-OIS Spread Measure Rises to Highest Since March 2009. A measure of banks’ reluctance to lend to one another in Europe rose to the highest in 2 1/2 years after the Federal Reserve signalled “significant downside risks” to the U.S. economy. The Euribor-OIS spread, the difference between the three- month euro interbank offered rate and overnight index swaps, climbed to 85 basis points as of 3:45 p.m. in London, the highest since March 2009, Bloomberg data show. The gauge was at 82.6 yesterday. European banks have the highest dollar funding costs in almost three years, according to one indicator. The three-month cross-currency basis swap was 106 basis points below the euro interbank offered rate, from 99 basis points yesterday. The cost was 112.5 basis points under Euribor on Sept. 12, when the swap was the most expensive since December 2008. The TED spread, the difference between what lenders and the U.S. government pay to borrow for three months, rose to 36 basis points, the highest since July 20, 2010, from 35 basis points.

Commerzbank Says Greek Default Poses Risk of ‘Domino Effect’. European banks face the risk of a “domino effect” on debt markets were Greece to default, a Commerzbank AG executive said today. Institutions would be able to handle a Greek default, regardless of the level of bondholder losses and the bigger concern is how it would affect Spain, Portugal, Ireland or Italy, Markus Beumer, a member of the German lender’s board of managing directors, said at a press briefing in Brussels. “We have no concerns to handle and to manage Greece, but what happens afterwards, nobody knows,” Beumer said.

Real’s Plunge Triggers Intervention Reversal: Brazil Credit. The real’s biggest five-day plunge since 1999 prompted Brazil to use derivatives to shore up the currency, reversing a 28-month-old strategy aimed at stemming gains. Brazil’s currency tumbled as much as 4 percent against the dollar today before the central bank auctioned swaps that are equivalent to selling dollars in the futures market, helping the real erase losses. The real has lost 8.4 percent since Sept. 14, handing investors in real-denominated bonds a loss of 13.5 percent in dollar terms this month through yesterday, the worst performance in emerging markets, according to data compiled by JPMorgan Chase & Co. Speculation is mounting that the real’s slide may deepen, pushing up import prices and adding to the highest inflation rate in six years, if the central bank fails to provide dollars or deploy some of its $352 billion in reserves to defend the real. Concern policy makers’ surprise rate cut last month signals they are giving up on their goal of slowing inflation is compounding the real’s decline as Europe’s debt crisis erodes demand for emerging-market assets. “The central bank is signaling it’s uncomfortable with the current foreign-exchange rate,” said Carlos Thadeu de Freitas Gomes Filho, chief economist with Franklin Templeton Investments in Brazil. “Other measures to defend the real may come.”

Europe Services, Manufacturing Industries Shrink for First Time Since 2009. Euro-area services and manufacturing output shrank for the first time in more than two years in September as the region’s worsening debt crisis added to concerns that the economy could slide back into a recession. A composite index based on a survey of purchasing managers in both industries fell below 50, indicating contraction, for the first time since July 2009, London-based Markit Economics said in an initial estimate today. The index fell to 49.2 this month from 50.7 in August, a deeper slide than the drop to 49.8 that economists had forecast, according to the median of 17 estimates in a Bloomberg survey.

Handelsblatt reports Kenneth Rogoff, a former chief economist at the IMF and now an economics professor at Harvard University, said the biggest risk to the eurozone at present is a run on southern European banks. In an interview with the newspaper, Rogoff said people may move their deposits to banks in safer countries such as Germany. A sovereign debt restructuring in some euro area states shouldn’t be “a taboo,” Rogoff said.

5) … What we have is not contagion, but gangrene.
Strong fallers today included:SSRI, -9.,8 and SIL -10.4% and GDXJ, -0.8, GDX, carry trade investing in the HUI precious metal mining stocks, ^HUI, evaporated today, -7.8%, with CRBI, -10.4, COPX -10.1, KOL, -9.0, CHIM, -7.0, ALUM, -6.7, PSCE -6.4, and HAP -6.1.
SLX, 8.1
XME, 7.8
OIH 6.6

ACWI, -4.1
VSS, -4.0
EUFN, -4.5
EMFN, -5.9
KBE, -2.7
XLF, -9.9
CHIX -9.0
BRAF -7..5

IDX 10.3
RSX 10.3
LATM 9.0
EWY 8.6
ECH 7.9
TWON 7.7
HAO, 7.2
KROO 7.0
EEM 7.0
GERJ 6.8
EWZ 6.8
INDY 6.7
YAO 6.5
SCIN 6.5
SKOR 6.0
EEB 6.0
VGK 3.8

6) … Credit and moneyness, that is seigniorage, will come from diktat
David Gallard, of Casey Research asks Is the US Monetary System on the verge of collapse? Clearly a threat to the international monetary system has developed: systemic risk is off the wall. I’ve written consistently that a global economic collapse is coming. The National Bank of Greece, NBG, fell 11% and European Financials, EUFN, 4%. While Phoenix Capital Research writes in Zero Hedge Buckle up, because it’s game over for the Fed, I believe banks will be nationalized as Les Echos is reporting credit evaporation: BNP Paribas SA and Societe Generale have stopped lending to aircraft purchasers because of difficulties in obtaining dollar refinancing. Airbus SAS may be affected more than Boeing(BA), which has easier access to credit in the U.S. Credit, lending, and moneyness will come via diktat as the Fed, Banks and the Government will become one and known as The Government bank or Gov Bank.

7) …Only a great sovereign power can provide a Middle East peace.
Steven Lee Myers in NYT writes that the role of the US in guiding future middle east peace negotiations is at risk by the United Nations providing a homeland and statehood for the Palestinian people. This report is very much in line with the Word of God,  that Jerusalem is a burdensome stone Zechariah 12:2-3. Prime Minister Ehud Olmert, once the mayor insisted that Jerusalem, would always be the “eternal, undivided capital” of the Jewish people. Such is at odds with the Palestinians who want a capital in East Jerusalem. Bible prophecy of Daniel 9:27 reveals that only the coming sovereign, will effect a middle east peace.

Stocks Plummet On Announcement Of Operation Twist … After The Soon Coming Global Economic Collapse, Credit Will Come By Diktat, As Banks Are Integrated Into The Government

September 21, 2011

Financial market report for September 21, 2011

1) ….The Too Big To Fail Banks, RWW, such as Bank of America, BAC, Citigroup, C, and Wells Fargo, WFC, led stocks lower today, as announcement of Operation Twist disappointed investors as they don’t see any stimulus benefits of the Fed’s actions.  Residential Reits, REZ,  lost their seigniorage today. Mortgage REITS, REM, fell strongly.  Real Estate, IYR, fell strongly reflecting a broad base of stock market failure. Gold mining stocks, GDX, disconnected from the price of gold once again, and turned lower with stocks.  Freeport McMoran Copper and Gold FCX, led the Morgan Stanley Cyclicals Index lower.  Transports, IYT, and Industrial, IYJ, fell strongly confirming that Kondratieff Winter is definitely underway.  Today’s collapse in stock value was accentuated by debt deflation, that is, currency deflation, as the world’s currency, DBV, and emerging market currencies, CEW, fell strongly lower on competitive currency deflation.  Country stocks falling lower included the following:
YAO -3.8
IDX-5.8
GAF -3.8
BRAQ -5.3
VMM -4.8
HAO -2.6
EWZ -4.4
EWD -4.2
EWS -4.1
ENZL -4.0
RSX-3.9
TUR -3.9
CNDA -3.8
EEB -3.8
EWG -3.8
EWW-3.7
EWU -3.7
EWA -3.7
EGPT -3.6
EWY -3.6
SKOR -.3.7
EWC -3.6
EZA -4.8
EWZ -4.4
ENZL -4.0
VGK -3.4
ECH -4.1

Base Metals, DBB, fell on lower stock values. Timber, CUT, and Oil, USO, fell lower on lower growth prospects. Commodity Currencies, CCX, took commodities, DJP, lower. Agricultural commodities, JJA,, fell lower.

World stocks, ACWI fell 2.9%, and World Small Caps, VSS, fell 2.7%. The credit intensive Russell 2000, IWM, fell 3.7%. European Financials, EUFN, fell 3.0% and Emerging Market Financials, 3.3%.  Zero Hedge reports Bank Downgrades Jump The Atlantic: S&P Cuts Numerous Italian Banks

There was a rush to perceived safety in longer duration US Government bonds, as the US Federal Reserve announced that it will extend the average maturity of its holdings of securities.  Under Operation Twist, The Fed intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less. The Flattner ETF, FLAT, rose to a new high, 57.15, reflecting a flattening of yield curves, as  the 30Y Treasury yield, $TYX,, has gone all the way back to January 2009 levels, at 3,039%, propelling the 30 Year US Government Bond, EDV, 5.9% higher to 119.75, and TMF to 68.82. The 10 Year US Government Note, TLT, rose 3.1% to 116.66.

One investment strategy is to own STPP and use margin to sell FLAT short; and to own TMV and to use margin to sell TMF short.  

2) … Matthew Saltmarsh of the NYT reports Troika Inspectors To Return To Athens To Analyze Data Next Week Before More Austerity Measure Are Imposed As Greek Government Tries to Sell New Belt Tightening Measures

3) … Between The Hedges reports
Bloomberg reports Greece makes good progress in talks with Troika to get loan payment. “We acknowledge that our fiscal data and economic structures are a problem for the euro area, which we are determined to tackle once and for all.”

Bloomberg reports Debt Crisis infects companies via bank loan costs Banks in Spain and Italy are curbing loans and charging customers more as aftershocks from the sovereign debt crisis drive their own borrowing cost higher. “They can’t lend what they don’t have, I suppose,” said Francesc Elias, the owner of Bomba Elias, a pumps and filters maker near Barcelona, which shelved a 100,000-euro ($144,000) plan to open a Bahrain office when it couldn’t get an affordable bank loan. “The banks are very clever about finding new ways to charge us more.” Spanish and Italian government bond yields surged to euro- era records this quarter as Greece struggled to avoid default, driving the cost of insuring against nonpayment by the region’s banks to a record and making it harder for them to sell bonds. Spain pays 5.35 percent for 10-year money, up from an average of 4.07 percent in the first half of 2010, while Italy pays 5.65 percent compared with a 4.05 percent average last year. As a result, banks such as Banco Santander SA, Spain’s biggest lender, are passing higher funding costs on to their customers. UniCredit SpA, Italy’s biggest lender, said on Aug. 3 it’s being more selective about who it lends to and levying higher rates. One out of three companies asking for credit in the second quarter period didn’t get it or obtained less than they asked for, according to Confcommercio, an Italian retailers’ lobby group. “The cost of financing our current activities has increased significantly,” said Riccardo Illy, chairman of Italian coffee maker Gruppo Illy SpA. “We don’t have any problems accessing credit because we’re large enough, but we know many businesses that are having trouble because banks’ requirements have become increasingly stringent.” Spanish banks including Santander and Bankia SA are shrinking their loan books after being pummeled by a collapse in credit demand for real-estate and surging loan defaults. Santander’s Spanish lending shrank an annual 7 percent through June, mirroring a trend in the Bank of Spain’s data that show a 1.9 percent annual drop in lending to companies and individuals. Lending at Bankia, the third-biggest lender formed from a merger of seven savings banks, was down 2.3 percent from December. Banks face a dilemma when trying to pass on increased funding costs in full because they risk driving more borrowers into default, said Barclays Capital’s Pascual. Bad loans in the Spanish banking system are near 7 percent of total lending, the highest since 1995. As lending slides in Spain and banks struggle to finance themselves, the outlook for growth is worsening, said Antonio Ramirez, an analyst at Keefe Bruyette & Woods in London. “It’s the negative feedback loop between what’s happening to the sovereign and the effect on banks and the economy,” said Antonio Garcia Pascual, chief southern European economist at Barclays Capital in London. “To a large extent, the problems facing Spanish lenders also apply to Italy.” As financing costs rise in Italy, analysts have started revising down their growth estimates for that country.

Bloomberg reports Lending Curbs Help Propel Commercial Paper Yields to Record: China Credit. Companies in China face record interest rates on short-term debt as curbs on lending force them to rely on commercial paper to pay back loans. The average yield on top-rated, one-year corporate notes has risen 101 basis points since June 30 to 5.9 percent, and is poised for the biggest quarterly increase in China bond data going back to 2007. High yields reflect “the market concern about liquidity and also the view that monetary policy may not change in the short-term,” said George Weisi Tan, who oversees about 300 million yuan as head of bond investments at Fortune SGAM Fund Management Co. in Shanghai. “It’s hard to get a loan from the bank these days.” Banks are demanding near-record interest rates to lend to one another for six months or more, Shanghai interbank rates show. The Shibor rate on six-month yuan loans was 5.2968 percent yesterday, after reaching 5.3093 percent on July 14, the highest level since the daily fixing was introduced in October 2006. Five-year credit-default swaps on China’s sovereign bonds rose 49 basis points this quarter to 133 basis points yesterday, the highest since April 2009, according to CMA.

Bloomberg reports Europe Banks Have $410 Billion Credit Risk: IMF. The European debt crisis has generated as much as 300 billion euros ($410 billion) in credit risk for European banks, the International Monetary Fund said, calling for capital injections to reassure investors and support lending. Political squabbling in Europe over ways to fight contagion and delays in implementing agreed measures are raising concerns about the risk of defaults by governments, the IMF said. Banks in turn face “funding challenges” because of investor concern about their potential losses from government bonds they hold, with some relying heavily on the European Central Bank for liquidity, it said. “A number of banks must raise capital to help ensure the confidence of their creditors and depositors,” the IMF wrote in its Global Financial Stability Report released today. “Without additional capital buffers, problems in accessing funding are likely to create deleveraging pressures at banks, which will force them to cut credit to the real economy

MarketWatch reports StanChart Warns on China’s Local-Government Debt. Bank’s China chief: Up to 80% won’t be able to cover debt service. The majority of local-government financing vehicles cannot repay their debt principle and interest, and are putting an enormous strain on local governments, said Stephen Green, head of Standard Chartered Greater China research department, in a forum on Saturday.

CNBC reports Swift Exit From Emerging Market Currencies. The other shoe has finally dropped: emerging market currencies have followed emerging market equities into the global financial storm.

CNBC reports Japan Exports Disappoint, Could Weaken Further. Japan’s exports rose in the year to August at less than half the pace expected as a global economic slowdown, a strong currency and Europe’s sovereign debt crisis put the country’s own recovery increasingly in doubt. Exports rose 2.8 percent in August from a year earlier, much less than a median forecast for an 8.0 percent annual increase, Ministry of Finance data showed on Wednesday.

Washington Post reports US Building Secret Drone Bases in Africa, Arabian Peninsula, Officials Say. The Obama administration is assembling a constellation of secret drone bases for counter terrorism operations in the Horn of Africa and the Arabian Peninsula as part of a newly aggressive campaign to attack al-Qaeda affiliates in Somalia and Yemen, U.S. officials said. One of the installations is being established in Ethi­o­pia, a U.S. ally in the fight against al-Shabab, the Somali militant group that controls much of the country. Another base is in the Seychelles, an archipelago in the Indian Ocean, where a small fleet of “hunter killer” drones resumed operations this month after an experimental mission demonstrated that the unmanned aircraft could effectively patrol Somali territory from there.Boris Volkhonsky writes on The World of Drone Warcraft

4)… GolemXIV relates Europe bank debt report in lurid detail

5) … I recommend that one purchase a EuroIntelligence subscription as it provides the best reporting and analysis. It relates CDU, CSU and FDP agree on Bundestag’s involvement in EFSF decisions.

Angela Merkel’s CDU, the Bavarian CSU and the liberal FDP yesterday agreed on how the Bundestag should be involved in all decisions of the EFSF, Frankfurter Allgemeine Zeitung and mass circulation daily Bild report. As a general rule the German representative may only vote for or abstain on all decisions that touch the parliament’s budgetary rights if there is an explicit decision by the Bundestag. In cases of particular urgency or confidentiality this decision may be taken by a small group of members of the parliament’s budget committee, which must comprise at least one representative from each parliamentary group. In these cases the group presumably convenes via telephone or video-conference and is empowered to take decisions on the Bundestag’s behalf. Without an explicit decision the German EFSF representative has to veto EFSF decisions as soon as they engage budgetary rights of the German parliament. The deputies of Merkel’s coalition think they have even gone further than the recent constitutional court ruling required them to go.

6) .. Illargi in The Automatic Earth in Reckless Abandon relates I’m not even sure if it’s right to claim that it’s unique to our societies, but it’s certainly something like a token sign. We do a lot of stupid and useless things, but this one is right up there with the cream of the crop of them.

For days now, the entire financial world seems to be holding its breath waiting for Ben Bernanke to issue a statement on what his Federal Reserve aims to do next, a statement to be delivered today, Wednesday, around 2.15 PM EDT.

What makes this so remarkable is that it should be clear to anyone with a pulse and some control of any of their senses left, that Bernanke’s upcoming speech is completely inconsequential for more than a very short and fleeting moment in time. The Fed can’t save our economies or banks from the upcoming recession slash depression anymore than it can send a rocketship to Andromeda.

The Federal Reserve is impotent when it comes to saving the economy, even if it tries with all its might not to show it. It flaunts its fictional capacity and ability to come up with new and creative well-calculated measures to influence everything from A to Z like once upon a time the emperor flaunted his new clothes. And no matter how badly any and all of its previous measures have failed, the vast majority among us still praises the subtly elegant materials and their dream-provoking shine. We don’t want reality, we want to believe.

Well, neither QE1, nor for that matter any other of the Fed’s measures of the past few years, have done anything at all to stop housing prices from plunging, to make sure people get hired again, or to make our children’s futures look less bleak. And it has failed to accomplish all of this while spending on and lending to the global financial system some $10-$20 trillion in American “wealth”, public funds.

It’s simply not true that with different policy decisions, the day could be saved.

Right now, the only time when one of the leading political and/or regulatory bodies in the world volunteers to give you a glimpse of reality, it’s to extort ever and even more of your money. The IMF came out with a dire report this week, but only so it can argue for more stimulus (which simply means more money being transferred from the public to the private sector). The IMF represents the financial sector; it does unequivocally not represent you, no matter what claims it may make to the contrary.

It’s nonsense to claim that what benefits the financial sector would automatically benefit you as well. The opposite is true. To understand and process that fact, however, you will first need to figure out that the entire financial sector is indeed bankrupt. It doesn’t seem to be, perhaps, at first glance, but it’s not all that hard to see it for what it is.

All you need to do is imagine where Wall Street banks, and the world’s other main banks, would be today if not for the money they have already received from the public trough. They wouldn’t be anywhere is where they would be; they would no longer operate as going concerns. And then, even with all that money, they have lost 70-80-90% of their market values.

The Fed sets interest rates, right? Wrong. It does nothing of the kind. All Bernanke can do is set a Fed funds rate, close his eyes, fold his hands and pray it’ll stick for more than 5 minutes. That’s the extent of his control over interest rates. In reality, the markets set interest rates.

Obviously, the ECB would love to keep Italy’s borrowing rates down, it would save it a huge headache. Problem is, it can’t: the markets currently demand a much higher rate for Italian debt than the ECB, or Rome, like. What the IMF wants the ECB to do is buy huge piles of Italian debt, while in the process de facto crippling the free market system.

But until and unless Italian debt is purged, the ECB would have to buy all of it, including all the upcoming dozens of billions in rollovers, or Italy would need to go elsewhere anyway. The ECB may save the day, but that’s all: it can’t even save the week that day is in.

7) … After the soon coming global economic collapse, credit will come by diktat … and European Leaders will meet in summit and waive national sovereignty to establish a Super State.

 The European Economic Government will be based upon a Fiscal Union with a leader serving as President of the EU.

It’s inevitable that a global economic collapse will come out of the European sovereign debt and banking crisis, as well as today’s fatal blow to the world’s financial and banking system by Operation Twist.

Credit will come by diktat; as banks are integrated into the government, that is nationalized.  Lending will flow to industries that sustain regional infrastructure and economic needs. Banks will be known as the Government Bank or Gov Bank for short.

In 1974, the 300 luminaries of the Club of Rome proposed a solution to the current growth and investment crises we are currently mired in. They foresaw that the Milton Friedman Free To Choose Regime would fail from derisking, deleveraging, and disinvesting; and to avoid political and economic chaos, regional economic government would arise.

Robert Wenzel writes “the facts I am about to state are off the wall, and further proof of my contention that Fed chairman Ben Bernanke is a mad scientist playing with the United States economy”. The Fed Chairman’s experiment was an accelerant of disinvestment,, causing world stocks, ACWI, to fall 2.9%, and World Small Caps, VSS, 2.7%. The credit intensive Russell 2000, IWM, fell 3.7% and caused.a collapse in Banking, KBE, Financials, XLF,  European Financials, EUFN, and Emerging Market Financials, EMFN.  

They foresaw that the clay of democracy would yield to the iron of diktat, and that by necessity economic and political structures be integrated regionally, for security and prosperity in all of the world’s ten regions. A Ten Toed Government, that being the Beast Regime of Neoauthoritarianism, is coming to rule mankind.

Credit is defined and it is based upon trust, which is rapidly evaporating. We see in today’s news that credit liquidity is evaporating and that state corporatism is growing. Mike Mish Shedlock writes Euro Flight Continues: Lloyd’s of London Pulls Euro Bank Deposits; Dollar Swap Premium Highest in 3 Years.  Major mistrust of European banks continues. Since the ECB will not publish banks needing emergency cash, all banks might be considered suspect. Then again, it’s hard to keep stories quiet, and most know which banks have received emergency funding. There is no reason to trust European banks and that is exactly what Lloyd’s of London and Siemens have decided.

Under Neoauthoritarianism, Austerity and Debt Servitude will be a way of life as Dr. Eric Toussaint writes The Debt Crisis in the European Union: Austerity for Life.

Euro Intelligence in its for fee news letter writes, Wolfgang Münchau foresees a pending catastrophe as the Economic Rubicon has been crossed.  “Wolfgang Münchau argues in his column in FT Deutschland that the eurozone crisis has now dragged on for so long, and has become so toxic that is now very unlikely to be resolved. Once the crisis hit Italy, followed by an absolutely inadequate policy response of the Italian government, the crisis has reached a point of No return. Italy is too big to save with the current set of instruments, including ECB bond purchases, and in the absence of a credible programme of eurobonds, he concludes that a breakup of the eurozone must now be considered as a probable scenario. The question is now whether and how the EU can survive such a cataclysmic event.”

Libertarians perceive themselves to be sovereign individuals; that they are their own persons; that they cut their own path and make their own destiny.

But fate is operating. The 1974 Call of the Club of Rome is clarion, that is ringing, clear and distinctive, and carries an authoritarian imperative. The global tectonic political and economic plates have shifted and a global authoritarian tsunami is on the way. Destiny will flow so that European Leaders will meet in summit and waive national sovereignty to establish a Super European Government, based upon a Fiscal Union, with a leader serving as President of the EU, that individual is very likely to be Herman Van Rompuy, as he orchestrated the original Greek bailout, and who the Daily Mail reports as saying, the age of the nation state is over and the idea that countries can stand alone is an ‘illusion’ and a ‘lie’.  State corporatism, that is statism, will rule in all of mankind’s seven intuitions and through out all the world’s ten regions, as the Beast Regime grows all more powerful through diktat.  Freedom and choice are mirages in the Neoauthoritarian Desert of the Real.

Bruce Krasting writes in Zero Hedge WH and Fed sleeping together  Bernanke shot back at the Republicans today. He’s facilitating a mortgage deal that will help the White House. The Republicans are going to fire right back.

Christian Zionism Will Determine The Outcome Of 2012 Presidential Election

September 21, 2011

News reports show all of the leading presidential republican candidates and a growning number of House GOP Representatives are Zionistis; the next presidential election will be awarded to Christian Zionist as Sherwood Ross writes Obama’s Re-election Chances May be Fading.

Tuesday’s September 13, 2011 Republican upset in New York’s Ninth Congressional District is a sign of bad things to come for Mr. Obama, the New York Times reports in article Policies Toward Isral May Hurt Democrats.  The Republicans narrative is that Mr. Obama is hostile to Israel. Mr. Obama tends to blame Israel and the Palestinians equally for the impasse in the Middle East, an equivalence many Jewish voters find objectionable. Republican groups are determined to make Israel a wedge issue.

Michele Bachmann sees a divine mandate to support Israel. “We believe very strongly that nations also receive blessings as they bless Israel,” Bachmann said. In 2010 she warned that “if we reject Israel, then there is a curse that comes into play.”

Mitt Romney is critical of Obama. “President Obama has thrown Israel under the bus,” he said. “He has disrespected Israel and undermined its ability to negotiate peace. He has also violated a first principle of American foreign policy, which is to stand firm by our friends.”

According to Wikipedia, Rick Perry, while visiting Israel, in an interview with Abe Selig of the Jerusalem Post, on August 13, 2000, in article Texas Gov. Compares Gaza To Mexico … Masada To The Alamo”, stated “I’m a big believer that this country was given to the people of Israel a long time ago, by God, and that’s ordained.”

Richard A. Oppel in NYT print edition reports Taking On Rivals, Perry Trumpets Support For Israel and  reports Perry Backs Full Israeli Control Over Jerusalem.

The NYT reports House G.O.P. Tightens Its Bond With Netanyahu

Financial Times reprts Palestinian Move Hits Obama Vote Base. At a time when Mr Obama is sweating on every vote he can muster for the 2012 poll, the Palestinian push for statehood is playing into the Republican narrative that he has let Israel and the US Jewish community down. A sliver of the electorate, making up a little under 3 per cent of voters, the Jewish community is nonetheless pivotal in the swing states of Florida and Ohio, and also important for fundraising.

As Greece Nears The Precipice Who Or What Will Provide For Greece’s State Workers And Greek Fiscal Spending When It Defaults … And Who Will Provide Credit When The European Banks Get Decapitalized By The Soon Coming Greek Default

September 20, 2011

Financial market report for Septemeber 20, 2011

1) … World Stocks, ACWI, waive and traded slightly lower, as Greece nears the precipice, with an announcement from the Troika and US Fed planned for tomorrow.
The NYT in Greece nears the precipice, raising fears writes While no one knows for certain what will happen, it’s a given that financial crises always have unexpected consequences, and many predict there will be collateral damage. Because of these fears, Greece is working frantically in concert with other European nations to avoid default, by embracing further austerity measures it has promised in return for more European bailout money to help pay its debts. Total Greek public debt is about 370 billion euros, or $500 billion. By comparison, Argentina’s debt was $82 billion when it defaulted in 2001; when Russia defaulted, in 1998, its debt was $79 billion.

Economists also warn that a Greek default could put further pressure on Italy, the euro zone’s third-largest economy, which, though solvent, is struggling to enact austerity measures and find a way to stimulate growth. Moreover, Italy’s government debt is five times the size of Greece’s, and concerns about Italy’s ability to meet its obligations could grow if Greece defaults. In a new sign of trouble for the country, Standard & Poor’s on Monday cut Italy’s credit rating by one notch to A, citing its weakening economy and limited political response. In part, what would happen in the wake of a Greek default would depend on whether European leaders could create a firewall to control the damage from spreading widely. That would require officials to come together in ways they so far have not been able to, because it is politically unpopular in some countries to spend many billions more bailing out Greece. Bailing out the banks will be crucial if Greece either defaults or imposes a hard restructuring, whereby banks would be forced to take a larger loss on their holdings compared with the fairly benign 21 percent losses that they are now being asked to accept as part of the second, 109 billion euro bailout package set for Greece in June. Merrill Lynch, in a recent report on the contagion effect of a worst-case situation in which a severe Greek debt restructuring results in other weak European countries having to take a hit on their bonds, estimated that overall European bank losses could be as high as $543 billion. French and German banks would be the hardest hit, because they are among the biggest holders of Greek debt. “We believe losses could be substantially larger through deleveraging and second-round effects, contagion from failure of individual banks from or outside the periphery, exposures of the non bank financial sector,” the Merrill Lynch report concluded. While a 60 to 70 percent debt write-down seems extreme, it actually represents the market expectation, with most Greek debt now trading below 40 cents on the dollar. A Greek default also would be costly to the European Central Bank, the Continent’s equivalent of the Federal Reserve. To help prop up Greece, the central bank is believed to have bought about 40 billion euros in Greek bonds at much higher prices than where they now trade. If the central bank were forced to take a major loss on its Greek bonds, it too would need a capital infusion. And the burden would most likely fall on Germany.

Analysts also say the seriousness of the crisis will depend on whether Greece stays within the euro common-currency zone or is forced to leave it, and return to the drachma as its national currency.

Willem Buiter, the chief economist at Citigroup, presents two possible default outcomes. In the first, Greece forces private sector creditors to take a loss on their bonds of 60 to 80 percent but manages to stay inside the euro zone by keeping current on the smaller amount that it owes its official lenders, like the European Union and the I.M.F. While technically a default, the loss would not be an outright repudiation of Greece’s debt and the contagion could, in theory, be contained.One big unknown revolves around the fact that, unlike other countries that have defaulted on their debts in the past, Greece does not have its own currency. The potentially more dangerous default outcome is if Greece decides to leave or is forced to leave the euro, according to Mr. Buiter. Then, Mr. Buiter believes, the debt write-off would approach 100 percent and the effects on international markets could be much more serious. Offsetting this, to some extent, is the fact that exiting the euro zone and re-adopting the drachma would enable Greece to devalue its currency versus the rest of Europe, and help it become more competitive, perhaps spurring economic growth.

(In as much as currencies are based upon sovereign debt, an inquiring mid asks just who would buy its debt? Also there would not be growth for years to come, as practically all the people would be unemployed as those who have jobs are currently state workers. Furthermore, Greece would be debilitated as it returns to a pony and cart economy)

Theyenguy news service reports Italy debt rating lowered by S&P on lack of credibility in deficit reduction program.  Italy’s credit rating was cut by Standard & Poor’s on concern that weakening economic growth and a “fragile” government mean the nation won’t be able to reduce the euro-region’s second-largest debt burden. S&P says deficit targets will be difficult to achieve with the latest deficit program. The rating was lowered to A from A+, with a negative outlook.

Bloomberg writes European Banks’ Dollar funding costs surge amid Italy downgrade. The cost for European banks to fund in dollars surged after Italy’s first ratings downgrade in five years stoked concern lenders will lose money on their euro- region sovereign debt holdings.The cost of converting euro payments into dollars, measured by the three-month cross-currency basis swap, was 99 basis points below the euro interbank offered rate at 3:15 p.m. in London, from 92 basis points yesterday, according to data compiled by Bloomberg. The cost was 112.5 basis points under Euribor on Sept. 12, when the swap was the most expensive since December 2008. The cost of one-year dollar funding also climbed, with the cross-currency basis swap for that period at 71 basis points less than Euribor, compared with 66 yesterday, Bloomberg data show. The difference widened to as much as 75 basis points a week ago. “It’s all about banks, the critical thing is trying to manage the euro crisis without it crashing the banks,” said Bill Blain, co-head of strategy at broker Newedge Group in London. “We’ve seen before that, when confidence goes in banking, it goes very quickly.” The Euribor-OIS spread, the difference between the three- month euro interbank offered rate and overnight index swaps, was at 79.9 basis points, from 79.7 yesterday, Bloomberg data show. That’s within five basis points of the highest level since March 2009, reached Sept. 12.

Open Europe relates that the Le Figaro, columnist Yves de Kerdrel argues, “The real catastrophe threatening Europe is not a Greek default. It would be to see banks unable to lend money to businesses. This is why, instead of wasting time looking for a solution which doesn’t exist to make Greece solvent, public authorities, in France as in Germany, would be better advised to set out a rescue plan for our big banks.” And Open Europe relates How the public’s attitude towards Greece and eurozone bailouts is changing in France.

The AP reports EU, IMF raise concerns over bank capital and Calculated Risk presents a Listing of research articles on sovereign debt.

I believe that a global economic collapse will come, in part as money market funds break the buck as they are terrifically overexposed to European banks as communicated in NYT article Suddenly over there, is over here. Zero Hedge reports Global Systemic Risk near record highs prompts ESRB warning.

Tyler Durden writes The corporate bank run has started as Siemens pulls €500 million from a French bank, redeposits direct with ECB.  The implications of this are quite stunning, as it means that even European companies now refuse to work directly with their own banks, and somehow the ECB has become a direct lender/cash holder of only resort to private non-financial institutions!

Paul Mitchell of WSWS writes Credit rating agencies threaten to downgrade Spain. Fitch Ratings warned last week that Spain’s credit rating could be downgraded because the country’s regions have fallen behind schedule on deficit-reduction targets, economic growth had been poor and public funds to rescue banks had been larger than forecast.

Reuters China reports Bank of China halts FX swaps with some European banks. Bank of China’s decision was made partly because of the downgrade of these entities by Moody’s ratings agency, the sources said. Bank of China has also stopped trading with UBS AG after the Swiss giant declared unauthorized trading had caused a $2.3 billion loss, the sources said. Contacted by Reuters after the story was published, spokespeople for Societe Generale, UBS, Credit Agricole and BNP Paribas declined to comment. “This is a reminder that some counter-parties feel a little bit uncomfortable. We’ve got many banks over-leveraged,” Adrian Foster, head of financial markets research for Rabobank in Asia, told Reuters Insider television. “My guess is that the Chinese banks are not major providers of liquidity or funding to the European banks, so it’s not of direct relevance to their businesses if you’d like, but it does send an important reminder there are risks to this balancing act.” Banks in Asia and elsewhere have been cutting credit lines and exposures to European banks through the past few months, unwilling to take on the risk of a default by Greece or any other peripheral European country. European banks have turned to swap lines offered by the European Central Bank to get around high funding costs for dollars and a broader unease about counterparty risk in interbank lending markets.

The Automatic Earth relates the following comments on the EFSF monetary authority, which most including myself believe is dead on and even before arrival,  Bundesbank President Jens Weidmann said:”The EFSF’s sole purpose is the financing of states and that’s in order as long as it’s done via the capital market. If it’s done via the central bank it constitutes monetary state financing,” (which is forbidden under European Union rules). And German Finance Minister Wolfgang Schäuble: “We don’t think that real economic and social problems can be solved by means of monetary policy. That has never been the European model and it won’t be.”

The Dutch and the Finns are also quite outspoken opponents of bottomless European pits. But most of the finance “experts” there are still cut from more or less the same cloth, and in the end adhere to the same faith-based economic models. They may feel fine about letting Greece go under, and Portugal and Ireland, but they will nevertheless pour their voters’ money down the nearest drain they can find when it comes to “saving” their own respective banks. Which is of course the exact same thing, even if it feels different to them.

We have no democratic means in place anymore to put those folks into power who would truly try and alleviate the plight of the people. Our democracies are based on voting systems, but votes are of necessity bought and sold if and when money is allowed to enter the political system. And the money that has bought the system says that it must fork over the money of the people. Or else. The faith-based fake science named economics, (I say perhaps faith based philosophy is a better word) is but a tool used on the ignorant in order to justify this. I sincerely hope that what Ambrose Evans-Pritchard has labeled “Germany’s austerity nihilism” will at least beat some sense into some heads. But I don’t have much faith in that. For our children, it would seem to be best if Greece falls tomorrow, and takes down a lot of countries and banks all over the globe with it. It’s the only way we might be able to stop ourselves from spending tomorrow’s money today. But the flipside of that, too, I’m afraid, is religious warfare. (I say perhaps a better wording would be faith warfare)

Stelfla Dawson of Reuters in Sliding toward financial crisis reports “We have entered a dangerous new phase of the crisis,” said Christine Lagarde, managing director of the International Monetary Fund, last Thursday. “To navigate it, we need strong political will across the world, leadership over brinkmanship.” World Bank President Robert Zoellick a day earlier said: “The time for muddling through is over.

Two factors are driving the crisis — political discord within Europe over how much support to give indebted euro-zone governments that are implementing tough fiscal austerity programs; and vulnerabilities within the region’s financial system, especially in France where banks hold 671.6 billion euros of government debt of high-deficit euro-zone countries.

These factors have fed upon each other in a vicious cycle. Talk among top German officials of Greece defaulting or leaving the euro zone has accelerated investor withdrawal of short-term funding to French banks, raising concerns about bank solvency.

On bank liquidity, the European Central Bank’s bold action last week to arrange three-month dollar funding for banks has shown ECB capacity to lead — despite German dissent within its ranks — and alleviate liquidity problems for European banks.

On bank solvency, the issue is trickier. Europeans sharply disagree with U.S. officials and the International Monetary Fund that their banks need more capital. The IMF has estimated a 200 billion-euro shortfall, a number that may be revisited in an IMF report this week.

Eswar Prasad,  senior fellow at the Brookings Institution, said the job of the IMF this week is to nudge countries in this direction and highlight serious dangers ahead. “The alternative is political paralysis, which we are seeing in many of these countries and could lead to very substantial risks for the longer term. And that’s the big concern,” he said.

Simon Black of Sovereign Man questions What happens when a nation goes bankrupt? Speaking at the World Economic Forum this morning, Chinese premier Wen Jiabao delivered a stern message: there is a limit to Chinese generosity, and it will come at a price. The Chinese will undoubtedly use any further investment in European bonds as leverage to influence western politicians. They already bought Tim Geithner. The US government refuses to label China a ‘currency manipulator’. Similarly, European politicians will now be forced to acknowledge China as a ‘market economy’.

Ultimately, this charade will fail. It’s a simple matter of arithmetic. China could buy every single penny of Greek debt and it still wouldn’t solve the underlying problem: Greece would still be in debt! And more, still hemorrhaging billions of euros each month. Throwing more money at the problem only makes it worse.

Then there are those Greek assets for sale… like state-owned Hellenic Railways Group. It lost a cool billion euros last year. Or the notoriously inefficient, highly unionized, traditionally lossmaking Greek postal service, Hellenic Post. Any takers? These are not exactly high quality assets… nor can Greece expect to get top dollar in what’s clearly a distress sale.

Over 200 years ago, Napoleon was forced to sell France’s claim to 828,000 square miles of land in the New World in order to cover his war expenses. US President Thomas Jefferson happily obliged, paying the modern equivalent of around $315 million (based on the gold price), roughly 59 cents per acre in today’s money. According to US census records, there were around 90,000 people living within the territory during that time who literally woke up the next day to a different world.  This is the sort of thing that happens when governments go bankrupt.

With the Lehman collapse, a lot of people got hurt… but it was mostly a financial and economic issue. When an entire nation goes bust, the pain is felt much deeper: the most basic systems and institutions that people have come to depend on simply disappear.

Argentina’s millennial debt crisis is a great example of this… suddenly the power failed, the police stopped working, the gas stations closed, the grocery stores ran out of food, the retirement checks stopped coming, and the banks went under (taking people’s life savings with them).

European leaders (with Chinese help) can postpone the endgame for a short time, but they’re really just taking an umbrella into a hurricane. It would be foolish to not expect a Greek default, and it would be even more foolish to not expect significant consequences. The only question is– how are you prepared to deal with what happens?

2) … Who or what will provide for Greece’s state workers and Greek fiscal spending when it defaults … And who will provide credit when the European Banks get decapitalized by the soon coming Greek default?
Austrian Economist Mike Mish Shedlock sees a breakup of the Euro into sovereign nation states as he writes in Point of No Return: Will it be Japanization, Monetization, or Crisis 2.0? as well as a number of previous articles. The Austrian Economists champion libertarianism and free enterprise as a solution to the disintegration of European Socialism that we see in today’s news.  Ludwig Von Mises wrote “State interference in economic life, which calls itself economic policy, has done nothing but destroy economic life. Prohibitions and regulations have by their general obstructive tendency fostered the growth of the spirit of wastefulness.” page 469 Socialism, Google Books.  And Fredrick Hayek said: “The Roman Empire crumbled to dust because it lacked the spirit of liberalism and free enterprise. The policy of interventionism and its political corollary, the Fuhrer principle, decomposed the mighty empire as they will by necessity always disintegrate and destroy any social entity.” page 763 Human Action Google Books.

One of the most prevalent doctrines throughout scripture is the Sovereignty of God as is seen in Isaih 4:9-14, and Ephesian 1:1. From the opening of the Book of Revelation in Revelation 1:1, to where God pronounces, “It is done”, Revelation 16:17, it is clear that mankind’s events which transpire are the result of God’s initiative.  Merrill C Tenney in Interpreting Revelation, Hendrickson Publishers, 1957, page 158, relates “Revelation presents a Sovereign God whose purposes must be victorious. He is almighty, Revelation 1:8, everlasting, Revelation, 4:8, seated upon the throne of the universe, Revelation, 4:2, the creator of all things, Revelation 4:11, and his name is security to those who trust in HIm Revelation 4:1.”  Another commentary which highlights God’s Sovereignty is Revelation by David Harrell,   

The Apostle John provides his prophetic dream of the end times in the last book of the Bible, that being Revelation.  We see that in Revelation 2:27, God is destroying national sovereignty, and all current forms of economic experience, such as European Socialism, whether it be in Greece or Italy, so as to reveal the sovereignty of his Son, Jesus Christ, by providing a Super European Government, as part of a ten toed kingdom of regional economic government, as foretold in bible prophecy of Daniel 2:42 where according to Revelation 17:12-14, ten kings will rule in each of the ten toes, that is the world’s ten regions

God is exercising sovereign will to dissolve national sovereignty through the 1974 Call of the Club of Rome, which is clarion, that is, clear, distinctive, and ringing, and is also trumpeting an authoritarian imperative for regional economic government, which in the case of the Eurozone, implies that out of its sovereign debt and banking crisis, leaders will announce regional framework agreements, waive national sovereignty, disregardful of any declaration by national supreme courts and constitutional law, and establish a fiscal union with authority over fiscal spending, as well of the appointment of a President of the EU, a sovereign ruler, who will be accompanied by a seignior, the word meaning a top dog banker who takes a cut, as presented by Elaine Meinel Supkis in History of seigniorage wealth.

The global economic, investment, and political plates have shifted, an as a result, an authoritarian tsunami consisting of a ten toed kingdom of regional economic government is on the way, as world stocks turned lower in May, investors became aware that a default union occurred in July, and Angela Merkel and Nicolas Sarkozy called for a true European economic government in August 2011.

God has ordained in Revelation 13:1-4, that the Beast Regime of Neoauthoritarianism rise from the sea of humanity to replace the Milton Friedman Free To Choose Regime, together with the post colonial British rule and US Dollar Hegemony, that governed political and economic life from the mid 1800s, up through the time when the world went off the gold standard in 1971 to May 2011, when world stocks began to turn lower. The Beast System will rule in all of mankind’s seven institutions and in all of its ten world regions.

Not only is national sovereignty failing, but as And Zero Hedge reports governments are collapsing:  Slovenian Government collapses after confidence vote loss. Where as the previous regime known as Neoliberalism was characterized by wildcat finance, a Doug Noland term, Neoauthoritarianism is characterized by wildcat governance, where leaders bite, tear, and rip one another.  

Libertarians are of the belief that they are sovereign individuals; this group of individuals includes: individualist anarchists, (Lysander Spooner), anarcho-capitalists (Murray Rothbard, John Locke), constitutionalists (Chuck Baldwin), fiscal libertarians (Kristin Davis), objectivists (Ayn Rand), libertarian economists (Milton Friedman), left-libertarians (Noam Chomsky), and anarcho surrealists (Andre Breton).Yet, under Neoauthoritarianism, there are no sovereign individuals as there are only sovereign leaders. As for freedom and choice, they are illusions, yes, mirages, on the Neoauthoritarian Desert of the Real.   

A default by Greece will relieve Greece of paying off a mountain of debt that it cannot afford.  But an inquiring mind asks, who or what will provide for Greece’s state workers and Greek fiscal spending when it default as CNBC reports on the patronage and pork of Greek Socialism Every Greek family has one public servant in its ranks.

Gideon Rachman in FT notes, “The images on euro notes are of imaginary buildings. While national currencies typically feature real people and places, George Washington on the dollar bill, the Bolshoi theatre on the Russian rouble, European identity is too fragile for that. This lack of a common identity is the fatal flaw that may sink the common currency.”

Bible prophecy of Revelation 13:3,  reveals that out of soon coming economic collapse, the word, will and way of One Leader, the Sovereign Revelation 13:5-10, and his banking partner, The Seignior, Revelation 13:11-18, will arise to speak for, and to the Eurozone. Their diktat will provide seigniorage, which will be the basis of a European identity. People will be amazed at this new seigniorage, and give their full allegiance to it, even as it imposes austerity and debt servitude on all.   

The extremity of consequences of the sovereign debt crisis is seen in the Jeanne Whalen WSJ report Roche keeps drugs from strapped Greek hospitals.

Bank nationalization will be the order of the day as Tyler Durden in article Jefferies: Expect massive policy response In Europe, Bank nationalizations and TARP In Drachma writes: The most scathing report describing in exquisite detail the coming financial apocalypse in Europe comes not from some fringe blogger or soundbite striving politician, but from perpetual bulge bracket wannabe, Jefferies and specifically its chief market strategist David Zervos.

“The bottom line is that it looks like a Lehman like event is about to be unleashed on Europe without an effective TARP like structure fully in place. Now maybe, just maybe, they can do what the US did and build one on the fly, wiping out a few institutions and then using an expanded EFSF/Eurobond structure to prevent systemic collapse. But politically that is increasingly feeling like a long shot. Rather it looks like we will get 17 TARPs,one for each country. That is going to require a US style socialization of each banking system, with many WAMUs, Wachovias, AIGs and IndyMacs along the way The road map for Europe is still 2008 in the US, with the end game a country by country socialization of their commercial banks. The fact is that the Germans are NOT going to pay for pan European structure to recap French and Italian banks,even though it is probably a more cost effective solution for both the German banks and taxpayers. Expect a massive policy response in Europe and a move towards financial market nationalization that will make the US experience look like a walk in the park/”

3) … With the failure of the Milton Friedman Free To Choose Currency Regime, and the emergence of the Neoauthoritarian Regime, deleveraging is the order of the day.
Love grows cold in the age of deleveraging as WSJ reports Greek crisis exacts the cruelest toll. Two years into Greece’s debt crisis, its citizens are reeling from austerity measures imposed to prevent a government debt default that could cause havoc throughout Europe. The economic pain is the price Greece and Europe are paying to defend the euro, the centerpiece of 60 years of efforts to unite the Continent. But as Greece’s economy shrinks, its society is fraying, raising questions about how long Greeks will be able to take the strain. Gross domestic product in the second quarter was down more than 7% from a year before, amid government spending cuts and tax increases that, combined, will add up to about 20% of GDP. Unemployment is over 16%. Crime, homelessness, emigration and personal bankruptcies are on the rise. The most dramatic sign of Greece’s pain, however, is a surge in suicides. Recorded suicides have roughly doubled since before the crisis to about six per 100,000 residents annually, according to the Greek health ministry and a charitable organization called Klimaka. About 40% more Greeks killed themselves in the first five months of this year than in the same period last year, the health ministry says. And Business Insider reports The completely outrageous cost of living in Brazil.

Irvine Renter writes of the deleveraging that comes with the collapse of mortgage banking cartel stating Bank of America increased its foreclosure notices an astounding 116% over last month. The resulting foreclosures are scheduled to hit the market in spring of 2012 thus dooming any rally.

Wall Street Journal reports Swiss Franc tumbles as market eyes possible SNB moves. Widespread market speculation that Switzerland may adopt new measures to prevent its currency from inflicting further damage on its export sector sent the franc sharply lower Tuesday, with the move momentarily distracting traders from Europe’s ongoing sovereign-debt problems.


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