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.