Archive for January, 2012

Investors Fearing Loss Of Greece Debt Sovereignty, Sell Currencies, Commodities, And Stocks … The New Economy Of Regional Global Governance Is Rising To Replace Capitalism

January 31, 2012

Financial Market Report for January 30, 2011

1) … Investors fearing losses from Greek default and Portugese default, sell currencies, commodities, and stocks, recommencing the downward trend in the Age of Deleveraging.   
Volatility rose, VIXY, and VIXM, rose as investors sold Major World Currencies, DBV, Emerging Market Currencies, CEW. Currencies falling lower included  FXM, FXC, ICN, FXB, FXS, FXF, BZF, FXA, FXRU. The Euro, FXE, traded lower at 130.71. The US Dollar, $USD, UUP, rose.

Commodities, DBC, Base Metals, DBB, Agricultural Commodities, JJA, traded lower.

European Financials, EUFN, Global Financials, IXG, the BRICS, EEB, Emerging Markets, EEM, Europe, VGK, Emerging Market Materials, EMMT, and Global Materials, MXI, traded lower as John Shayne writes We Can’t Go On Together with Suspicious Minds, Because Were Leveraged too Much Baby. (h/t to Mike Mish Shedlock)

2) … Fate is operating through creative destruction to replace the banker regime of capitalism with the beast regime of regional global governance.
Please consider that Angela Merkel has been appointed by the Sovereign Lord God, Psalm 2:4-5, as dignitary and vessel to effect regional global goverance, as foretold in Daniel, 2:31-45, which is the same as the ten horns seen on the Beast of Revelation 13:1-4. Milton Friedman provided the Free To Choose floating currency regime, known as Neoliberalism, aka Capitalism, which featured inflationism. But, investors sold out of currencies and stocks in July 2011, on fears that a debt union had formed in the EU, and now destructionism has commenced, where the Beast Regime of Neoauthoritarianism is rising to terminate all forms of economic and political life.  The dynamos of profit and growth that empowered capitalism have been exhausted through US Central Bank and ECB monetary policy.

God’s prophetic word of Revelation 6:1-2, is unleashing the First Horseman of the Apocalypse to power up the dynamos of regional security and prosperity, where public private partnerships led by monetary cardinals will manage the economy, and where fiscal commissioners will oversee government budgets, to implement strategic reforms and austerity measures, as they work together in regional global governance. Choice is an epitaph on the tombstone of a bygone era. Freedom, free enterprise, and a free monetary system, are Libertarian principles seen the Ron Paul agenda; yet they are mirages on the Neoauthoritarian Desert of the Real. The sovereign, junk, personal, and corporate credit boom that produced the debt economy, is history; the debt servitude experience will commence soon.

Germany will take sovereign preeminence over other countries as Euroland rises to be a type of revived Roman Empire.  And a New Charlemagne will rise to power through regional framework agreements; these being the basis for regionalization world wide. The Apostle John, writes, “And now understand this: The seven heads of the beast represent seven hills of the city where this woman rules. They also represent seven kings. Five kings have already fallen, the sixth now reigns, and the seventh is yet to come, but his reign will be brief. The scarlet beast that was alive and then died is the eighth king. He is like the other seven, and he, too, will go to his doom. His ten horns are ten kings who have not yet risen to power; they will be appointed to their kingdoms for one brief moment to reign with the beast. They will all agree to give their power and authority to him.” Revelation 17:9-13. Throughout history “seven hills” has often been erroneously interpreted as a reference to Rome, the city of seven hills. However, the original Greek is literally interpreted as “seven mountains.” From Daniel chapter 2, we know that a mountain can represent a kingdom, and given the context of the verses, it is proper to interpret these seven mountains as seven kingdoms. The seven heads of the beast represent seven world empires. Assume that we are in the time of John the apostle when he revealed this. “Five kings have already fallen, the sixth now reigns, and the seventh is yet to come”

  1. Egypt – fallen
  2. Assyria – fallen
  3. Babylonia – fallen
  4. Medo-Persia – fallen
  5. Greece – fallen
  6. Rome – time of John
  7. A Revived Roman Empire, whose Leader, the Sovereign, will rise to global power.

The same progression of empires is seen in Nebuchadnezzars’ dream of Daniel 2:31-45. Head of Gold, Nebuchadnezzar ruling Babylon; Chest of Silver, Cyrus and Cyrus and Darius ruling Merdo Persia; Belly of Bronze, Alexander the Great establishing Greece; Leg of Iron, Charlemagne ruling Rome; Iron of Iron, Tony Blair ruling the UK, and George Bush, The Decider, ruling America;

Toes of Iron and Clay, News reports continually document that the power of the two iron kingdoms, which began for the UK in the late 1700s, and which began for the US in the late 1800s, is flowing into a ten toed kingdom of regional global governance, Daniel 2:31-33. This system is described by Daniel as beastly, Daniel 7:7.

The ten toes being continually mixed in the iron of diktat and the clay of democracy, will crumble and give way to mankind’s final empire seen in Revelation 13:5-18, where the Sovereign, after establishing  a middle east peace treaty, gains the upper hand and establishes a one world government, a one world currency, and global seigniorage, Revelation 13:17-18.

Then the Son of God will establish his empire and rule from Jerusalem, over planet earth for a thousand years.

Along with those mysteries, there is also a woman riding on the beast with 7 heads and 10 horns, Revelation,17:3-6, “Then the angel carried me away in the Spirit into a desert. There I saw a woman sitting on a scarlet beast that was covered with blasphemous names and had seven heads and ten horns. The woman was dressed in purple and scarlet, and was glittering with gold, precious stones and pearls. She held a golden cup in her hand, filled with abominable things and the filth of her adulteries. This title was written on her forehead: mystery Babylon the great the mother of prostitutes And of the abominations of the earth. I saw that the woman was drunk with the blood of the saints, the blood of those who bore testimony to Jesus.”

John Notter Jr. relates Mystery Babylon is a great economic, political, and spiritual unification. The harlot of Babylon will ride a beast that is headquartered in Europe and the Middle East.  She is great wickedness as she denies the true power of salvation, Jesus Christ. This false religion will have the full backing of Satan and the unholy trinity. It will unite east and west, and all of the world!  She will come about as men try to overcome a recent war with shouts of peace and safety, so they will bow to her wishes as they see this prostitute as a means to accomplish their ends.

Of note, COG writer relates Europe gets its name from Europa of Roman/Greek mythology

During the first week of February 2012, the Interest Rate on the 10 Year Note, ^TNX, will continue to fall, and Volatility, VIXY, VIXM, TVIX, will rise, as anticipation of debt debasement by LTRO 2 causes disinvestment of world stocks, ACWX, world small caps, VSS, emerging market small cap leaders, EWX, emerging market materials, EMMT, emerging market financials, EMFN, being led so by inflation nations, INP, TUR, EWZ, ARGT, EGPT, as well as China Industrials, CHII, and China Materials, CHIM.  Ongoing central bank stimulus will not inflate fiat assets; rather currency deflation will deflate, stocks and delever commodities. Wealth can only be preserved by dollar cost averaging into the possession of physical gold.

Bloomberg reports Angela Merkel Says Greece’s Debt Sustainability Is Especially Bad” Merkel told reporters. “You have to find a way through more action by the Greek government, more contributions by private creditors, for example, in order to close this gap. EU chiefs agreed to speed the setup of a full-time 500 billion-euro ($654 billion) rescue fund and signed off on a German-inspired deficit-control treaty. After the Meeting of European Leaders, EU President Herman Van Rompuy convened a smaller group, including Greek Prime Minister Lucas Papademos and European Central Bank Executive Board member Joerg Asmussen, to weigh the next steps on Greece.

Bloomberg reports EU Stumbles as Merkel Signals Greece Debt Deal Delay. European leaders sparred with Greece over a second rescue program, clouding progress toward a permanent aid fund and tougher budget rules designed to stabilize the euro. Greece faced criticism that its economic makeover is faltering, and it fended off German-led calls for a European overseer to take command of its budget after its deficits surpassed targets for two years. “What the Greeks have to do is show they are ready to implement the package,” Dutch Prime Minister Mark Rutte told reporters as he arrived for a European Union summit in Brussels today. “We can help Greece through this difficult phase, but then Greece has to execute all agreements they made with us.”

Business Insider reports Papademos Says Greece Could Need More Public Funding. Greece’s prime minister says he cannot exclude the possibility that his country will need more help on top of a new €130 billion ($170.43 billion) bailout and a deal with private investors to slash its debt

Zero Hedge reports European Bailout Infographic: Presenting The Truckloads Of Cash Needed To Rescue The Insolvent. And Zero Hedge reports Good Gendarme: Recently Downgraded France Opposes German Demands For Greek “Tutelage

EU Business relates Jacques Delors Calls Resistance To Eurozone Bailout Boost Scandalous. Former European Commission chief Jacques Delors on Sunday blasted the reluctance of eurozone countries like Germany to boost the size of the Greek bailout and create a system of eurobonds to facilitate lending. “It is scandalous. You cannot be a member of the euro cooperation and at the same time say no to elementary demands for solidarity with other members within the framework of existing agreements,” the prominent European federalist said in an interview with Dagens Nyheter, Sweden’s daily of reference. “We have to save Greece together. What has been done so far is too little, too late,” he added. Delors, who was commission chief between 1985-95 and a key player in creating the framework for the euro’s 1999 launch, said it was “out of the question” to push Greece out of the eurozone and insisted the solution was for “Greece to privatise more of its economy.” “The euro countries also must together introduce common eurobonds, not to finance the current debt but to create greater efficiency and connectivity in the financial and monetary system,” the 86-year-old Frenchman said. The creation of such a “eurobond,” which would pool the debt of the entire monetary bloc in a bid to reassure markets and facilitate lending, has long been a contentious issue among top policymakers, with the European Commission and France being in favour of such an instrument but Germany strictly opposed for now. “It is a mistake of German Chancellor Angela Merkel to refuse to go along with such bonds,” Delors said.

Ambrose Evans Pritchard reports Portuguese Storm Gathers As EU Leaders Fight Over Greece Surging borrowing costs in Portugal have raised the spectre of a second full-fledged contagion crisis in the eurozone, eclipsing the latest efforts by European Union leaders in Brussels to agree on Europe’s bail-out machinery and a strategy for Greece.

New York Times reports Portugal Suffers as Loss of Confidence in Bonds Sends Yields Higher. Investors fled out of bonds of weaker European countries on Monday, sending yields on Portuguese government bonds to a record high over concerns that the euro zone debt troubles were spreading beyond Greece. The fears of contagion spreading to other periphery countries in the zone that share the euro have grown more intense in recent months, with much of the latest focus on Portugal.

Reuters reports Commerzbank Says  Greece Needs to Dump Euro Shackles . Greece must surrender the “shackles” of the euro in order to survive if it does not want to constantly ask for a handout from euro zone governments, the supervisory board chairman of Commerzbank said late on Monday. “What do they need, another 15 billion euros? If you think that is the last 15 billion that they will have miscalculated, then best wishes,” Klaus-Peter Mueller told an industry event in Frankfurt.”They will come back for more and there will be no end, unless you really see them enact structural reforms, but this won’t take just two-three years — we’re talking 20, 30 or 40 years for Greece. “Mueller said it doesn’t do any good to Greece were euro zone governments to continue forcing them to wear the “shackles” of a currency that only permits internal adjustments via spending cuts and declining wages.”The Greeks need on balance a currency that they can then devalue,” Mueller said, adding it would take a long time before the government could build up from scratch functioning structures that restore competitiveness.Athens and its EU partners have long ruled out a euro exit, which could drag the bloc even deeper into crisis. However, earlier in January a Greek government spokesman said the country would have to leave the euro zone if it fails to clinch a deal on a second, 130 billion euro bailout with its international lenders. The chairman of Germany’s second largest listed lender disagreed that an exit would prompt “global chaos” and cause investors to dump sovereign debt from other periphery countries like Italy and Spain. “I don’t think that markets would react negatively towards the other countries that would then remain in the euro zone after such a decision,” he said

Ambrose Evans Pritchard reports Portuguese Storm Gathers As EU Leaders Fight Over Greece Surging borrowing costs in Portugal have raised the spectre of a second full-fledged contagion crisis in the eurozone, eclipsing the latest efforts by European Union leaders in Brussels to agree on Europe’s bail-out machinery and a strategy for Greece.

Gray of Between The Hedges reports The Western Europe Sovereign CDS Index is still near its Jan. 9th all-time high. The TED spread is near the highest since May 2009. The 2Y Euro Swap Spread is near the highest since Nov. 2008. The 3M Euribor-OIS spread is near the highest since February 2009. The Libor-OIS spread is still very near the widest since May 2009, which is also noteworthy considering the equity surge off the recent lows. Overall, the improvement in credit gauges appears to be stalling at still stressed levels, which is liklely related to rising concerns surrounding Portugal. The market’s focus is rapidly moving from Greece to Portugal, which appears headed for another bailout. Many are suggesting that the issues in Europe are priced into stock prices at current levels, however recent history suggests otherwise. Furthermore, given that several key investor sentiment gauges are registering too much complacency and stocks are technically extended, a more cautious approach is warranted. For an intermediate-term equity advance from current levels, I would still expect to see further European credit gauge improvement, subsiding hard-landing fears in key emerging markets, a rising 10-year yield, better volume, stable-to-lower energy prices.

Stocks in Europe Fall Most in Six Weeks; BNP Paribas Tumbles on French Tax. European stocks dropped the most in six weeks as Portuguese bonds sank amid concern a meeting of the region’s leaders will fail to draw a line under the sovereign- debt crisis. BNP Paribas SA (BNP) tumbled 7.1 percent, leading French banks lower, as President Nicolas Sarkozy said he will unilaterally impose a financial-transaction tax. Royal Philips Electronics NV (PHIA) fell 2.2 percent after reporting a larger-than-estimated loss. Hochtief AG (HOT) slid 5.8 percent after saying it will post a wider annual loss than previously anticipated. The Stoxx Europe 600 Index retreated 1.1 percent to 252.52 at the close of trading, the largest slide since Dec. 14.

Corporate Bond Risk Rises in Europe, Credit-Default Swaps Show. The cost of insuring against default on European corporate debt rose, according to traders of credit- default swaps. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings increased 13.5 basis points to 618.5 basis points, according to JPMorgan Chase & Co. at 7:30 a.m. in London. An increase signals worsening perceptions of credit quality. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings was up 3.25 at 144.75 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers added 4.5 basis points to 215 and the subordinated gauge was up six at 375.

Tyler Durden reports Think filing for bankruptcy is the only way to get debt discharge? Think again, at least in Greece. While previously we have reported that Greek courts had written off “untenable” debts of unemployed Greeks owed to local banks, Kathimerini describes a landmark case which may have profound implications for the indebted country, in which a fully employed woman has had the bulk of her debt written off. From Kathimerini: “In what could turn out to be a significant ruling for Greeks suffering from the economic crisis, a court in Hania, Crete, has become the first in the country to order that the majority of the debt owed to banks by someone still in full employment be wiped out. Sunday’s Kathimerini understands that the Justice of the Peace Court in Hania based its decision on a 2010 law that allows judges to give protection to people struggling to meet their financial commitments. Until now, the legislation has only been used to give debt relief to unemployed people or those with no substantial income.” This means that virtually every indebted person in Greece, regardless of employment status will rush into court rooms, demanding equitable treatment and a similar debt write down. It also means that the Greek bank sector, already hopelessly insolvent, is about to see its assets, aka loans issued to consumers, about to be written off entirely. And since the ultimate backstopper of the entire Greek financial system is the ECB, the creeping impairments will have no choice but to impact, very soon, the mark-to-market used by both the ECB and the various national banks. Finally, how long before other courts in Europe express solidarity with their own citizens and proceeds with similar resolutions?

In news of regionalization, the GCC region of global governance emerges as Reuters reports Gulf Arabs Have Plans Against Hormuz Closure. Coastguards and naval forces of the Gulf Cooperation Council (GCC) group of Arab countries have contingency plans for a possible attempt by Iran to shut the Strait of Hormuz, a Kuwaiti maritime official said on Monday.

Love grows cold in the Age of Deleveraging. EconomicPolicy Journal reports Greek Financial Crisis Resulting in More Abandoned Children

Richard Tol writes in Irish Economy  Ireland in the European Court again, now over gas In December, I blogged about the gas interconnector, the Shannon LNG terminal, and the need for regulatory reform in the wholesale gas market. Last week, the European Commission chipped in. It is taking Ireland to court over the lack of competition in the market for gas between Scotland and Northern Ireland, and between Ireland north and south. Intriguingly, the UK is sued as well, although most of this is Irish rules on UK soil. John Fingleton gave a great presentation at last week’s conference on the Irish economy. Among other things, he argued that competition policy in Ireland exists by virtue of the European Union. (h/t Paul Hunt)

John Redwood reports Parliament Bares Its Teeth On RBS. Mr Hester decided to waive his bonus when he heard there would be a Commons vote on it. Labour who had signed such a generous contract in the first place decided to table a debate and vote in Opposition time to condemn it to make amends for their original deal. Many Conservatives and Lib Dems would have voted with them. The truth is the Board of RBS was set the wrong task and given the wrong remuneration for doing it when the bank was stupidly nationalised in the first place. Will this government now call them in and change the requirements? They should be instructed to split the bank up, creating new functioning smaller High Street banks which can be immediately floated off into the private sector, where they need to raise more capital to allow them to lend more to power an economic recovery. The sooner the government does this, the sooner its economic policy will function better. If the current Board does not want to do this, then there are plenty of able people who would happily go in and do it for them, for less pay.

I comment that the ongoing chart of UK area banks RBS, LYG, BCS, HDB, IRE, shows that over the last ninety days, RBS, has risen the most; but now RBS is one of the banks falling the greatest in value.

Global trade is going to massively shrink; and global supply chains will become regional supply chains overseen by regional monetary cardinals. Tyler Durden in article As Europe Goes (Deep In Recession), So Does Half The World’s Trade. It is of course no surprise and as the World Bank points out half of the world’s approximately $15 trillion trade in goods and services involves Europe.

Charles Hugh Smith writes in Zero Hedge, One Dam Metaphor For The 2012 Global Financial System. The way to visualize the current situation is to imagine a dam holding back rising storm waters. The dam is the regulatory system, the rule of law, trust in the transparency and fairness of the system and the machinery of perception management. All of these work to keep risk, fraud and excesses of speculation and leverage from unleashing a destructive wave of financial instability on the real economy below. As legitimate regulation and transparency have been replaced with simulacra and manipulated data, the dam’s internal strength has been seriously weakened.

Brandon Smith writes in Zero Hedge, Baltic Dry Index Signals Renewed Market Decline

A Global Eurasia War is coming to both Syria and Iran. Tyler Durden writes Third Aircraft Carrier Group Coming To Iran

Currencies, Stocks, And Bonds Seen Topping Out … Regional Monetary Cardinals Will Rise To Replace Wall Street Financiers …. Regional Global Governance Is Replacing Capitalism

January 30, 2012

Financial Market Report for the week ending January 27, 2011

1) … Currencies, stocks, and bonds are seen topping out this week.
Trading in Utilities, XLU, Housing, XHB, ITB, Small Cap Pure Value, RZV, Automobiles, F, GM, VROM, CARZ, Networking, IGN, Banking, KBE, KRE, Community Banks, QABA, Dividend Payers, DVY, Memory Chips, MU, Communications Equipment, QCOM, show that the way is now down in the stock market, as the benefit of neo liberal finance is exhausting.  Many of the vehicle manufacturers seen in this Finviz Screener are now trading lower.  

The cloud computing stocks seen in this Finviz Screener are either starting to fall lower, or appear ready to do so.  Education stocks seen in this Finviz Screener and Tobacco stocks seen in this Finviz Screener have already turned lower.     

The Eurozone Debt Contagion Safehaven Rally in US Stocks is ending, as communicated in the chart of Residential Reits, REZ, Dogs Of The Dow, DOD, Industrial Reits, FNIO, North American Infrastructure, PKB, Nasdaq Biotechnology, IBB, Paper Products, WOOD, Wildcaters, WCAT, Energy Partnerships, AMJ, Steel, SLX, Semiconductors, XSD, Health Care Provider, IHF.

The design, build, and construction stocks seen in this Finviz Screener have been the beneficiary of a flight to safety in US Infrastructure. And the chemical manufacturers seen in this Finviz Screener have seen an inflow of Euros as well, especially since the ECB turned on the LTRO spigot of credit liquidity. Some of the stealth QE provided carry trade seigniorage, that is carry trade moneyness, in these the US chemical manufacturers seen in this Finviz screener.     

Both Shipping, SEA, and Airlines, FAA, have risen parabolically. The chart of US Infrastructure leader American Water Works, AWK, shows just how strong the rally in these stocks has been.  I expect Preferred, PFF, and Biotechnology, XBI, to be fast fallers after weeks of steady rising.

Business Services, Synnex, SNX, and Recreational Vehicle Manufacturer, Thor Industries, THO, have been strong risers as well, as have the value and consumer stocks seen in this Finviz Screener.     

Various commodity charts communicate that commodities, DBC, USCI, are fully leveraged out, these include base metals, DBB, tin, JJT, nickel, JJN, lead, LD, aluminum, JJU, copper, JJC, timber. CUT. These appear to be the beneficiary of Fed Announcement liquidity.  The chart of oil, USO, shows it residing at the middle of a broadening top pattern; prices usually fall from such structures. The chart of Grains, GRU, and Corn, CORN, show completion, suggestion that the rally in agriculture, JJA, is complete. Insolvent sovereigns, and insolvent banks, and dead fiat money, brought back to life by the  zombie wand of Neo liberal bankers are unable to support leverage. The age of leverage is history, and the age of deleveraging which is already here is soon going to once again pick up speed.

The full leveraging of timber suggests that the paper product manufacturers, WOOD, seen in this Finviz Screener have topped out.  And the topping out of agricultural commodities suggests that the rally in agricultural implement manufacturers seen in this Finviz Screener, and in the US Agricultural stocks, MOO, and the Global Agriculture stocks, PAGG, is over as well. The run up in base metal commodities, suggests that Steel, SLX, the mining stocks seen in this Finviz Screener, S&P Mining, MXI, Copper Mining, COPX, Aluminum Mining, ALUM, Rare Earth Mining, REMX, Uranium, URA, have run their course. A falling oil price, USO, will certainly knock WCAT and PSCE down a goodly amount.

The debt economy maxed out this week on rising world currencies, DBV, and emerging market currencies, CEW, as the US Federal Reserve announcement debased the US Dollar, $USD, UUP.  Currency traders brought the Yen, FXY, back up, resetting trades for disinvesting out of recent carry trade commitments in the zombified currencies FXE, FXM, FXC, ICN, FXB, FXS, SZR, FXF, BZF, FXA, FXRU, CEW. I expect the US Dollar, $USD, to be higher from here in the first part of February 2012. The rise in currencies this week caused a 27% rise in the National Bank of Greece, NBG. That’s the wonder working power to Ben Bernanke inflationism fueled by free capital from Mario Draghi’s LTRO facility.  Given the exhaustion of the US Federal Reserve’s monetary policies and the cheap credit of the ECB’s  LTRO facility, there is now no money good.

Ambrose Evans Pritechard writes The more they use the facility, the more collateral they hand over to the ECB. Since the ECB has senior status, everybody else faces “subbordination”. At some point this dynamic may turn nasty, causing private credit to tighten. Mr Mandy frets about what will happen if Fitch and Moody’s join S&P in downgrading Italy to BBB+, triggering a 5pc margin call. Yes global subordination will commence as major currencies, DBV, and emerging market currencies, CEW, turn lower. International corporate bonds, PICB, will be turning parabolically lower. In particular, the Southern Europe, that is Latin Credit Bubble, is going to make all credit bad.    

The chart of the 200% Dollar ETF, UUP, is at the edge of a head and shoulders pattern, and is likely to move once again higher.  The rise seen in the chart of the ETF JYN, reflects the rise in the US Dollar. I expect JYN to be lower next Friday, and the USD/JPY, which traded down to 77.0, to be higher at that time.  Yahoo Finance Daily FX reports Euro Propped Up On Hopes For Greek PSI Deal, USD Strength AheadLooking to Buy USD/JPYEuro Chart Hints Down Trend vs US Dollar May Be Ready to Resume. The FX currency reports herald a rising dollar. A falling Brazilian Real, BZF, will cause a tumble in these Brazil Shares, SBS, CPL, FBR, GGB,SID, CBD, NETC, CPL, ERJ, SBS, BAK, VALE, CZZ, CIG, ITUB, BSBR, BBD.  

It was anticipation and follow through of the Fed Announcement that goosed up China Industrials, CHII. Falling currencies globally will cause a strong deleveraging out of these as well. The US Central bank monetary policies have been a strong driver, like the Nile River in spring, of stocks.

Major market beneficiaries of rising currencies this week were, European Financials, EUFN, Germany, EWG, Italy, EWI, Austria, EWO, South Africa, EZA, Brazil, EWZ, Russia, RSX, India, INP, China, YAO.

Emerging market beneficiaries of rising currencies were Emerging Market Financials, EMFN,  India Earnings, EPI, Brazil Financials, BRAF, Greece, GREK, Turkey, TUR, Emerging Asia, GMF, Latin America Small Caps, LATM, Argentina, ARGT, India Small Caps, SCIF, Brazil Small Caps, BRF, New Zealand, ENZL, Canada Small Caps, CNDA, Emerging Europe, CEE, Poland, EPOL, Vietnam, VNM, Philippines, EPHE, Egypt, EGPT, Russia Small Cap, ERUS, Emerging Market Small Caps, EWX, and Emerging Market Materials, EMMT.

The credit based fiat system is entering a debt deleveraging cycle. Small Cap Pure Value, RZV, and US North American Infrastructure, PKB, crested higher on rising currencies this week. These will be falling lower with world government bonds, BWX, and emerging market bonds, CEW, municipal bonds, MUB , as world currencies, DBV, and emerging market currencies, CEW, trade lower in a global debt deleveraging purge of fiat wealth. This is the natural economic cycle at work; they can be no further intervention to prevent fiat asset deflation.

The Bespoke Investment Group article Uh-Oh — Guidance Dips Too evidences that the Age of Leverage is shifting to the Age of Deleveraging.

Bullion Money presents two charts from the McKinsey Global Institute, which provide elegant snapshots of progress of debt and deleveraging by the 10 largest mature global economies. The first chart (but second in the report) shows the composition of debt by country. Notably Japan is leaps ahead by gross debt levels (but as argued later in the report at around Euro levels when netted off), as is the UK, mainly because of the City Of London’s insatiable diet for financial debt instruments.
Minority Opinion relates The long and painful road to deleveraging.

Gold, GLD, may go lower for a while, but it is going to explode massively higher. Silver, SLV, is likely to trade lower with base metals, DBB. Natural gas, UNG, is going to plummet. One will not be getting a natural gas hookup from the utility company, as these simply will not have the operating capital to install new infrastructure. In the age of deleveraging funding for US infrastructure investing, PKB, and Emerging Market Infrastructure and Smart Grid Infrastructure, EMIF, INXX, CHXX, GRID, BRAF, will plummet.

The three white soldiers seen in the chart of bonds, BND, and in the medium duration corporate bonds, LQD, and longer duration corporate bonds, BLV, suggests that Peak Credit has been achieved, confirmation comes from Municipal Bonds, MUB, has moved parabolically higher. Municipal bonds have been a safe haven investment risen parabolically in value ever since the major currencies, DBV, and the emerging market currencies, CEW, started to fall lower in May 2011 when investors started to fear that a debt union had started to form in the EU.  This peaking of credit drove the Interest Rate on the US 10 Year Treasury Note, ^TNX, lower to 1.89% today, and caused US 10 Year Notes, TLT, 30 Year US Government Bonds, EDV, and the Zeroes, ZROZ, to trade higher. For those into trading it was a good place to start short selling the US Treasuries. And sent the most toxic of debt, Michigan Municipal Bonds, MIW, rose to a new high at 14.94. The chart of junk bonds, JNK, shows a parabolic move higher.  Joseph Ciolli of Bloomberg reports Junk-bond trading volumes are rebounding to the highest level in 11 months as optimism the U.S. economy can weather Europe’s debt crisis kindles investor appetites for riskier assets. Sales of new junk bonds are accelerating at the fastest pace since September, and exchange-traded funds focused on the debt are growing at the fastest two-month pace since 2009. And Tim Catts of Bloomberg reports Corporate bond sales worldwide have slowed from their record pace in the middle of the month as everyone from the Federal Reserve to the International Monetary Fund cuts forecasts for economic growth. General Electric Co., SABMiller Plc and Bayerische Motoren Werke AG led $287.8 billion of offerings this month, the slowest start to a year since 2008.

Chris Cook in Back To The Future writes In or around 2007 the financial system reached a point of peak credit, at which the debt obligations taken on by populations exceeded their capacity to pay. This occurred because banks began to outsource credit risk and free their capital for further lending, to “shadow bank” investors:
a. Totally – through securitization and sale of debt;
b. Temporarily – through credit derivatives ie time limited guarantees;
c. Partially – through credit insurance eg by AIG or Ambac;
d. Toxic cocktails of these, such as collateralized debt obligations (CDOs); CDO squared and so on.
The result was a series of massive bubbles in property prices which imploded from 2007 onwards and led to a breakdown in trust in the banking system so that banks ceased to lend to each other. I believe that the collapse of Lehman Brothers in October 2008 will come to be seen as the definitive end of the centralized, but connected, Economy 2.0 paradigm operated by and for the profit of middlemen. At this point, through 2009, the flow of inflation-hedging dollars became a flood as banks queued to launch new funds and to set up the necessary support and trading operations. Commodity and equity prices became completely detached from the underlying reality of physical production and consumption, and of flows of profits and dividends, as funds took ownership – through purchases or leases – of commodities and equities purely as an alternative to holding dollars.

Dis-intermediation – Since the credit market is essentially dead, or at least on life support, the reason banks flocked to sell funds to clients is that market risk is not with the banks but with investors. Banks need relatively little capital to be service providers to the funds, and are able to make substantial profits in very short-term trading on behalf of the funds.

The banks have knowledge in respect of the ownership of market inventory which is not known to other market participants. These are the merchants who buy and sell physical commodities, and speculative financial traders such as hedge funds or even risk-taking individual investors, who attempt to make transaction profit. Through such information asymmetry, and the use of new trading tools such as high-frequency trading which provide often dubious liquidity, high profits may be made on minimal capital.

The adjacent possible – The point is that, as capital became scarce after October 2008, banks evolved their business model to the adjacent possible of marketing and operating new quasi-equity instruments. They transitioned from an intermediary role to a service provider role because it was and is profitable to do so.

But these instruments, and the presence in the markets of investors who aim to avoid loss rather than make profits, have now led to what are essentially two tier and false markets.
In my home turf of the oil market, all the signs are that in the absence of massive new flows of quantitative easing dollars from the Federal Reserve, and/or substantial cuts in oil production, especially from members of the Organization of the Petroleum Exporting Countries, there will be a collapse in oil market prices in the first quarter of 2012. Indeed, some market participants have already taken option positions in the oil market in anticipation (or in fear) of a fall in the oil price as low as $45 per barrel in 2012.

The coming collapse in commodity prices will lead to the next great regulatory scandal of mis-selling, when the risk-averse investors who bought these funds from the banks make massive market losses to which they never realized they were exposed. At that point the way will be open to go Back to the Future – to the next adjacent possible – which is direct people-based credit and direct asset-based credit.

I comment that Monetary Napsterization, a Jerry Cook term, after the music file sharing phenomenon, will never happen; but that I do agree there is risk to being long in oil through market disintermediation. And on Chris Cook’s statement. “I believe that the collapse of Lehman Brothers in October 2008 will come to be seen as the definitive end of the centralized, but connected, Economy 2.0 paradigm operated by and for the profit of middlemen,” I comment that a new paradigm, Economy 3.0 is coming, where public private partnerships led by monetary cardinals will manage the economy and fiscal commissioners will oversee government budgets, as they work together in regional global governance.  

Solar Energy Stocks, TAN, rose strongly on likely short selling coveing. I expect these to be fast fallers next week. And the fall in the ten year interest rate sent a number of US Infrastructure companies rising strongly, the heavily debt laden MTW rose 8%. Small Cap Industrial, PSCI, shares rising included, ROLL, HEES, BRC, LECO, SNA, and BDC. The chart of Caterpillar, CAT, is quite stunning; and it communicates a grand finale in global growth stocks. Since the beginning of QE1 it has risen from a value of 20 to 111 today. As a leader in the debt contagion rally, it has risen 5% this week, and 22% this month.  An inquiring mind asks, are these Residential Real Estate REITS, traded by REZ, ready for a fast fall?

Investment Postcards asks Investor Sentiment: Is this the end of the road for the rally?  The Yahoo Finance Chart of VIXY, VIXM, and TVIX shows today’s a possible rise in volatility, and market turn in the making.  A special thanks to Finviz for their free basic charting service. Today’s Finviz Map shows stock IFF rising strongly under Bernankeism. And today’s Finviz Map shows that Small Cap Pure Value, RZV, rose a stunning 16% in the last three months, as investors fled the European Sovereign Debt Crisis, and found safe haven in its portfolio, which includes business services company Synnex, SNX. And. today’s Finviz Group, shows this week’s leader was basic materials. The Finviz Elite Service is available for only $40 a month.   

2) … Bible prophecy foretells, that out of chaos, political capital will rise to replace investment capital.
Inflationism has begotten destructionism.  The dynamos of growth and prosperity are being replaced by the dynamos of security and stability whereby capitalism is giving way to regionalization where monetary cardinals will rise to replace Wall Street financiers; and regional fiscal commissioners will work in technocratic government for structural reforms to manage governmental budgets.

Through creative destruction regionalization and true socialism will arise to provider regional security and stability.

In as much as Greece has lost debt sovereignty, Germany is now demanding that Greece submit to a list of demands for structural reforms and abdicate fiscal sovereignty in order to receive another bailout. Reuters reports in this regard Reuters reports Germany Wants Greece To Give Up Budget Control. Germany is pushing for Greece to relinquish control over its budget policy to European institutions as part of discussions over a second rescue package. The Financial Times said it had obtained a copy of the proposal showing Germany wants a new euro zone “budget commissioner” to have the power to veto budget decisions taken by the Greek government if they are not in line with targets set by international lenders. And Bloomberg reports  Euro Officials Discuss Greek Budget Veto Powers European policy makers are discussing plans to directly intervene in Greek budget decisions as the country struggles to cut its deficit, two euro-region government officials said today. Under the proposals, European institutions would have powers to implement austerity measures agreed under the terms of Greece’s bailout agreements, said one of the officials, who declined to be identified because the talks are confidential. The plan would accelerate decision making and strengthen the power of officials overseeing Greece’s budget as part of the so called Troika of the European Commission, the European Central Bank and the International Monetary Fund, the person said.  European leaders meet in Brussels on Jan. 30 as they draw up a fiscal compact to strengthen governance of the euro region after Greece sparked a wave of financial turmoil that still threatens to splinter the bloc. With Greece struggling to meet the terms of bailout agreements struck over the past two years, European officials are trying to work out how to deal with countries that can’t meet the terms of bailout agreements. The Greek government rejects the plan because it’s contrary to national sovereignty, a Greek official said today.  And the WSJ reports Germany Pushes for EU Budget Control Over Greece.  Frustrated with the slow pace of implementation of budget overhauls in Greece, Germany is leading a push to force Athens to cede some control over its budget decisions to Europe, a move met by skepticism by European Union officials. A European official familiar with the matter said on Saturday that the reason for such a move, made as a condition of disbursing another round of bailout aid, is “the insufficient progress on Greece’s debt reduction, which in part is the result of the country’s extremely decentralized budget process.” And Zero Hedge reports Germany formally requests that Greece hand over fiscal independence. Furthermore, Zero Hedge reports Greece politely declines German annexation demands. It’s Official: German Economy Minister Demands Surrender Of Greek Budget Policy, Says It Is First Of Many Such Sovereign Requests. And Mike Mish Shedlock reports Text Of German Demands Detailed. Perhaps I am mistaken but I do not see any chance Greece will agree with this proposal. German and IMF demands make meaningless any hint of a deal “soon”. Germany has signaled it has had enough and will not throw another 130 billion euros down a rat hole. The IMF signaled the same thing but not as emphatically. Look for a bank holiday in Greece soon. an Mike Mish Shedlock reports Greek Debt Solution Likely to Trigger Credit Default Swaps.  

Neo liberal finance, that is Ben Bernanke and Mario Draghi credit, will fail in February 2012, as currency traders sell the world major currencies, DBV, and the emerging market currencies, CEW.

The bursting of the global government fiance bubble bubble, BWX, bursts, will be the genesis that transforms democracy into diktat.

True socialism, that is totalitarian collectivism, will rise terminate all forms of economic and political life. The sovereign debt to GDP ratio is going to plummet fast, causing quick and fast deleveraging out of stocks and bonds, as the seigniorage, that is the moneyness, that came via national sovereignty fails.   
 
Bible prophecy of Revelation 13:1-4, and Daniel 2:31-45, foretells that capitalism, also known as the Banker regime of Neoliberalism, which came via the Free To Choose script of Milton Friedman, is history. The 1974 Clarion Call of the Club of Rome is rising up the Beast Regime, out of the profligate Mediterranean Sea countries of Italy, EWI, and Greece, GREK, to occupy in mankind’s seven institutions, and rule in the world’s ten regions. The Beast regime showed its teeth in demanding that Greece submit to a list of demands for structural reforms, and abdicate its fiscal sovereignty and thus its national sovereignty in order to receive yet another bailout package. Choice is an epitaph on the tombstone of a bygone era. Freedom, free enterprise, and a free monetary system, as envisioned by Libertarians; these  are called for by the Ron Paul agenda; yet they are mirages on the Neoauthoritarian Desert of the Real. The sovereign, junk, personal, and corporate credit boom that produced the debt economy, is history; the debt servitude experience will commence soon.

Bible prophecy of Revelation 13:3-4, foretells that out of financial armageddon, that is a credit bust and financial system collapse, sovereign leaders will arise from regional framework agreements to replace sovereign nations. Lacking any money good, people will place their trust and faith in the word, will and way of these leaders. The people will give their allegiance to the diktat of the new sovereigns who will meet in summits, waive national sovereignty, and establish a Federal Europe, with the ECB or the Bundesbank empowered as the EU’s bank, appoint monetary cardinals as stakeholders to manage the factors of production and provide credit as necessary; and appoint a EU wide technocratic government featuring fiscal commissioners who oversee structural reforms and manage government spending, and impose austerity measures for regional security and stability.  

3) … Bespoke Investment Blog reports Recoveries Don’t Get Much Weaker Than This
While some investors and economists were surprised by this morning’s weaker than expected GDP report for Q4 2011, it was really just par for the course.  Since the recession ended in June 2009, we have consistently seen growth rates that were weaker than estimated. Historically speaking, the US economy has typically shown growth of 3.0% during the 10th quarter of a recovery/expansion.  Based on this morning’s Q4 GDP report, though, growth in the most recent quarter was only 2.8%.

4) … Conclusion
The debt debauchery practiced central bankers, has run up bad credit to grotesque levels. The monetization of debt by the world central banks is causing the death of fiat money, and a will now commence a most painful deleveraging and derisking out of all forms of fiat wealth.

Capitalism cannot be saved. Investopedia relates that Joseph Schumpeter fathered the term creative destruction. “A process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one”. Econolib relates Schumpeter believed that capitalism would be destroyed by its successes, that it would spawn a large intellectual class that made its living by attacking the very bourgeois system of private property and freedom so necessary for the intellectual class’s existence. And unlike Marx, Schumpeter did not relish the destruction of capitalism. “If a doctor predicts that his patient will die presently,” he wrote, “this does not mean that he desires it.” Capitalism is going to fall to regional global governance.  

The dynamos of growth and profit that powered Neoliberalism, will give way to the dynamos of regional security and stability, that will empower Neoauthoritarianism.

The world is passing through peak money. The seigniorage of fiat currencies, will give way to the seigniorage of diktat. Diktat will serve as new credit, and new money, in the New Europe. In the soon coming deflationary collapse, all kinds of debt will be repudiated, but not forgiven; these debts will be applied to every man, woman and child on planet earth. Fitch says Greece is going to default on its sovereign debt. When the state defaults, the fiat becomes useless, and diktat arises to become de rigueur. Greeks cannot be Germans. The former are of the olive republic and the latter of the industrious state, but they will all be one in debt servitude.

The debt super cycle, is cresting higher, and will turning dramatically lower, creating an Elliott Wave 3 of 3 of 3 down in the S&P, $SPX, which is clearly seen in this daily SPY chart

Kerry Lutz relates We are living in the tail end of a 40 year global credit bubble. For the past four decades, the entire world has been growing credit/debt faster than underlying economies. Economic growth is measured by GDP, but GDP is a fraudulent measure. GDP doesn’t really measure the wealth creation of an economy; it measures consumption, which in our society has become synonymous with wealth. But wealth is really something totally different than consumption. Chris and I agree, the calculation of GDP should not include the effects of going into debt simply to consume. Consider, Bernie Madoff who contributed 65 billion to GDP, but now all that money has just disappeared. Same with other entities that contribute to GDP like MF global. The government continues to print money mostly for consumption, not investment. They are just kicking the can down the road, and overstating the wealth of the economy. We cannot print our way to prosperity.

Doug Noland of Prudent Bear relates It’s A Bubble. Unprecedented operations back in late-2008 took the Fed’s balance sheet from about $900bn to $2.2 TN. We were assured that the Fed had an “exit strategy.” I’ve always presumed “no exit,” and here we are today with Fed holdings at $2.9 TN. The economy is expanding, financial markets are strong and consumer price inflation is rather undeflationary – yet Dr. Bernanke is again signaling he is prepared for additional monetization.

The Fed has for years operated with the premise that aggressive “Keynesian” stimulus has been necessary to stabilize a system hamstrung by post-Bubble headwinds. I’ve for as many years argued that the problem was being dangerously misdiagnosed. From my perspective, it has been much more a case of ongoing misguided “inflationism” sustaining history’s greatest Credit Bubble. And history is unequivocal: inflationism has an end-game problem.

The power players in political circles and the securities markets have benefited tremendously, ensuring ongoing support for the Fed’s controversial reflationary policy course. The financial mania has reached the point where the completely unreasonable is accepted as perfectly reasonable.

When it comes to Credit and Bubble analysis, the Fed has proven itself incompetent. After the Fed-induced steep yield curve from 1991 to early-1994 fomented a destabilizing speculative Bubble, they should have focused keenly on how their policy measures were inciting leveraging and speculation. After the 1995 Mexican bailout further emboldened speculative excess and fomented the catastrophic Bubble throughout SE Asia (and beyond), policymakers should have been fixated on the risks associated with destabilizing “hot money” flows, derivatives and a ballooning global “leveraged speculating community.”  

I have seen overwhelming support for the “global government finance Bubble” thesis. Fiscal and monetary policy has been out of control for going on four years now. And with parallels to the mortgage finance Bubble, the more prolonged the Bubble period the more dismissive the crowd becomes to the notion that they might be participants to a manic Bubble. That’s ok. As an analyst of speculative Bubbles, I am well aware of the nuances. Objectively, it is possible to recognize Bubble dynamics in real time. Realistically, however, it is the nature of things that this analysis will be dismissed and disparaged. As I’ve written in the past, “Bubbles tend to go to unimaginable extremes – and then double!” I am comfortable with the analysis that we are in the late stage of a historic global financial mania.

In a replay of mortgage finance Bubble dynamics – with only greater ramifications and inevitable consequences – the perception of ongoing government market intervention is allowing the self-reinforcing issuance of Trillions of debt at the most meager of risk premiums. Systemic risk rises exponentially, as the price of government finance is pushed to the floor.

It has reached the point where the Fed (along with fellow global central banks) has completely abrogated the market pricing mechanism – and with it the capacity for the self-regulation of debt issuance through higher borrowing costs.

Responding to the Fed announcement, Treasury, agency debt and fixed income prices rose; U.S. stock prices rose; gold, energy and commodities prices rose; and emerging debt, equity and currency prices rose. The dollar was one of the few losers.

And forgive me one last time for thinking that the invincible hand of the Federal Reserve – along with unfathomable global central bank liquidity creation – further bolsters boom and bust dynamics and heightens the risk of further rounds of global de-leveraging and de-risking. If it looks like a Bubble, smells like a Bubble.

The dollar index this week fell 1.6% (down 1.7% y-t-d). On the upside, the South African rand increased 2.5%, the Swiss franc 2.4%, the New Zealand dollar 2.3%, the Danish krone 2.3%, the euro 2.2%, the Mexican peso 2.1%, the Australian dollar 1.7%, the Singapore dollar 1.6%, the Canadian dollar 1.1%, the Brazilian real 1.1%, the British pound 1.0%, the South Korean won 1.0%, the Swedish krona 0.6%, the Taiwanese dollar 0.5%, and the Japanese yen 0.4%.     

Freddie Mac 30-year fixed mortgage rates jumped 10 bps to 3.98% (down 82bps y-o-y). Fifteen-year fixed rates rose 7 bps to 3.24% (down 85bps y-o-y). One-year ARMs were unchanged at 2.74% (down 52bps y-o-y). Bankrate’s survey of jumbo mortgage borrowing costs had 30-yr fixed rates down 4 bps to 4.46% (down 105bps y-o-y).

Federal Reserve Credit increased $1.5bn to $2.905 TN. Fed Credit was up $486bn from a year ago, or 20.1%. Elsewhere, Fed Foreign Holdings of Treasury, Agency Debt this past week (ended 1/25) jumped $14.4bn to $3.406 TN (19-wk decline of $69bn). “Custody holdings” were up $55bn year-over-year, or 1.6%.

Global central bank “international reserve assets” (excluding gold) – as tallied by Bloomberg – were up $939bn y-o-y, or 10.2% to $10.186 TN. Over two years, reserves were $2.371 TN higher, for 30% growth.  M2 (narrow) “money” supply rose $8.0bn to a record $9.763 TN.

“Narrow money” expanded 10.2% from a year ago. For the week, Currency increased $3.0bn. Demand and Checkable Deposits fell $12.6bn, while Savings Deposits jumped $29.3bn. Small Denominated Deposits declined $2.4bn. Retail Money Funds fell $9.2bn.

Ty Andos writes in PDF TedBits Newsletter When Leverage Fails Private property rights were ended at Bretton Woods II in August 1971. Between regulation and taxation, private property is nothing more than a myth, as is the myth that the dollar is as good as gold or money. It is an IOU as are all FIAT currencies.

What will become known as the greatest depression in history has begun and will continue to unfold
“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” ~ Ludwig von Mises

The Keynesians’ approach is articulated quite nicely by former Treasury Secretary, Larry “canary in the coal mine” Summers: “The central irony of financial crisis is that while it is caused by too much confidence, too much borrowing and lending and too much spending, it can only be resolved with more confidence, more borrowing and lending, and more spending”. ~ Of course, today’s government, elites and banking leaders have chosen the latter route as have all  those who have gone before them. In the long run none have succeeded.

This downward wave will terminate fiat currencies, fiat wealth and democracy, and introduce the ten toed kingdom of regional global governance, where un dollar transactions, such as bartering and exchange of local currencies, and diktat as money, and diktat as currency, will  govern economic and investment transactions. The investment demand for gold will soon quicken as fiat money continues to die, and capitol controls will be rapidly implemented on investment trading. I recommend that one dollar cost average purchase and take possession of gold bullion; one can purchase a gun safe to safely store these at home or in the office; and I recommend that one buy and sell gold at BullionVault as well; I have no connection what so ever to that company; nor do have any investments there.      

4) … In Today’s News
Spiegel Online reports Revenge for EU Sanctions: Iran Set to Turn Off Oil Supply to Europe .  

Open Europe reports
Handelsblatt: German government has begun preparing for the return of the Drachma
The front page of Handelsblatt claims that, despite its public position, the German government has been planning for a Greek exit from the eurozone, even engaging in discussions with business leaders over its potential impact on the German economy.
Meanwhile, the negotiations on the voluntary Greek restructuring started up in Athens again last night, with reports of progress being made. Greek bondholders may accept a lower starting interest rate with the possibility of an increase based on Greek economic growth, although even this will not be enough to allow Greece to reach the target of 120% debt-to-GDP ratio in 2020. Therefore a larger second Greek bailout may be needed. EU Economics Commissioner Olli Rehn said yesterday, “There is likely to be some increased need of official sector funding…[But] not anything dramatic.” FTD reports that the additional funds could total €15bn.
Dow Jones reports that eurozone governments are also discussing the possibility of asking the ECB to take losses on its holdings of Greek debt to aid the situation. Reuters reports that the ECB has ruled out taking losses voluntarily but is split over how to deal with forced losses. On his Telegraph blog, Mats Persson argues that an alternative to accepting outright losses, is for “ECB-held bonds to be bought by the euro bailout fund, the EFSF (at cost price), and then submitted by the EFSF to the voluntary restructuring. The EFSF could absorb the losses, though it too may have to deal with some very uncomfortable questions from taxpayers who will have lost money. But arguably it’s better than sacrificing the credibility of the ECB.”
Rehn also called for an increase in the total size of the eurozone bailout funds, possibly by allowing the temporary fund, the EFSF, and the permanent bailout fund, the ESM, to run in parallel. Finnish Prime Minister Jyrki Katainen said in Davos yesterday, “I don’t believe fresh money on the table is the only possible solution”. Italian ten year bond yields briefly dropped below 6% yesterday for the first time since early December, most likely due to the impact of the massive increase in long term liquidity from the ECB. Italy also managed to sell €11bn in short term debt this morning.
Dow Jones reports that the US Republican party is preparing to shoot down any request from the IMF for an increase in funds from the US. The FT reports that across Europe left leaning parties are coming out to criticise the austerity focus of the new European fiscal pact, led by French Presidential candidate Francois Hollande.
FT WSJ CityAM Reuters WSJ 2 Irish Independent Irish Times IHT Guardian Dow Jones FT 2 WSJ 3 FT 3 FT 4 Irish Times Telegraph Dow Jones 2 WSJ 4 EurActiv European Voice Telegraph Irish Independent Irish Independent BBC El País Handelsblatt Handelsblatt 2 Handelsblatt 3 Business Week Spiegel Reuters Handelsblatt 4 Welt FAZ Spiegel FTD FTD 2 Tagesschau Der Standard Handelsblatt 5 Telegraph blogs: Persson
In a speech at Davos yesterday, David Cameron called on eurozone leaders, and Germany in particular, to safeguard the single currency by recapitalising banks, increasing the bailout fund and resolving the issue of the write-down of Greek debt. He also strongly criticised the proposed Financial Transaction Tax – describing it as “madness”.
CityAM Independent IHT Le Figaro Cameron’s Speech FT WSJ Times Mail Guardian Telegraph Express Conservative Home Sun Les Echos Nouvel Observateur Nouvel Observateur 2 Welt
The Swedish minority government and main opposition party Social Democrats have agreed that Sweden should join the euro fiscal pact subject to several conditions, including that none of the budget rules apply to Sweden and that the pact makes clear that the labour market model in individual EU member states is respected.
SVD Europaportalen
Hahn: No spare money in EU’s structural funds to support struggling eurozone states
In an interview with Süddeutsche, EU Commissioner for regional policy, Johannes Hahn, has described Angela Merkel and Nicolas Sarkozy’s suggestion that spare money from the EU’s structural funds could be used to promote growth policies in struggling eurozone states as “unrealistic”, claiming that the total value of funds unused in 2010 and 2011 only amounted to €30m.
However, Expansión reports that Spanish Europe Minister, Íñigo Méndez de Vigo, has claimed that there were over €100bn of EU funds available to subsidise programmes aimed at boosting employment and growth across Europe, although he said it was up to the Commission to provide the exact figure.
Meanwhile, EurActiv reports that the Danish EU presidency has been criticised by MEPs for paying too little attention to regional policy in the EU’s upcoming long term budget for 2014-2020. The article cites Open Europe’s recent briefing on EU regional policy which found that the UK contributed roughly £29.5 billion to the EU’s structural and cohesion funds and received only £8.7bn in return. The report was also covered by WalesOnline, which noted that although West Wales was only one of two UK regions that was a net beneficiary from the funds, Wales overall paid £1.65 for every £1 it received back from the funds.
Open Europe Research Süddeutsche Expansión EurActiv WalesOnline
EU Internal Market Commissioner Michel Barnier has said he will delay plans to introduce rules forcing creditors to share some of the pain if a large financial institution fails until after the eurozone is “past the worst” of the fiscal crisis.
Bloomberg
Socialist presidential favourite Francois Hollande called for a crackdown on the financial sector, pledging a 15% tax increase on banks, and threatened to upset relations with Berlin by pledging to renegotiate the fiscal compact in favour of a greater emphasis on growth. A leader in FAZ argues that “If the polls are confirmed the road between Berlin and Paris looks set to be bumpy. Hollande has presented a programme that is heavily influenced by redistribution and by the firm belief in the supremacy of the state.”
FT WSJ Times Times 2 FTD FAZ
Carlos Moedas, Portuguese Secretary of State, writes in today’s WSJ that Portugal is undergoing a rigorous program of reforms to boost competiveness and growth. He argues, “Last week, the government and social partners reached a comprehensive agreement for labour-market reform, an area previously marked by considerable rigidities.”
WSJ: MoedasG
EU Internal Market Commissioner Michel Barnier will raise objections with US Treasury Secretary regarding the potential effects of the incoming ‘Volcker’ Rule, which could hamper the ability of US firms to trade European sovereign bonds, WSJ reports.
WSJ
Barclays has criticised the EU’s new Capital Requirements draft legislation, which would place a single capital charge on trade finance loans, arguing that it will considerably harm the ability of SMEs to export their goods and services.
Telegraph
Romania and Bulgaria’s accession to the Schengen area will be delayed as the EU is set to publish a negative report on the issue in February, following Dutch opposition to their membership.
Liberation
European Voice reports that 13 member states have failed to implement recent EU legislation concerning the welfare of caged hens.
European Voice
Luxembourg’s Foreign Minister: Fiscal pact will not work without agreement of all 27 member states
In an interview with Der Spiegel, Luxembourg’s Foreign Minister Jean Asselborn said that “a lot of the time and energy it took to negotiate the fiscal compact could have been saved. Most of what they wanted to regulate could have easily been achieved in the existing system, via the so-called secondary EU law.” Asselborn also said he did not believe the compact would work in restraining states with excessive deficits, because “outside of the EU Treaties, the Commission can only initiate infringement proceedings before the European Court of Justice with the agreement of all EU Member States.”
Spiegel: Asselborn EUobserver
EU leaders reach crude agreement on Iran sanctions
Open Europe Blog

Euro Intelligence provides the best of Euro zone reporting; this comes at a cost; I recommend that one buy their email reporting services; it relates Ernst Elitz of Bild sees Angel Merkel Is Euorpes Powerfrau and reports Hollande Drops Keynes In Favour Of Joseph Schumpeter. Nicolas Sarkozy’s Socialist challenger Francois Hollande will today unveil his economic proposals. According to Le Monde there are several circles of economists who have elaborated Hollande’s economic policy proposals. Among the dominating figures are Harvard economist Philippe Aghion, Bruegel director Jean Pisani-Ferry, industrial policy specialist Elie Cohen and social policy expert Gilbert Cette, the paper reports. „The Socialists are today engaged in the transformation the Social Democrats in Scandinavia have already gone through several years ago“, Les Echos quotes Aghion.The Keynesian model of of relaunching consumption would today aggravate our external deficit. Our thinking is now much closer to Schumpeter who emphasizes the role of innovation for growth in the medium to long term.“ Francois Hollande came out with his economic plan: €20bn more expenditures, €29bn in higher taxes on the rich and large companies

Graham Summers, Chief Market Strategist, Phoenix Capital Research, The Fed Cannot Act Without a Crisis … And One is Coming.  Well the Fed disappointed as I stated it would. How anyone could be surprised by this is beyond me. The Fed was admitting that the consequences of QE rendered it less “attractive” as an option as far back as May 2011. Moreover, the last six months have shown the Fed to be relying heavily on verbal intervention rather than direct monetary intervention. Every FOMC meeting (and any time the market takes a dive) some Fed official steps forward and promises that the Fed stands ready to help if needed.
The reasons for this are three fold:
1)   Why bother with monetary intervention when you can get the same effect from verbal intervention?
2)   The Fed is too politically toxic now to simply unveil a massive new monetary scheme without a Crisis hitting first.
3)   The Fed is well aware of the consequences of QE (higher food and gas prices) and while it focuses on CPI as the measure of inflation, the political pressure engendered by higher costs of living are certainly on the Fed’s radar.

In plain terms, the bar for more QE is set much, much higher than the vast majority of analysts realize. The reason is that the Fed can no longer simply prime up the printing presses if the economy takes a dip.

We’ve seen this clearly in the last two Fed FOMC statements, in which the Fed downgraded its view of the US economy to posting “modest growth” (Fed speak for next to none) and then offered a “highly accommodative stance,” (Fed speak for “we’re out of ideas but can always hit the ‘print’ button”) as way of dealing with this.

Let’s cut the BS here. The Fed has maintained a more than highly accommodative stance for three years now and U-16 unemployment, food stamp usage, home prices, and virtually every other economic metric indicate that they’ve done little to boost the US economy in any meaningful way. QE has and always will be about boosting asset prices in the hope that the Fed can stimulate a recovery by getting the S&P 500 to some level.

The only problem with this is that people don’t engage in financial speculation to pay their bills. Incomes have and always will be the single most important metric for gauging consumer strength. And as the below chart from Morgan Stanley shows, the Fed’s policies of the last few years have done nothing to boost incomes (unless you work on Wall Street).

This chart goes a long way towards explaining the current political environment in which the Fed is about as popular as the bubonic plague. If you read headlines stating “Fed Gave Trillions to Banks” and you’ve been laid off and are living off food stamps, your blood pressure might tend to rise.
And you might tend to vote based on that.

Folks, the reality is that the Fed’s hands are tied. That’s why they keep issuing these innocuous policies (keeping interest rates low until 5056 or some insane future date) without actually doing anything. They know that additional easing means inflation soaring, which makes the Fed that much more a target of popular outrage.

So if you’re counting on the Fed propping the market up throughout 2012 as it did in 2011, you may be in for a rude awakening in the coming months. Every day that we get closer to the 2012 Presidential election, the bar for more QE goes higher and higher. Truly unless we get some kind of major Crisis, the Fed won’t be doing much of anything. So let the traders run their “end of the month” games this week. But don’t be surprised if stocks start to take a dive in early February.

This article has been posted on the Internet here.

Market Slips After Rally As Housing Sputters

January 26, 2012

Financial market report for Thursday January 26, 2012

Charlie Blaine of Market Dispatches reports Stocks slide after flirting with best levels since 2008
Stocks. Reports of weaker-than-expected new-home sales in December (and the worst year on record) and a bump higher of initial jobless claims gave skeptics an opening to sell the market lower.

Bloomberg reports New Home Sales in U.S. Fell in December. Sales of new U.S. homes unexpectedly declined in December for the first time in four months, capping the slowest year on record for builders

Tyler Durden relates Barclays presents the definitive Greek End-Game Scenario decision tree.

The Yahoo Finance Chart of VIXY, and VIXM , shows today’s rise in volatility.  

ETFs falling today included
QABA -3.1%
KRE -2.6%
PSCE -2.4%
ITB -2.0%
XBI -1.1
PKB -1.0%

Stocks Rise On Fed Announcement … Europe Needs A Deep Restructuring And A New Constitution, Harvard Professor Kenneth Rogoff Says

January 26, 2012

Financial Market Report For Wednesday January 25, 2012

1) … Global financial investments rose on acceptance of the Federal Reserve announcement.
Global financial investments, stocks, VSS, VT, ACWI, ACWX, VTI, EEB, EEM, EWX, bonds, BND, commodities, DBC, USCI, currencies, DBV, CEW, rose, as the US central bank stated that is ready to offer the economy additional stimulus, and that it will likely keep interest rates near zero until at least late 2014.

Despite the announcement, bond vigilantes gained control of interest rates on January 20, 2012 when the Interest Rate on the US 10 Year Treasury Note, ^TNX, passed 2.0%,  It stands at 2.01% today, and caused US 10 Year Notes, TLT, 30 Year US Government Bonds, EDV, and the Zeroes, ZROZ, to trade lower. This has derisked investors out of the debt laden, and interest sensitive utilities, XLU, and railroads. This has left railroad service company, GBX, and railroad, KSU, with high PEs, so that when the downturn does come, these transportation, IYT, shares will be fast fallers. Because of their debt and physical nature, these old infrastructure are now abandoned investments, as investors for the last week have been pursuing value in new infrastructure. The design build and basic material stocks, seen in this Finviz Screener, have been ongoing safe haven investments, that is investments far away from the European sovereign debt crisis. These include URS Corp, URS, Great Lakes Dredge And Dock, GLDD, Strandex, SXI, Manitowoc, MTW, Eagle Materials, EXP,

Bond vigilantes gained the upper hand over the Fed as global currency debasement has been underway as the US Dollar, $USD, UUP, has been rising since September 1, 2011. The world passed through peak credit on December 19, 2011, when Bonds, BND, peaked and traded lower on December 20, 2011.  The loss of debt sovereignty by the US Central Bank is seen in the Flattner ETF, FLAT, falling, and the Steepner ETF, STPP, rising. The steepening of the 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, portends an upcoming global depression.

A continuing rising 10 Year US Interest Rate, ^TNX, and a rising 30 Year US Interest Rate, ^TYX, is going to be destabilizing to world economics and to personal wealth. The Fed’s six officials referenced by Tyler Durden in article Six Fed Officials Do Not See Rate Hike Until 2015 are in denial of the fact that the bond vigilantes are in control of US Sovereign Debt Interest rates.

Today, the US Federal Reserve gave carry trade seigniorage to the most sold-off material stocks and to the countries with the greatest basic materials resource base, as well as to an on going EU debt contagion safe haven rally in home builders, ITB, design build, PKB, small cap value, RZV, biotechnology, IBB, XBI, steel, SLX, and dividend, DVY, as is seen in the chart of VTI, ITB, PKB, RZV, IBB, XBI, SLX, DVY; these ETFs are seen in this Finviz Screener together with four other strong small cap ETFs. Steel, SLX, finally reached its 200 day moving average objective.

Confidence and trust in Ben Bernanke and the US Federal Reserve, continues to give ongoing seigniorage, that is moneyness, to consumer services, IYC, small cap consumer discretionary, PSCD, recreational vehicles, small cap value stocks, business services, asset management companies, rental and leasing services, seen in this Finviz Screener, such as Artic Cat, ACAT, Winnebago, WGO,  Harley Davidson, HOG, Global Payment Network, GPN, Clear Channel Outdoor Holdings, CCO, Cedar Fair, FUN, Prospect Capital Corporation, PSEC,  Rent A Center, RCII, Alliance Data Systems, ADS,

Faith in Ben Bernanke continued to fuel a safe haven rally in North American infrasturcture, that is design build and basic materials, PKB,

The Fed’s message was debt debasing to the US Dollar, $USD, UUP, as currency traders responded by taking world currencies, DBV, and emerging market CEW, firmly higher and the Yen, FXY, lower. Currencies rising included, FXE, FXM, FXC, ICN, FXB, FXS, SZR, FXF, BZF, FXA. And the Fed’s message gave seigniorage to Gold, GLD, and Silver, SLV.

The Fed’s announcement stimulated Commodities, DBC, US Commodities, USCI, Natural Gas, UNG, Aluminum, JJU, Copper, JJC, Base Metals, DBB, and Agriculture Commodities, JJA, to move higher.

The Fed’s announcement stimulated the most toxic of debt including Michigan Municipal Bonds, MIW, Junk Bonds, JNK, and High Yield Bonds, HYG, to new highs. Leveraged Buyouts, PSP, rose.

Stock ETFs rising today included, GDXJ, GDX, SIL, XME, KOL, ALUM, REMX, COPX, URA, SLX,  PSCM, MXI, IYM, MOO, IBB, XBI, PKB, PSCD, ITB, DVY, RZV, FAA, SEA, XLU, IYR, XRT.   Country ETFs rising today included, EWZ, RSX, INP, SCIF, EWA, KROO, LATM, TUR, EWO, EWI, EWW, EZA.

The Fed’s reassuring statement of ongoing neo liberal finance, stimulated the financial shares to rise, EUFN, NBG, IXG, XLF; and stimulated Industrial Office REITs, FNIO, and REIT General Growth Properties, GPP

Investors are now waiting news of resolution of a potential Greek Default. FT reports Uncomfortable Days for ECB.  The ECB started buying Greek bonds in May 2010, when the eurozone debt crisis first erupted. The objective of Jean-Claude Trichet, president, was to stabilise financial markets. The assumption was that bonds bought at market prices would be held until maturity, when the ECB would book a tidy profit. Having taken action when the private sector held back, it justifiably feels it should not have to pay a price now, said Erik Nielsen, chief economist at UniCredit. “In an emergency, the fire brigade goes in – but the deal is that it is protected.” Economists estimate that a 70 per cent “haircut” on the face value of the ECB holdings could leave a loss of more than €20bn – a significant but not disastrous sum given the size of the reserves held by the ECB and eurozone national central banks. But the ECB’s resistance to accepting losses is not just principled. Agreeing to take a loss could be viewed as providing financial assistance to Greece – and in violation of the European Union’s ban on central banks funding governments.

I comment that the ECB does not want to take a loss on Greek debt and that it does not want to monetize that debt. It was globalist leader and former ECB Chief Jean Claude Trichet who bought the Greek debt to support Herman Van Rompuy’s May 2010 plan to preserve Greece in the EU. And it was Bundesbank president Axel Weber who resigned in protest of the move.

The FT also reports IMF Takes Tougher Stance Over Greek Debt. On Wednesday IMF Chief Christine Lagarde argued that if Greece’s private creditors did not accept a big enough writedown, the European Central Bank might have to take a reduction in its own Greek debt holdings. “The balance between the participation of the private and the public sector is a concerning question,” Ms Lagarde said.

Mike Mish Shedlock relates “If the ECB and IMF never have to take losses, and everyone else does, then investors are buying subordinate debt that should have a much higher yield. The situation is obviously a complicated mess in more ways than one.”

Investors await insight from global leaders meeting at the Davos Forum Summit, where global visionaries and global leaders are communicating problems with capitalism, as Robert Wenzel of EconomicPolicy Journal writes Now Greenspan Says Capitalism Needs Adjustment.

2) … A New Constitution and a Deep Restructuring will produce a New Europe.
Kenneth Rogoff, professor of Economics at Harvard University, and listed in the Council On Foreign Relations’ publication Foreign Policy Top 100 Global Tinkers, told CNBC, “they are so far from having a solution in Europe, they need a new constitution, they need deep re-structuring, this is not just about Greece this is way deeper than that, it sort of has a certain calm because they are printing money, but that doesn’t work.”

An inquiring mind asks, will there be a United States of Europe one day? Die Presse reports Israeli Foreign Minister Avigdor Lieberman saying at a conference in Vienna “My vision is that Israel must be part of united Europe.”

Open Europe reports Swedish Finance Minister Anders Borg, whose country is currently grappling with whether to sign up to the Euro Fiscal Pact, spoke with harsh words on Greece’s reform effort, relating he is not impressed by Greece’s implementation of its EU-led austerity programme.

In July 2011, investors became aware that a debt union formed in the EU, and sold out of the world major currencies, DBV, and emerging market currencies, CEW, and derisked out of stocks, and deleveraged out of commodities, DBC. Fiat money died, only to be revived by the ECB’s LTRO money printing ponzi scheme.

Capitalism is marked by bad money, poisoned credit, insolvent banks and insolvent nations. The European Financial, EUFN, are insolvent banks, brought back to life by the ECB zombification maneuver. Strong risers today included NBG, and IRE.  The PIIGS are insolvent nations, yet Italy, EWI, Spain, EWP, and Ireland, EIRL, were all zombified by Bernankeism and rose today. The death of fiat money, the failure of credit, banking insolvency and sovereign insolvency are bringing about the death of capitalism. Debased currencies, insolvent banks and insolvent nations cannot support growth and profit. These are diseases destroying democracy and capitalism.

Capitalism is going to be replaced by true socialism. Wikipedia relates true socialism is an economic system based on direct production of utility rather than on the capitalist laws of accumulation and value. Wikipedia also relates Immanuel Wallerstein, writing in 1979, maintained that “There are today no socialist systems in the world-economy any more than there are feudal systems because there is only one world-system. It is a world-economy and it is by definition capitalist in form. Socialism involves the creation of a new kind of world-system, neither a redistributive world-empire nor a capitalist world-economy but a socialist world-government. I don’t see this projection as being in the least utopian but I also don’t feel its institution is imminent. It will be the outcome of a long social struggle in forms that may be familiar and perhaps in very few forms, that will take place in all the areas of the world-economy.”

Please consider that bible prophecy is being fulfilled in our times. The Sovereign Lord God, Psalm 2:4-5, has ordained current events, as a means of reveling the sovereignty of His Son, Revelation 2:6-7. The credit based fiat system known as Neoliberalism is entering a debt deleveraging cycle. Out of a credit bust, creative destruction will bring forth a diktat based system, that is Neoauthoritarianism, where a Federal Europe will be one component of a ten toed kingdom of regional global governance, as foretold in Daniel 2:31-45.

Fate is operating to replace the Banker Regime with the Beast Regime which is rising out of the profligate Mediterranean Sea nations of Italy and Greece. This monster of statism has seven heads, which will come to occupy in all of mankind’s institutions, and will rule in all of the world’s ten regions, Revelation 13:1-4.

Despite the stated intentions and stated monetary policies of US Federal Reserve to maintain inflation, as reported by Binyamin Appelbaum in the NYT article Fed to Maintain Rates Near Zero Through Late 2014, the global debt economy is deflating, as is seen in the chart of world government bonds, BWX, international corporate bonds, PICB, world stocks, ACWX, VT, VSS, EWX, EEM, EEB.  Today, is likely final rise in  Neoliberalism’s death rattle rally.

Democracy is giving way to diktat.  Out of a soon coming Sovereign Armageddon, that is a credit bust and global financial collapse, stemming from a Greek Default, a New Constitution and a Deep Restructuring will produce a New Europe. EU leaders will meet in crisis summits and announce regional frame work agreements to establish a United States of Europe, that is a Federal Europe, with the ECB or Bundesbank empowered as Europe’s Bank, and a Fiscal Union to oversee dramatically reduced government spending. This New EU Policy Infrastructure, will feature monetary cardinals, that is regional stake holders, appointed to work for the region’s security and stability. These will provide credit to grease the wheels of economic action and provide coordination of structural economic policies.

The dynamos of growth and profit that powered Neoliberalism, will give way to the dynamos of regional security and stability, that will empower Neoauthoritarianism. Regionalization is the Clarion Call of the 300 elite who met in 1974 at the Club of Rome. Their Call is clear, distinctive and ringing for regional global governance to replace democracy, when destructionism replaces inflationism, as the global dynamic of political and economic activity. Ten regional blocs will coalesce to form a ten toed kingdom of regional global governance, characterized by a miry mixture of clay democracy and iron diktat, featuring dollar restriction zones, and un-dollar transactions, such as bartering and the exchange of local currencies. Robert Wenzel of EconomicPolicy Journal features the Marin Katusa, Lew Rockwell, article The Demise Of The Petro Dollar. The global hegemony of the UK and the US will soon be history.

Revelation 6:1-2 relates Look! And See! God has sent the First Horseman, riding on the white horse;  he has a bow without  any arrows, to pass the baton of sovereignty to new sovereigns, that is the EU ECB and IMF Troika, giving them sovereign authority over all of the Euro zone.  Fate, not any human action, will also soon open the curtains, and onto the world’s stage, will step the most credible of leaders. A seemingly Little Authority, Daniel 7:24-25, will come to be known as the Sovereign,Revelation 13:1-4, and together with his banking partner, The Seignior, Revelation 13:5-10, will change our times and laws. By working in the schemes of regional framework agreements, they will make sweeping economic and political changes. Their word, will and way, will replace the rule of law, and provide the seigniorage of diktat, replacing the seigniorage of neo liberal credit. They will lead Germany to become preeminent in a type of revived Roman Empire.

In Ian Traynor Guardian article, Germany’s Chancellor Angela Merkel relates incrementalism in European Federalism. “My vision is one of political union because Europe needs to forge its own unique path. We need to become incrementally closer and closer, in all policy areas,” the chancellor said. “Over a long process, we will transfer more powers to the [European] Commission, which will then handle what falls within the European remit like a government of Europe. That will require a strong parliament. A kind of second chamber, if you like, will be the council comprising the heads of [national] government.” … “And finally, the supreme court will be the European court of justice. That could be what Europe’s political union looks like in the future – some time in the future, as I say, and after a goodly number of interim stages.”

Wall Street Journal reports Merkel’s Speech Is Firm on Austerity, Bailout Limits German Chancellor Angela Merkel, sharply criticized for her government’s prescriptions of austerity as a cure for the euro zone’s sovereign-debt crisis, said labor-market reforms and greater European integration also were needed to correct flaws in the makeup of the common currency.

Ambrose Evans Pritchard writes Merkel defiant as IMF attacks Germany.  Angela Merkel has defied calls for a radical shift in strategy to lift Europe out of crisis but is increasingly isolated as the IMF and global bodies join ranks.

My take is that Angela Merkel’s comments are prophetic; and come from the authoritarian imperative of the 1974 Club of Rome Clarion Call for regional global governance; and set the stage for one greater to rise to power to provide order out of chaos.

I conclude. with two reflections, First, I present my May 21, 2010 article EU Task Force Meets Under New EU President van Rompuy To Work On A Framework Agreement For European Economic, Monetary And Seigniorage Governance. And second, I present my May 29, 2010 article Herman Van Rompuy, The E.U.’s New President Is Known For Bringing Peace And Stability. Time Magazine’s 2-Min. Bio of Herman Van Rompuy relates “He’s no big hitter, but don’t underestimate Herman Van Rompuy. This country was in a terrible state and he’s managed to bring peace and stability … But now, everyone is worrying about what will happen when he’s gone.” — Liesbeth Van Impe, writer for the Belgian newspaper Het Nieuwsblad (London Independent, Nov. 14, 2009). The EU’s first permanent president, Herman Van Rompuy, says the solution to peace and economic troubles is increased European Union integration, reports the COGwriter. Catholic Van Rompuy first permanent Euro President, Catholic News Asia reports

3) … In Today’s US News
Mat Negrin Of ABC News relates the Meet The Billionaire Behind Newt Gingrich’s Rise To Power

This article is available on the Internet Stocks Rise On Fed Announcement … Europe Needs A Deep Restructuring And A New Constitution, Harvard Professor Kenneth Rogoff Says

Is The World On The Verge Of A Schumpeterian Depression …. Which Will Produce Regional Global Governance?

January 25, 2012

Financial market report for Tuesday January 24, 2012

1) … Angela Merkel is effectively the head of the Eurozone, paper says …. Larry Summers calls for yet more Government stimulus … Yen trades lower forcing Japan shares lower  … Small cap value shares rise higher.
Euro Intelligence is the premier new service; this comes at a cost. I recommend that one subscribe to their daily news letter which reports that Angela Merkel is effectively the head of the Eurozone, and that Larry Summers calls for yet more government stimulus

Le Monde writes that now after France has lost its AAA status, Angela Merkel is now the effectively leader of Europe. The paper details the leaders who Angela Merkel has met and will meet in the days leading to the next crisis summit on January 30: Christine Lagarde, Herman Van Rompuy, José Manuel Barroso, Elio de Rupo, Swedish prime minister Fredrik Reinfeldt, the Austrian Chancellor Werner Faymann, the Portuguese prime minister Pedro Passos Coelho, the opening speech at Davos, a phone conversation with David Cameron and a meeting with the new Spanish prime minister Mariano Rajoy have been and will be on Merkel’s agenda,  Absent is Nicholas Sarkozy. Berlin is at the helm of European decision making.  On this point Austen Sherman and Sara Eisen of Bloomberg report Greek Economy on Track to Implode, Hanke of Johns Hopkins Says. Whether or not Greece is able to reach an agreement on the restructuring of its debt, the country is set to “implode” as the economy contracts, according to Johns Hopkins University’s Steve Hanke. “The game is completely over,” Hanke, professor of applied economics, said at the Bloomberg Sovereign Debt Crisis Conference in New York hosted by Bloomberg Link. “All the calculations are nonsense and have been since day one. Since the crisis began the money supply has been shrinking and the economy is going to implode, no matter what they do in the short run.” Money supply is shrinking at an annual rate of about 16 percent in Greece, meaning there won’t be growth needed to support debt payments, Hanke said

In FT Larry Summers argues that we are in a similar situation as during the Great Depression, where only a strong fiscal stimulus can unleash a lasting economic recovery. He relates that interest rates are close to zero, that stock valuation and house prices are relatively cheap, and that companies are hoarding cash. This is a scenario, from which a strong recovery could emerge; but economic history tells us that this will only happen if governments follow the advice given by Keynes to President Roosevelt in the 1930s, which is expand demand, in another words through another fiscal stimulus.

I comment that more credit is not the answer. Excessive credit was the cause of the 1929 through 1932 depression. Currencies failed in July 2011, when investors feared that a debt union had formed in the EU, and now a credit bust is underway with bonds, BND, and US Treasuries, ZROZ, EDV, TLT, turning lower. US Federal Reserve monetary policies of credit liquidity, quantative easing, and the ECB LTRO facility, has made both money and credit bad. There is no money good. The only safe investment is personal possession of gold bullion.

The Yen, FXY, traded lower today, forcing Japan, EWJ, and Japan Small Shares, JSC, lower. Japan experienced ongoing debt deflation, that is currency deflation today; the reason being central bank credit policies world wide are debasing currencies and Japan is gong to experience less sales globally due to Euro zone debt contagion.  The Telegraph reports Ageing Japan Faces Chronic Trade Deficit After Fukushima.  Japan has racked up its first trade deficit in 31 years as the country’s ageing crisis hits home and the Fukushima nuclear disaster raises dependence on imported fuel.  Bloomberg reports Japan Exports Fall for Third Month as Global Demand Slows. Japan’s exports fell for the third consecutive month in December, capping the first annual trade deficit in 31 years, figures underscoring the toll slower global growth and March’s earthquake have taken on the economy. Shipments dropped 8 percent in December from a year earlier, the Ministry of Finance said today in Tokyo. In addition to the export slump, higher energy needs in the aftermath of the the nuclear accident in Fukushima increased energy imports, the report showed. A yen near postwar highs against the dollar is cutting into profits of exporters from Nippon Steel Corp. to Toyota Corp. by making Japanese products more expensive abroad, hampering the nation’s rebound from March’s temblor. The first annual trade deficit since 1980 shows how exports are weakening, robbing the economy of what has traditionally been its main driver of growth. “The decline in exports is directly related to slow GDP growth in Japan,” Masayuki Kichikawa, chief economist at Merrill Lynch Japan Securities Co., said in Tokyo before the report. “The European crisis is reflected in weak demand from China, which directly affects the triangular trade relationship between Asia, Japan, and Europe.”

Utilities, XLU, continues to trade lower. The rise in interest rates across the board, caused by bond vigilantes calling US Sovereign debt interest rates higher, as is seen in the Interest Rate on the US 10 Year Note, ^TNX , rising above 2%, has made these debt burdened companies less appealing.  

Since the first of the year, Utilities, XLU, have fallen 4%, while Small Cap Pure Value, RZV, Home Builders, ITB, Design Build, PKB, Infrastructure, IGN, Agriculture, MOO, US Basic Materials, IYM, Wood Producers, WOOD, have rallied to current market tops, as is seen in the chart of XLU, RZV, ITB, PKB, IGN, MOO, IYM, WOOD.   

The loss of debt sovereignty by the United States to the bond vigilantes, reflected in higher interest rates, is causing debt deflation, that is currency deflation, in the utilities. The monetary policies of the US Federal Reserve, which once proved stimulative, have now turned toxic. Excessive Neo liberal finance has made money bad. The seigniorage, that is the moneyness, of the US Federal Reserve is failing, with the result that disinvestment will be coming out of stocks, and deleveraging will come out of commodities, DBC, such as base metals, DBB, JJC, JJN, JJT, JJU, LD, agricultural commodities, JJA, COW, CORN, GRU, and Timber, CUT.     

Debt deflation is likely to spread to other stock sectors, after the FOMC announcement, resulting in a complete stock market downturn, which will likely take the stocks that rose the most during the Eurozone debt contagion rally, quickly lower.  I anticipate that in addition to the small cap pure value RZV, that Homebuilders, ITB, and all of the US Infrastructures stocks, Design Build, PKB, Networking IGN, Agriculture, MOO, US Basic Materials, IYM, Wood, WOOD, to be fast fallers.  

The US Banks have been rising with seigniorage, that is moneyness, coming from the  ECB’s LTRO Facility, I expect KRE, RF, HCBK, FHN, STI, C, BAC, seen in this chart to be falling lower as well.

The S&P, SPY, is peaking out; and will be entering an Elliott Wave 3 of 3 of 3 Down. This wave is the most destructive of economic wave known to mankind, as it for all practical purposes destroys all wealth built on the previous five waves up.

Mankind will be utterly decimated by the collapse of fiat money that is coming with the exhaustion of the last forty years of credit liquidity and quantitative easing provided by the US Central Bank.  

2) … Have we been at a market top before, that is, just like this current one?
Small cap pure value shares, RZV, rose on a synthetic carry trade, that is a rise in world currencies, DBV, relative to the Yen, FXY ….  DBV:FXY; the candlestick appears massively bullish engulfing on the daily chart, but manifests as a lollipop hanging man candlestick on the weekly chart suggesting a completion of its rally; the carry traded funding for the rise in the small cap pure value shares appears to be complete.   

I wrote on December 20, 1010  in article Investors Flock To Small Cap US Value Stocks As The Euro Falls Lower, Small cap shares rose to a new high; but this was not confirmed in the S&P, suggesting that the S&P has topped out.  Small Cap Revenue Shares RWJ rose 0.7%. Small Cap Revenues Shares rising included Community Bank Sys, CBU, Synnex, SNX. The small cap value shares, RZV, rose 1.2% manifested three white soldiers, suggesting that a sharp stock market reversal is at hand. The S&P, SPY, closed up at 124.60 but short of its recent 12-16-2010 high of 124.82.  Comstock Partners: The Market Is Overbought, Overextended And Overvalued. After an 86 percent gain in 21 months the market looks overbought, overextended and overvalued …   And deja vu, the S&P, SPY, traded today at 131.61 in what is likely another market top. And the Euro, FXE, traded lower today, as stated above, Small Cap Value, RZV, rose on a synthetic carry trade, that is a rise in world currencies, DBV, relative to the Yen, FXY ….  DBV:FXY.

3)  … Networking, Agricultural, US Basic Materials, and Wood Producers, just like Pure Small Cap Value and Design And Build rally shares, rally to their doom.
Networking Infrastructure, IGN, Agriculture, MOO, US Basic Materials, IYM, Wood Producers, WOOD, have been rallying to their doom, just like pure small cap value, RZV, and design build, PKB, as part of the debt contagion US based stock rally, as is seen in the chart of SPY, RZV, PKB, IGN, MOO, IYM, WOOD.

The Networking Infrastructure companies seen in the chart of SPY, NTGR, AKAM, RHT, VMW, INAP, ………. and the Agricultural companies seen in the chart of SPY, AGCO, LNN, NC, CASC,  … and the US Basic Material companies seen in the chart of SPY, AA, BTU, CLF, POT, ZINC, ……… and the Wood Production Companies seen in the chart of SPY, IP, DEL, WY, LPX, PCL, UFPI ……..
will be fast fallers in the soon coming downturn.

4) … Creative Destruction is underway as bonds and US Treasuries have traded lower.
The failure of credit, and the failure of moneyness coming from the failure of fiat money seen in world currencies, DBV, and emerging market currencies, CEW, turning lower in July 2011, and the failure of the seigniorage, that is the moneyness, of the US Central Bank monetary policies, means that creative destruction will stimulate a loss of stock value, and bring forth a ten toed kingdom of regional global governance, first as a Federal Europe, then in other regions such as North America.   

Investopedia relates that Joseph Schumpeter fathered the term creative destruction. “A process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one”. Econolib relates Schumpeter believed that capitalism would be destroyed by its successes, that it would spawn a large intellectual class that made its living by attacking the very bourgeois system of private property and freedom so necessary for the intellectual class’s existence. And unlike Marx, Schumpeter did not relish the destruction of capitalism. “If a doctor predicts that his patient will die presently,” he wrote, “this does not mean that he desires it.”

Through the failure of credit, and the failure of US Federal Reserve Monetary Policies, a Schumpeterian depression will commence, and end the Pure Small Cap Value, Home Builder, Dividend, and US Infrastructure rally in Design Build, Networking, Agriculture, US Basic Material, and Wood Producing stocks. The world is embarking on something new, the emergence of regional global governance out of the death of capitalism, credit and fiat money. Loss of confidence in debt, and the loss of debt sovereignty by the US central bank, means an end to the Milton Friedman Free To Choose floating currency banker regime known as Neoliberalism, and confirms the death of capitalism. By divine appointment, these will be replaced by the Beast regime known as Neoauthoritarian, Revelation 13:1-4, and the ten toed kingdom of regional global governance, Daniel 2:31-33, where the emphasis will be on regionalization, specifically regional trade, barter and use of regional currencies. The dynamos of corporate growth and investor prosperity, are being replaced by the dynamos of regional security and stability.

The development of regional blocs will mean private public partnerships, such as MIC, will rise in importance as regional stakeholders are appointed from business, banking and government to manage the factors of production and natural resources. The emphasis will be on un-dollar transactions, as the world’s reserve currency falls into disrepute. Banks will be nationalized, perhaps better said regionalized, and come to be known as the government bank or the govbank for short. Regional blocs, that is regional unions already in existence include SCO in Asia, and CELAC, in South, Central, and Caribbean America; these will be increasingly dollar exclusion zones. A North America Union will form out of Canada, Mexico and the US, and might be called CanMexAmerica.

In as much as fiat money has failed, credit will be replaced by diktat. Bankers providing growth and prosperity, will be replaced by monetary cardinals providing regional security and stability. Under Neoliberalism, people trusted in bankers, who securitized ponzi credit. Under Neoauthoritarianism, people will place their their trust in sovereign leaders whose word, will, and way, will provide order out of chaos. The monetary cardinals will provide diktat as currency and also diktat as credit; and they will be responsible for managing regional infrastructure assets.

By God’s Sovereign Will, Ephesians, 3:1-11, the seigniorage, that is the moneyness, of neo liberal finance, will be replaced by the seigniorage of diktat.

Perhaps the reality will settle in this week that Greece is bankrupt, and that when default occurs no one will trade with them, and they will have no seigniorage, that is moneyness, for fiscal spending. And that in order to prevent regional chaos, leaders must waive national sovereignty, and create a Federal Europe with the ECB or the Bundesbank chartered as Europe’s Bank.

AFP Breitbart reports on the 2012 World Economic Forum And Global Leaders Summit in Davos relating Capitalism Is The Problem. Economic and political elites meeting this week at the Swiss resort of Davos will be asked to urgently find ways to reform a capitalist system that has been described as “outdated and crumbling.” A major topic at Davos is The Future of Capitalism.

Simone Foxman of Business Insider reports Peter Westaway, Chief European Economist at Vanguard Asset Management, communicates we are likely to see a New Eurozone Economic Infrasturcture Policy. The immediate risk relates to Greece and the restructuring of its debt which if handled badly could lead to damaging contagion and in the worst case, fragmentation of the monetary union itself. More years of continuing fiscal consolidation and painful structural reform in the periphery will still be needed with all the attendant economic and political risks. By the time that period of adjustment is complete we are likely to see a new policy infrastructure up and running. Only then will the euro area be truly sustainable. At that point, we might be able to declare the euro area sovereign crisis over. (Hat Tip to Between The Hedges for this news item).

Moyers & Company relates David Stockman says, “We need not only a reinstitution of Glass-Steagal, but even a more serious limitation on banks — [a provision that says] if you’re a bank and you want to have deposit insurance (which ultimately, you know, is backed up by the tax payer). if you’re a bank and you want to have access to the so-called discount window of the Fed (the emergency lending), then you can’t be in trading at all. … If they’re too big to fail, they’re too big to exist.”

Creative destruction will combine the too big to fail with government to form a public private partnerships managing the factors of production and natural resources to establish true socialism.

Wikipedia relates true socialism is an economic system based on direct production of utility rather than on the capitalist laws of accumulation and value. Wikipedia also relates Immanuel Wallerstein, writing in 1979, maintained that “There are today no socialist systems in the world-economy any more than there are feudal systems because there is only one world-system. It is a world-economy and it is by definition capitalist in form. Socialism involves the creation of a new kind of world-system, neither a redistributive world-empire nor a capitalist world-economy but a socialist world-government. I don’t see this projection as being in the least utopian but I also don’t feel its institution is imminent. It will be the outcome of a long social struggle in forms that may be familiar and perhaps in very few forms, that will take place in all the areas of the world-economy.”

The credit based fiat system is entering a debt deleveraging cycle. Out of a credit bust, Revelation 13:3-4, creative destruction will bring forth a Federal Europe, Revelation 13:1-4, and the ten toed kingdom of regional global governance seen in the progression of kingdoms as foretold in bible prophecy, Daniel 2:31-45. Fate, not any human action, will bring forth many political events where leaders waive national sovereignty, and establish public private partnerships to provide regional security and stability. Default by Greece will be the catalyst for the formation of a One Euro Government and a Fiscal Union as well as a Eurozone Bank. Monetary cardinals will rule as regional economic stakeholders managing the factors of production as well as natural resources, such as refineries. Tyler Durden reports PetroPlus, Largest European Refiner By Capacity, Files Bankruptcy. Soon, a monetary cardinal will be assigned to oversee this refinery and other regional infrastructure assets. Deleveraging and disinvesting out of the credit based fiat system will produce a diktat based system of regional global governance.

5) … Notable quotes; here are some insightful currency comments from NowAndFutures
There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final or total catastrophe of the currency system involved.”
— Ludwig von Mises

“Nations are not ruined by one act of violence, but quite often, gradually, and almost imperceptibly, by the depreciation of their currency, through excessive quantity”.
— Nicolas Copernicus, 1525

“The function of a ratings agency is to visit the field at the end of the battle and shoot the wounded.”
— John Heimann, Spring 1998 (former U.S. Comptroller of the Currency and later vice chairman of Merrill Lynch and chairman of the Financial Stability Forum)

6) … Will Angela Merkel pass the baton of European sovereignty to another, that is a more capable sovereign?  Is Angela Merkel just a precursor, that is an antecedent, of one greater?
John, God’s apostle, meaning sent one, recorded a dream that was given by angels for one’s consideration. The Revelation of Jesus Christ presents those things which must shortly come to pass, Revelation 1:1, meaning that once they start to occur, they fall rapidly in place, like dominoes falling one on top of another.

God is sending the First Horseman of the Apocalypse, Revelation 6:1-2, to replace all current economic, banking and political rule with authoritarian rule, as evidenced by the appointment of emergency financial managers in Michigan by Public Act 4, and by the appointment of technocratic governors in the EU’s periphery. The Sovereign Lord, Psalms 2:4-5, is passing the baton of sovereign authority from nation states to the EU ECB and IMF Troika.

Bible prophecy of Revelation 13:1-4, foretells the Beast Regime of Neoauthoritarianism  rising up out of the profligate Mediterranean Sea countries of Greece and Italy. This monster of statism has seven heads, symbolic of its occupation in mankind’s seven institutions, and ten horns symbolic of its rule in the world’s ten regions. It is being called forth by the 1974 Clarion Call of the Club of Rome for regional global governance, as a means of providing security and stability, in a world of chaos, that is coming from derisking and deleveraging out the Banker Regime of Neoliberalism.

Throughout history, God has provided a series of kings and a progression of kingdoms to rule mankind, Daniel 2:31-45. Freedom and Free Enterprise, the Libertarian dream, has come only recently and existed for a brief period, that is from the end of the Revolution War to the beginning of the Civil War. Fate appointed kings 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 fate is pushing political and economic power out of the UK and the US, the two iron legs of global hegemony, into the hands of ten kings, who will eventually come to rule, each in his own regional power base. The regional blocs will be dollar exclusion zones, where un-dollar bartering and local currencies are used. Casey Research reports Tehran Pushes to Ditch the US Dollar. India and Iran are hammering out a deal to trade oil for gold.

With this distribution of power to regional blocks, we see the rising of the Ten Toed Kingdom of regional global governance, where rule in the ten toes will be mired in the clay of democracy and the iron of diktat. The coming EU Leader, will be one knowledgeable with the scheme of framework agreements, Daniel 8:22-23. An inquiring mind asks, might this august leader be Herman Van Rompuy, or José Manuel Barroso, two of those Angela Merkel plans to meet with?

As credit instruments break down, not by any human action, but rather by fate, the curtains will open, and a most credible leader, The Sovereign, Revelation 13:5-10, and his banking partner, The Seignior, Revelation 13:11-18, will step onto the world’s stage. In a credit exhausted and currency devalued world, the people will come to place their faith in the word, will, and way of these two; they will give their full allegiance to their diktat Revelation 13:3-4.

Eventually Europe’s Lord, will lord it over all other lords, whether they be in the UK or in the US, as he rises to rule the world in a one world government, and as his partner establishes a one world goverment, Daniel 7:7,  a establish a one world currency that provides global seigniorage, Revelation Revelation 13:17-18.

7) … A Global Eurasia War is coming; it will be centered in both Syria and Iran as Russia and Russia will move into Syria to protect its economic trading interests.  
Mahdi Darius Nazemroaya writes in GlobalResearch Obama’s Secret Letter to Tehran: Is the War against Iran On Hold? “The Road to Tehran Goes through Damascus”

Mahdi Darius Nazemroaya writes in Global Research  Confrontation Between Military Blocs The Eurasian Triple Alliance The Strategic Importance of Iran for Russia and China

Kareem Fahim of the NYT writes Syria Rejects Peace Effort From Region

Gold Continues Higher With The Failure Of Credit … Creative Destruction Will Produce A Ten Toed Kingdom Of Regional Global Governance

January 24, 2012

Financial Market Report for Monday January 23, 2011

1)  … Introduction
Gold continued higher with the failure of credit.

The destruction of fiat wealth and European socialism commenced, as the strongest rallying stocks traded lower on the failure of credit, and as the Troika returned to Greece with a list of demands including the closure of state entities, state worker layoffs, reduced salaries in the private sector, reduction of pensions, and opening of closed professions.

Out of the collapse of credit, creative destruction will produce a Federal Europe and the ten toed kingdom of regional global governance.  

2) … Small cap pure value, homebuilders, US infrastructure stocks trade lower on the failure of credit; the destruction of fiat wealth has commenced.    
The investment demand for Gold, GLD, continued strong, as bond vigilantes called US sovereign debt interest rates higher. The interest rate on the US Ten Year Note, $TNX, rose to 2.067%, in advance of the FOMC meeting scheduled for Tuesday and Wednesday. The chart of the steepner ETF, STPP, shows a steepening sovereign debt yield curve, which portends a global recession is at hand.   

Commodities, DBC, rose today on continuing higher world currencies, DBV, and parabolically rising emerging market currencies, CEW. Reuters reports Oil up on EU deal to ban Iran crude.

The Euro, FXE, rose 0.80% to close up at 128.8, which took European Financials, EUFN, higher. Higher emerging market currencies took Emerging Market Financials, EMFN, higher. Rising world currencies took China Financials, CHIX, India Earnings, EPI, and World Financials, IXG, higher. Banks rising strongly included, IRE, NBG, BPOP.  Here is the ongoing chart of the EURUSD.  

The higher major currencies, DBV, stimulated the major countries, ACWX, ACWI, VT, higher. The higher emerging market currencies, CEW, stimulated the world small caps, VSS, emerging markets, EEM, EMMT, EWX, EEB, higher.  The most currency driven and carry trade driven nations rose the strongest; the large countries included EWY, RSX, EWI; and the small countries included  ENZL, SCIF, BRF, KROO, ERUS, SKOR, LATM, CEE, GMF, EPOL, TUR, ARGT, EWO. But former Dollar rally leaders Russell 2000, IWM, and Philippines, EPHE, traded lower.  

Gaming, BJK, Uranium, URA, Steel, SLX, Coal, KOL, Metal Manufacturing, XME, Copper Mining, COPX, Mining, MXI, Rare Earth, REMX, Global Agriculture, PAGG, rose on today’s higher currencies. Southern Peru Copper Corporation, SCCO, and Aluminum Corporation of China, ACH, rose strongly.

Industrial Office REITS, FNIO, and US Reits, RWR, both rose in a three white soldiers pattern. US Small Cap Real Estate, ROOF, Residential REIT, REZ, Real Estate, IYR, Blackrock, BLK, Cedar Fair, FUN, RJL Trust, RJL, rose.   

Energy AMJ, WCAT, XLE, ENY, PSCE, rose on higher oil prices, and Shipping, SEA, and Small Cap Pure value, RZV, rose of higher today’s higher currencies

But a broad number of other sectors IYT, IYJ, ITB, XLI, PXN, IYZ, IHE, SKYY, IEZ, XTL, RZG, IWO, IWM, IYC, XLB, OIH, WOOD, IHF, IGV, IGN, PSCI, PSCT, PSCD, CVCO, traded lower, reflecting that Neoliberalism’s Death Rattle Rally is coming to an end.  

Dividend paying Exxon Mobil, XOM, manifested a spinning doji, at the top of an ascending wedge, after having risen in a three white flag advance; this is a terrifically bearish pattern.  And VMWare, VMW, fell in spite of ales and profit that exceeded estimate. The combination of these two facts suggests that the rally in dividend paying stocks, DVY, and rally in tech stocks, IPK, is ending. An inflection point has been reached in the Dow, DIA, and the Nasdaq 100, QTEC. And a pivot point has been reached in the the S&P, SPY, RSP; it will now enter an Elliott Wave 3 of 3 of 3 down.

The ratio of the small cap pure value shares, RZV, relative to the small cap pure growth shares, RZG, RZV:RZG, manifested a questioning doji, suggesting that the small cap value rally and the US infrastructure rally are over.  The RZV:RZG ratio reflects funding status for the debt contagion rally.   

The US infrastructure stocks, that is the North American design build and construction stocks, PKB, the solar energy stocks, TAN, the homebuilders, XHB, ITB, regional banks, KRE, dividend payers, DVY, semiconductors, XSD, railroads, KSU, UNP, CSX, NSC, GWR, that had led the Eurozone debt contagion rally, traded lower, suggesting a failure of credit is commencing the death of fiat wealth.   

Although higher currencies took Caterpillar, CAT, higher, the US infrastructure stocks, seen in this Finviz Screener, traded lower; these included, CX, URS, NX, USG, NCS, TRN,  RBN, SXI,  AEGN, DY, PRIM, BECN, GVA, EXP, GBX, MHK, FLR.

Eurozone debt contagion rally leaders, seen in this Finviz Screener,  trading lower included value shares SBUX, TBI, ORLY, CTAS, SNX, BEBE, LII, IMAX, SHFL, PSEC, SIX, CHRS, GPN, HLF, PETM, NGPC, WTW, NUS, IMAX, CCO,  

The ongoing Yahoo Finance chart of ACWI, EWJ, YAO, RZV, PKB, XBI, ITB, DVY, shows the small cap pure value rally, infrastructure rally, biotechnology rally, home builder rally, and dividend rally, which came to an end today. Fiat wealth has finally been destroyed by the credit liquidity policies and quantitative easing policies of the US Federal Reserve and the ECB LTRO credit liquidity policy. Neo liberal finance has finally caused the death of currencies, capitalism and fiat wealth. Too much central bank credit has made both money and credit bad, an as a result creative destruction is bringing forth a Federal Europe and the ten toed kingdom of regional global government to replace democracy and capitalism.   

Biotechnology, XBI, IBB, leaders, AMGN, MON, traded lower, suggesting an end to the profitable investing in biotechnology research.

The trade lower in Boeing, BA, Airlines, FAA, and airplane rehabilitator, BEAV, suggests that the failure of neo liberal finance and credit, has terminated the age of growth.    

Small cap industrials, PSCI, trading lower included DXPE, SWK, LECO, WTS, ROLL, BRC, CLC, DCI, PLL.

The former rally leader, IP, a North American, non oil, natural resource company, traded lower. It being debt laden, will now be a fast faller. Other similar companies trading lower included DEL, WY, PCL, UFPI.

Electrical equipment manufacturers trading lower included ETN, TNB, AIMC, AMRC, heralding a pivoting turn lower in the Morgan Stanley Cyclical Index, $CYC.

Bonds, BND, LAG, AGG, traded lower again, establishing the death of credit. The trade lower in bonds is part of the death of capitalism. The strong fall lower in US Treasuries, ZROZ, EDV, TLT, IHF, BAB, in front of the US Federal Reserve Meeting, establishes that bond vigilantes have command of interest rates, and established an end to over forty years of neo liberal finance.The Debt Super Cycle has come to an end. The global government finance bubble, BWX, has finally burst.  Longer duration corporate bonds, BLV, fell more than medium duration corporate bonds, LQD, documenting a flight of capital out of the bond market.  Emering Market Bonds, EMB, Junk Bonds, JNK, High Yield Corporate Bonds, HYG, rose on today’s higher currencies, but Leveraged Buyouts, PSP, traded lower.  

Credit providers, MA, and V, traded lower suggesting that the age of neo liberal finance is over.    

3) … Creative Destruction commenced today as the debt contagion rally in US infrastructure stocks, small cap value, and homebuilders failed, and as credit providers Master Card and Visa traded lower, and as bonds and US Treasuries traded lower.  The failure of credit means that creative destruction will bring forth a Federal Europe and the ten toed kingdom of regional global governance.
Investopedia relates that Joseph Schumpeter fathered the term creative destruction. “A process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one”.  Econolib relates Schumpeter believed that capitalism would be destroyed by its successes, that it would spawn a large intellectual class that made its living by attacking the very bourgeois system of private property and freedom so necessary for the intellectual class’s existence. And unlike Marx, Schumpeter did not relish the destruction of capitalism. “If a doctor predicts that his patient will die presently,” he wrote, “this does not mean that he desires it.”

Through the failure of credit and the ending of the US infrastructure, small cap pure value, home builder, and dividend rally, creative destruction commenced today. The world is embarking on something new, the emergence of regional global governance out of the death of capitalism, credit and fiat money. Loss of confidence in debt, and the loss of debt sovereignty by the US central bank, means an end to the Milton Friedman Free To Choose floating currency banker regime known as Neoliberalism, and confirms the death of capitalism. By divine appointment, these will be replaced by the Beast regime known as Neoauthoritarian, Revelation 13:1-4, and the ten toed kingdom of regional global governance, Daniel 2:31-33, where the emphasis will be on regionalization, specifically regional trade, barter and use of regional currencies. The dynamos of corporate growth and investor prosperity, are being replaced by the dynamos of regional security and stability.

The development of regional blocks will mean private public partnerships, such as MIC, will rise in importance as regional stakeholders are appointed from business, banking and government to manage the factors of production and natural resources. The emphasis will be on un-dollar transactions, as the world’s reserve currency falls into disrepute.  Banks will be nationalized, perhaps better said regionalized, and come to be known as the government bank or the govbank for short. Regional blocks, that is regional unions already in existence include SCO in Asia, and CELAC, in South, Central, and Caribbean America; these will be increasingly dollar exclusion zones. A North America Union will form out of Canada, Mexico and the US, and might be called CanMexAmerica.

In as much as fiat money has failed, credit will be replaced by diktat. Bankers providing growth and prosperity, will be replaced by monetary cardinals providing regional security and stability. Under Neoliberalism, people trusted in bankers, who securitized ponzi credit. Under Neoauthoritarianism, people will place their their trust in sovereign leaders whose word, will, and way, will provide order out of chaos. The monetary cardinals will provide diktat as currency and also diktat as credit; and they will be responsible for managing regional infrastructure assets.  

By God’s Sovereign Will, Ephesians, 3:1-11, the seigniorage, that is the moneyness, of neo liberal finance, will be replaced by the seigniorage of diktat.   

Out of sovereign armageddon, that is a credit bust and global financial collapse, fate will open the curtains, and onto the world’s stage, will step the most credible of leaders. This seemingly Little Authority, will come to be known as the Sovereign, Revelation 13:1-4, and together with his banking partner, The Seignior, Revelation 13:11-18, will change our times and laws, Daniel 7:24-25.  By working in regional framework agreements, they will make sweeping economic and political changes. God has unleashed the First Horseman of the Apocalypse, Revelation 6:1-2,  to pass the baton of sovereignty from nation states to sovereign bodies such as the EU ECB and IMF Troika. Soon these two leaders will build a Federal Europe, with the ECB or the Bundesbank, Buba, empowered as Europe’s Bank which, will in effect be a type of revived Roman Empire.  

Perhaps the reality will settle in this week that Greece is bankrupt, and that when default occurs no one will trade with them, and they will have no seigniorage, that is moneyness, for fiscal spending. And that in order to prevent regional chaos, leaders must waive national sovereignty, and create a Federal Europe with the ECB or the Bundesbank chartered as Europe’s Bank.    

AFP Breitbart reports on the 2012 World Economic Forum And Global Leaders Summit in Davos relating Capitalism Is The Problem.  Economic and political elites meeting this week at the Swiss resort of Davos will be asked to urgently find ways to reform a capitalist system that has been described as “outdated and crumbling.” A major topic at Davos is The Future of Capitalism.

“We have a general morality gap, we are over-leveraged, we have neglected to invest in the future, we have undermined social coherence, and we are in danger of completely losing the confidence of future generations,” said Klaus Schwab, host and founder of the annual World Economic Forum.

“Solving problems in the context of outdated and crumbling models will only dig us deeper into the hole.

“We are in an era of profound change that urgently requires new ways of thinking instead of more business-as-usual,” the 73-year-old said, adding that “capitalism in its current form, has no place in the world around us.”

Bloomberg reports European bank downgrades now complement the recent Eurozone sovereign downgrade. Societe Generale, Credit Agricole Cut by S&P in Wake of France’s Downgrade. Societe Generale SA (GLE) and Credit Agricole SA (ACA) were among French banks to have their credit grades cut by Standard & Poor’s after France was stripped of its top rating earlier this month. The downgrade of some of these banks follows the downgrade of France, S&P wrote in a statement.

Perhaps the elites will conclude that capitalism is outdated, and that the Milton Friedman paradigm of floating currencies needs to be replaced with the paradigm regional global governance, as the world is being undone by debt deflation and failing credit. Perhaps they will come to relate that economies need to be regionally directed to deal with bad credit and trade imbalances.

Simone Foxman of Business Insider reports Peter Westaway, Chief European Economist at Vanguard Asset Management, communicates we are likely to see a New Eurozone Economic Infrasturcture Policy.  The immediate risk relates to Greece and the restructuring of its debt which if handled badly could lead to damaging contagion and in the worst case, fragmentation of the monetary union itself. More years of continuing fiscal consolidation and painful structural reform in the periphery will still be needed with all the attendant economic and political risks. By the time that period of adjustment is complete we are likely to see a new policy infrastructure up and running. Only then will the euro area be truly sustainable. At that point, we might be able to declare the euro area sovereign crisis over.  (Hat Tip to  Between The Hedges for this news item).

Moyers & Company relates David Stockman says, “We need not only a reinstitution of Glass-Steagal, but even a more serious limitation on banks — [a provision that says] if you’re a bank and you want to have deposit insurance (which ultimately, you know, is backed up by the tax payer). if you’re a bank and you want to have access to the so-called discount window of the Fed (the emergency lending), then you can’t be in trading at all. … If they’re too big to fail, they’re too big to exist.”

Creative destruction will combine the too big to fail with government to form a public private partnerships managing the factors of production and natural resources to establish true socialism.

Wikipedia relates true socialism is an economic system based on direct production of utility rather than on the capitalist laws of accumulation and value. Wikipedia also relates Immanuel Wallerstein, writing in 1979, maintained that “There are today no socialist systems in the world-economy any more than there are feudal systems because there is only one world-system. It is a world-economy and it is by definition capitalist in form. Socialism involves the creation of a new kind of world-system, neither a redistributive world-empire nor a capitalist world-economy but a socialist world-government. I don’t see this projection as being in the least utopian but I also don’t feel its institution is imminent. It will be the outcome of a long social struggle in forms that may be familiar and perhaps in very few forms, that will take place in all the areas of the world-economy.”

John Mauldin in PDF report shows the chart of 2003 to 2011 OCED nominal labor costs for European nations rising quite dramatically with the exception of Germany. Lower cost labor in this industrialized state has been a major factor in regional trade imbalances. Structural reforms, such as dissolution of national wage contracts, will be mandated by the EU ECB and IMF Ttroika. Capitol controls will be forth coming rather quickly to prevent bank runs.

The credit based fiat system is entering a debt deleveraging cycle. Out of a credit bust, Revelation 13:3-4, creative destruction will bring forth a Federal Europe, Revelation 13:1-4, and the ten toed kingdom of regional global governance seen in the progression of kingdoms as foretold in bible prophecy, Daniel 2:31-45.  Fate, not any human action, will bring forth many political events where leaders waive national sovereignty, and establish public private partnerships to provide regional security and stability.  Default by Greece will be the catalyst for the formation of a One Euro Government and a Fiscal Union as well as a Eurozone Bank. Monetary cardinals will rule as regional economic stakeholders managing the factors of production as well as natural resources, such as refineries.  Tyler Durden reports PetroPlus, Largest European Refiner By Capacity, Files Bankruptcy. Soon, a monetary cardinal will be assigned to oversee this refinery and other regional infrastructure assets.     

4) … Current news reports suggest the beginning of the destruction of European socialism
Euro Intelligence is the premier new service; this comes at a cost. I recommend that one subscribe to their daily news letter which reports The EU ECB IMF Troika returned to Athens. According to Kathimerini troika demands the closure of 100 state entities, resulting in some 10,000 layoffs; the trimming of the 13th and 14th salaries paid to workers in the private sector; cuts to auxiliary pensions; and the full liberalization of all closed professions. Euro Intelligence also reports two pro Europeans end up finalists in the race for Finland’s Presidency. Two Pro-Europeans will face each other in a second round of the Finland’s presidential election in two weeks, as Sauli Niinistö, the leading candidate failed to secure a majority of votes in the first round last Sunday. The FT reports that Niinistö, a pro-European former finance minister from the ruling National Coalition party, won 37%, Pekka Haavisto, a pro-European candidate from the Green League, grabbed second place winning 19%. The eurosceptic Paavo Väyrynen from the Centre party, received 17.5%. The euro-crisis figured high in the campaign, even if the president has no executive rights in economic policies. Niinistö said on Sunday night that ‘a pro-Europe policy and support for the euro has received strong backing from the people, according to YLE news. People now have a longing for stability.’

Open Europe reports EU Tax Commissioner: UK “would lose a lot” if other countries go ahead with FTT; Barnier: The City “must play the European game”.
EU Taxation Commissioner Algirdas Semeta told the FT, “The UK would lose a lot if other [EU] members decide to move ahead with a financial transactions tax. Because of its design, [Britain] will be subject to the tax, but at the same time, it will not receive any money from it.” The paper notes that the FTT could use the ‘residence principle’, and therefore cover any trade made by a firm which is based in the tax area, even if the trade takes place in London or other financial centres outside of the EU.
Meanwhile, after German Economy Minister Phillip Rösler floated the idea of introducing a European ‘bourse tax’ instead of an EU-wide FTT, Open Europe’s Head of Economic Research Raoul Ruparel was quoted in Saturday’s Telegraph saying, “If it is imposed only on shares this bourse tax may not have such a big impact but if it covers, say, derivatives, then it would have a disproportionate effect on the UK because of the size of the City.” Open Europe’s latest report on EU financial regulation is cited by Simon Nixon in the WSJ.
Separately, EU Internal Market Commissioner Michel Barnier is today expected to argue in a speech in the City, “The EU must not hinder the City’s dynamism. But the City must also play the European game. The same applies for the UK government…Opening the door to unanimity for the UK on financial services would mean similar legitimate demands in other sectors from other member states. And that would spell the end of the single market.” Open Europe research FT FT 2 Saturday’s Telegraph WSJ: Nixon

Croatia has voted to become the 28th EU member state following yesterday’s referendum in which 66% voted for membership and 33% against, albeit on a low turnout of around 44%. Providing all other member states ratify Croatia’s accession treaty, the country will officially join in July 2013.
FT CityAM BBC Guardian IHT Le Figaro EUobserver Il Sole 24 Ore Süddeutsche FAZ European Voice EurActiv Irish Times

At a rally on Sunday, the Socialist candidate for the French presidential elections, François Hollande, promised to demand that Germany drop its devotion to austerity as the cure to the eurozone crisis, and insisted that – if elected – he will try to renegotiate the new European ‘fiscal treaty’ on budgetary discipline. Times Le Monde La Tribune Les Echos Welt

Greek bondholders make final offer in voluntary restructuring negotiations; Monti and Draghi call for euro bailout fund to be doubled in size.
Eurozone finance ministers will meet in Brussels today, with the failing negotiations on the voluntary Greek restructuring likely to be top of the agenda. It was hoped that a deal could be struck ahead of the meeting. However, disagreements remain despite bondholders saying that they have made their final offer over the “maximum” level of losses they will accept – thought to be a net present value loss of between 65% and 70%. Der Spiegel reports that even this level of write-downs may not be enough to make Greek debt sustainable. Sources close to the negotiations said they were still hopeful a deal could be struck ahead of the meeting of EU leaders on 30 January.
Der Spiegel reported over the weekend that Italian Prime Minister Mario Monti and ECB President Mario Draghi have called for the ESM, the eurozone’s permanent bailout fund, to be doubled in size to €1 trillion. German Finance Minister Wolfgang Schäuble dismissed these calls yesterday. The WSJ reports that Monti also said that he has a “very high” expectation that the eurozone will eventually have some form of debt pooling through Eurobonds.
The EU/IMF/ECB Troika overseeing Ireland’s bailout warned the Government that a financial “bomb” would go off in Dublin if it defaulted on payments to bondholders of the former Anglo Irish Bank. Handelsblatt reports that Germany may back Luxembourg’s Yves Mersch to fill the vacant slot on the ECB’s executive board in order to stop the board being dominated by members from southern Europe.
FT CityAM WSJ EUobserver El País Sunday Telegraph  Independent on Sunday Sunday Times Mail on Sunday Telegraph Guardian BBC Le Figaro Il Sole 24 Ore Expansión Spiegel Spiegel 2 Bild WSJ 2 Welt WSJ 3 Spiegel Irish Independent EurActiv European Voice FT 2 WSJ 4 Irish Times Mail on Sunday: Watkins Sunday Telegraph: Halligan Conservative Home: Davis Mail: Wiscarson Times: Lyons FT: Atkins FT: Munchau FT: Dizard Irish Times: Leader Standaard Handelsblatt Kathimerini FAZ Le Figaro: Mills El País: García-Margallo

Following Sunday’s first round of Finnish presidential elections, two pro-euro candidates, Sauli Niinistö and Pekka Haavisto, will run-off in the second round. Niinistö is the favourite– receiving 37% of votes in the first round – while Haavisto polled 19%, beating anti-euro candidate Paavo Väyrynen into third place with 18%. FT EUobserver

EU finance ministers will tomorrow try to reach a final agreement on new EU rules on over-the-counter derivatives trading. Divergences remain over the role of the EU’s financial watchdog ESMA, especially when it comes to authorising or rejecting the establishment of clearing houses in a member state, notes EUobserver. Open Europe research EUobserver

FT: France and Germany to seek dilution of bank capital rules
The FT reports that France and Germany are to call for a relaxation of the Basel III global bank capital rules – which form part of the fourth review of the EU’s Capital Requirements Directive (CRD IV) – setting them at odds with the UK’s desire to see stronger capital requirements for the banking sector.
A separate article in the paper notes that the draft directive would treat all loans as if they are in default when they are 90 days in arrears, common practice in much of the EU, rather than the 180 days the UK allows. The change will increase UK banks’ capital charges on its mortgages by 15-20%, forcing many institutions either to cut lending or charge more to customers.  The British Banking Association is reported as saying the 90-day definition was one of their “top concerns” with the draft.
Open Europe Research: Continental Shift Open Europe research: Ten Lessons to be learnt FT FT 2

The Sunday Telegraph reported that David Cameron will this week issue a challenge to the European Court of Human Rights by saying it must no longer be able to act as a court of appeal on cases already dealt with in Britain. Britain is also pushing for changes to the way ECHR judges are appointed.
Mail Sun Sunday Telegraph Sunday Telegraph: Leader Mail on Sunday Conservative Home:Goodman Conservative Home: Rudd

The FT reports that EU plans to apply Solvency II-type capital requirements to funded defined benefit pensions have attracted strong criticism from the pension industry, particularly in the UK and Netherlands – which between them account for more than 75% of the EU’s funded pension schemes by value of assets. Open Europe research FT

FT Deutschland reports that the independent European credit ratings agency conceived by the consulting firm Roland Berger is due to be launched this summer, after 30 institutional investors such as banks, insurance companies and stock exchanges across Europe agreed to provide a €300m endowment. FTD

The BBC reports that EU foreign ministers are today expected to confirm the embargo on Iranian oil agreed by EU member states’ permanent representatives last week. BBC

The European Commission is this week due to unveil plans to introduce a single set of privacy standards in the EU-27. Businesses are concerned that the proposed overhaul could result in costly burdens and big fines for companies that fail to comply with the rules, reports the FT. FT

In the Sunday Telegraph, Christopher Booker noted that several studies commissioned by EU regulators warned about the potential dangers of how large cruise ships, such as the Costa Concordia, are now designed. Sunday Telegraph: Booker

Ambrose Evans Pritchard reports Crucial talks between Greece and private creditors on debt restructuring stalled over the weekend … Reuters reports Euro zone ministers reject private bondholders’ Greece offer … Reuters reports IF says creditors at limits of voluntary Greek deal
… The NYT reports Greek taks hit a snag over rates … The Automatic Earth relates The latest solution for Europe solves absolutely nothing … GreekCrisis relates the WSJ report Euro zone spars over solution for Greece … GreekCrisis relates the Richard Barley WSJ article ECB may hold dey to exiting from Greece’s debt labyrinth  … GreekCrisis relates the Bloomberg repor  EU calls for more bondholder concessions as Greece seen going off track

BBC reports IMF’s Christine Lagarde warns of 1930s moment … unless more financing is secured.
I comment that more credit is not the answer. Excessive credit was the cause of the 1929 through 1932 depression. Currencies failed in July 2011, when investors feared that a debt union had formed in the EU, and now a credit bust is underway with bonds, BND, and US Treasuries, ZROZ, EDV, TLT, turning lower.  US Federal Reserve monetary policies of credit liquidity, quantative easing, and the ECB LTRO facility, has made both money and credit bad. There is no money good. The only safe investment is personal possession of gold bullion.

Stephen Kinsella writes in Irish Economy article Eurozone Debt And Deleveraging, Paul Krugman links to the latest McKinsey report on debt and deleveraging. There’s a lot of useful data in there, but this chart struck me as worth posting on this blog, with little comment required.

5) … The ECB’s LTRO facility, was the mother of all central bank ponzi credit schemes.
Mario Draghi’s stealth money printing operation increased the ECB’s balance sheet by 38%. The LTRO rally was the investor’s golden moment. Today, Finviz provides the monthly chart of IRE which shows a rise of 46% so far this year; and the monthly chart of NBG shows a 37% gain. The LTRO rally, that is the stealth ECB money printing rally, is seen in the ongoing chart of EUFN, IRE and NBG. The National Bank of Greece, NBG, and Governor and Company of the Bank, IRE, are insolvent banks; yet they have been brought back to life by the ECB’s so called temporary lending facility. The ECB LTRO facility was a zombification of dead banks, this clearly being seen in the EUFN, IRE and NBG chart which shows hot money flows to the most insolvent of all banks.  There has been a stunning European money printing rally.  Today we have the Irish Independent report Bailout chiefs order banks to slash 2,500 workers. Officials say Government cuts must be made immediately to speed revamp.

Giancarlo Corsetti, Professor of Macroeconomics, University of Cambridge; and Programme Director, CEPR, talks to Viv Davies in VOX.Mr. Corsetti is of the opinion that liquidity support is essential for, and compatible, with reforms in the failing Eurozone economies. Alas, creative destruction has commenced, and it will bring forth political, monetary, and fiscal infrasturcture reforms, along the lines of the Club of Rome which in 1974 call for regional integration.

Bloomberg reports Draghi Makes Euro Favorite For The Most Profitable Carry Trades With Rate Cuts   
Betting against the euro may be the most profitable trade in the foreign-exchange market as policy efforts to stave off a European recession debases the currency.

The Euro became a carry trade funder where a number of investors borrowed in Euros, FXE, and invested long in Australia, EWA, Brazilian, EWZ, South Africa, EZA, and South Korea, EWY, as is seen in this chart.   

6) … News of the day
Business Insider provides the James Pethokoukis, American Enterprise Institute, report into Team Obama’s thinking as the financial crisis exploded. Article Larry Summers’ Secret Economic Memo     features The New Yorker report Policymaking In The Obama White House, where Ryan Lizza provides the 57-page, “Sensitive & Confidential” memo, written by the National Economics Council economist in December 2008.

Think Money reports UK has second-highest debt-to-GDP ratio in the world, second only to Japan.

The Daily Ticker reports Obama To Fight For Fairness, Soical Justice, And Income Equality And Bloomberg reports Obama Speech to Embrace U.S. Manufacturing Rebirth, Energy for Job Growth

Ciovacco Capital reports Last time bullishness hit these levels …

Capitalism Dies As The US Federal Reserve’s And ECB’ Monetary Policies Have Destroyed The World’s Currencies …. Regional Global Governance And Diktat Will Provide Security And Stability

January 22, 2012

Financial Market Report for Friday January 20, 2011

1) … Introduction
The most toxic and overvalued investments rallied the strongest this week, putting an end to the Free To Choose Regime of Neoliberalism that has governed the world ever since Milton Friedman encouraged abandonment of the gold standard in 1971. The topping out of the most rallied of investments heralds the beginning of the rise of the Beast regime of Neoauthoritarianism to replace the Banker Regime of Neoliberalism. Capitalism is being replace by a ten toed kingdom of regional government governance where moneyness will come from diktat not debt. Global growth has failed with the death of fiat currencies. Regional framework agreements will provide the basis for trade, stability and security.  In as much as credit is dying, new credit will come from monetary cardinals, that is regional stakeholders, working in public private partnerships overseeing the factors of production and natural resources.            

2) … This Week’s Trading Activity Was Strongly Up.  
The most insolvent financial institutions, IXG, the most insolvent banks, EUFN, and the most speculatively driven banks, EMFN, RWW, C, BAC, rose strongly. The most exemplary of neo liberal finance banks rose dramatically. The pop higher in IBN, HDB, GGAL, BBD, BFR, BMA, ITUB, BSBR, IRE, NBG, LYG, RBS, BCS, marks an end to the Eurozone and global debt trade where financial trading underwritten by a nations’ debt gave seigniorage, that is moneyness, to banking debt.  With the trade lower in Bonds, BND, the global debt bubble has burst, and confidence in debt has failed. Solar stocks, TAN, finally turned down, as Intel, INTC, and Semiconductors, XSD, rose to what is likely a rally high.

The WSJ reports Sugar rush for euro-zone markets. The most ponzi credit stimulated or insolvent nations, Spain, EWP, Italy, EWI, Austria, EWO, Europe, VGK, Turkey, TUR, Poland, EPOL, Emerging Asia, GMF, South Korea Small Caps, SKOR, India Small Caps, SCIN, China Small Caps, HAO, Brazil Small Caps, BRF, Emerging Europe, CEE, Russia Small Caps, ERUS, Latin American Small Caps, LATM, and Emerging Market Small Caps, EWX, rose.  

The most speculative of commodities, timber, CUT, base metals, DBB, lead, LD, nickel, JJN, aluminum, JJU, and copper, JJC, rose. which drove Wood, WOOD, Uranium, URA, Aluminum, ALUM, Copper Mining, CHIM, Rare Earth, REMX, Coal, KOL, China Industrials, CHII, China Materials, CHIM, Steel, SLX, Taiwan, EWT, Global Agriculture, PAGG, Emerging Market Mining, EMMT, rose.

Growth shares Taiwan Semiconductors, TSM, Aluminum Corporation of China, ACH, Sterlite Industries, SLT, CF Industries, CF, Alcoa Aluminum, AA, Southern Peru Copper, SCCO, BHP Billiton, BHP, Vale, VALE, rose strongly.

Airlines, FAA, and Shipping SEA, rose strongly, with Greece Shipping Firms, ESEA, CPLP,  and DCIX, now turning lower.  

S&P Materials, MXI, and S&P Financials, IXG, S&P Dividends, SDY, S&P Financial Services, IYF, S&P Technology, IPK, S&P Homebuilders, XHB, S&P Banks, KBE, S&P Financial Services, IYZ, Investment Bankers, KCE, Stockbrokers, IAI, Lender, AXP, took the S&P, SPY, and RSP, higher. S&P Health Care, XLV, remained strong.

Ford Motor, F, General Motors, GM, Tata Motors, TTM, and a number of automobile stocks, gave rise to CARZ and VROM. The rise in M2 Money and replacement of automobiles by the public has driven up auto sales.

Debt laden companies, such as MTW, and IP, rose strongly.The most capital of depleted stocks rose; these included retailer Sears, SHLD, and LED Manufacturer, CREE, rose strongly. US Preferreds, PFF, rose, to their likely finale high. Petsmart, PETM, rose strongly.

The Design Build ETF, PKB, popped higher displaying a likely evening star candlestick. Clean Energy, PBW, rose. Both of these contain US based companies, that is the ones favored by investors seeking a US safe haven investment from debt contagion. Design Build, PKB, has been a death contagion rally leader as it has a sampling of stocks such as large cap US based non oil and mining basic material stocks, MLM, EXP, VMC, LPX, US based small cap value retailer, TSCO, US based agricultural implement manufacturer, CASC, US based debt laden companies, MTW, IP, US based textile manufacturer, MHK, home improvement retail store, LOW, home builder, NVR, US based design build company, FLR, and heavy construction company, DY.  
  
Industrial Office REITS, FNIO, and Small Cap Real Estate, ROOF, took real estate, IYR, higher; the seigniorage, that is the moneyness of Residential REITS is likely at its end, IYR, FNIO, ROOF, REZ.  

Metal Manufacturing, XME, NUE, STLD, RS have likely finished their rally.

Networking shares, IGN, FFIV, NTGR, AKAM, have likely completed their rally.

Homebuilders, ITB, and associated retailers, LOW, HD, have likely completed their rally.

The small cap value shares, RZV, RPV, IJS, IJR, IWN, IWD, RWJ, have likely completed their rally now that the European Financials have been stabilized temporarily by credit liquidity from the ECB’s LTRO facility, RZV, RPV, IJS, IJR, IWN, IWD, RWJ. The small cap revenue shares, RWJ, rose, led higher by Nicholas Financial, NICK, and  Global Payments, GPN.

It’s a likely end to the rise in Brazil Shares, EWZ, TSU, TAM, CIG, ABV, ERJ, FBR, SBS, GBB, UGP, VIV, VALE, SID. As well as a likely end to the other BRICS, EEB, that is Russia, RSX, India, INP, EPI, China, YAO, FXI, and CAF. And as well as to the rise in Argentina, ARGT, and Philippine, EPHE, shares.   

The charts of DVY, EWX, RZV, PKB, and IXG shows the topping out of Neoliberalism’s death rattle rally; these always make market turns together.

Since October 11, 2011, dividend payer Exxon Mobil, XOM, has steadily attracted investment and moved higher this week in a three white soldier advance to close at 87.50  In the last ninety days it has gained almost as strongly as the small cap energy shares, PSCE, and has outperformed Chevron, CVX, and Energy, XLE, as is seen in the chart of XOM, PSCE, CVX and XLE. Its rise was responsible for the rise of S&P dividend SDY, and dividend payers, DVY.    

The chart of the S&P, $SPX, presented in MBETrader article A Possible Pivot Level , shows an Elliott Wave 2 of 2 of 2 high, suggesting an inflection is about to commence into an Elliot Wave 3 of 3 of 3 down. And Springhill Jack presents SPY chart relating This is a good place to expect at least a short term reversal. And PretzelLogic presents SPY chart relating The first chart shows that there are enough squiggles to count this as a complete 5-wave move. And Goldie presents SPY chart relating The most important trendline in the universe. Associated Press reports US, Europe weigh on SPX 2012 profit guidance.

The most toxic of debt, Michigan Municipal Bonds, MIW, rose as did Junk Bonds, JNK, and Leveraged Buyouts, PSP.  It was a carry trade day with the Yen, FXY, falling and the world currencies, DBV, and emerging market currencies, CEW, rising, making the US Dollar, $USD, UUP trade lower. The chart of the USD/JPY shows trading around 76.70.  The ratio of RZV to RZG, RZV:RZG, rose; the safe haven in US small caps where seigniorage comes from rental income and consumer spending and finance is coming to an end.   

3) …   Capitalism Dies As The US Federal Reserve’s And ECB’ Monetary Policies Have Destroyed The World’s Currencies  …. Regional Global Governance And Diktat Will Provide Security And Stability.
Neoliberalism featured neo liberal finance where bankers profited from credit liberality. Gary of Between The Hedges relates Tages-Anzeiger reports Harvard University Professor Kenneth Rogoff said he sees a risk of more than 80% that at least one or two countries will leave the 17-member euro region in the coming years. “Greece, Portugal, Ireland and possibly also Spain are insolvent and need a restructuring of their debt.” Rogoff also said it’s “problematic” to think that the ECB “could create money with a magic act, purchase bonds of problem nations and hide them in a dark corner of its balance sheet.” That’s “a Ponzi scheme, which eventually collapses.” He said European banks need “hundreds of billions of euros” of fresh capital.  

Fiat money died in July of 2011 when investors feared that a debt union had formed in the EU and fled world currencies, DBV, emerging market currencies, CEW, causing debt deflation in world government bonds, BWX, in September 2011, and emering market bonds, EMB, in January 2012. The debt of the insolvent sovereigns, the PIGS, will not be restructured in the traditional sense, nor can any fresh capital be raised. The Euro, FXE, is a dead currency. It lives a zombie existence through lending support from the ECB. The death of currencies and the Euro in particular, means the regime known as Neoliberalism is dead. Inflation is fiat assets has stopped. Deflation in fiat assets will commence.  

Insolvent sovereigns and insolvent banks cannot support growth. The law of diminishing returns is at work. US Central Bank monetary policy of quantitative easing and credit liquidity is failing to stimulate. Neo liberal finance is exhausted. Capitalism has died, as fiat money has died.

The Sovereign Lord God, Psalm 2:4-5, is exercising His Sovereign Will, Ephesians 3:1-11, to pass the baton of sovereignty from nation states to sovereign leaders and sovereign bodies, Revelation 6:1-2, so as to create New Credit. Nations such as Greece, Portugal, Italy and Spain have lost their debt sovereignty. Investment capital is giving way to political capital, particularly economic diktat and political diktat. Out of a soon coming sovereign armageddon, that is a credit bust and global financial collapse, EU leaders are going to waive national sovereignty and create a One Euro Government, where the economy will be directed by monetary cardinals who work as fiscal, credit, manufacturing and resource stakeholders in private public partnerships, for the security and stability of the Eurozone. Public private partnership manager  Macquarie Infrastructure Company, MIC, will provide leadership in the New Economy. These new sovereigns will provide diktat as a currency, and the people will be amazed by this and place their trust and faith in it; they will give their full allegiance to it, Revelation 13:3-4. People will place their confidence in diktat. This New Credit of diktat will grease Neoauthoritarianism’s wheels.  Banks will be nationalized, better said regionalized and integrated regionally in the push for regional global governance. The banks will be known as the government banks or gov banks for short. Neoliberalism’s sovereign debt and banking debt will be applied to every man, woman and child in the Eurozone. The EU is going to be come a totalitarian collective where residents live in debt servitude. Totalitarian Collectivism is Europe’s Future. Choice is an epitaph on Neoliberalism’s tombstone. Freedom is a mirage on the Neoauthoritarian Desert Of The Real.

In the North American Continent, monetary cardinals will manage regional energy  infrastructure. Canadian energy companies, specifically oil sands, ENY, and oil and gas companies, ENB, and, TRP, will be regionalized and fenced in by a regional security and stability perimeter.  

Infrastructure investments, being capital intensive and inherently costly, will be abandoned. Emerging Market Infrastructure and Smart Grid Infrastructure, EMIF, INXX, CHXX, GRID, BRAF, will see a strong loss of investment value.

US Infrastructure, PKB, which has been a beneficiary of the debt contagion rally, that is neoliberalism’s death rattle rally, will see a rapid decline.  US Infrastructure stocks seeing a rapid decline in value will include railroad car manufacturer, GBX, basic material stocks MLM, EXP, VMC, LPX, tractor retailer, TSCO, agricultural implement manufacturer, CASC, debt laden companies, MTW, IP, textile manufacturer, MHK, home improvement retail store, LOW, home builder, NVR, US based design build company, FLR, heavy construction company, DY, labor service provider, TBI, and metal manufacturer, RS.   

The banks and economies of Canada, Mexico and the US will be regionalized. The North American Continent will become a region of global governance and will be known as the North American Union, or perhaps CanMexAmerica. John Fonte writes in timely manner Sovereignty or Submission: Will Americans Rule Themselves or be Ruled by Others?  Other regions of global governance are CELAC in South and Central America and SCO in Asia.
 
Free Market Capitalism, as envisioned by Austrian economists will never, ever see the light of day, as God determined in eternity past, that the ten toes of regional global governance rise to be sovereign. Three hundred of the world’s elite met in the Club of Rome in 1974, and as part of institutional economics, provided the Clarion Call for regional global governance. It is clear, ringing and distinctive, and carries an authoritarian imperative that is currently being heeded by Angela Merkel and Nicolas Sarkozy as well as the the EU ECB IMF Troika which has installed technocratic government.      

Regional global governance will attempt to produce true socialism; this is not a people’s socialism. Wikipedia relates true socialism is an economic system based on direct production of utility rather than on the capitalist laws of accumulation and value. Wikipedia also relates Immanuel Wallerstein, writing in 1979, maintained that “There are today no socialist systems in the world-economy any more than there are feudal systems because there is only one world-system. It is a world-economy and it is by definition capitalist in form. Socialism involves the creation of a new kind of world-system, neither a redistributive world-empire nor a capitalist world-economy but a socialist world-government. I don’t see this projection as being in the least utopian but I also don’t feel its institution is imminent. It will be the outcome of a long social struggle in forms that may be familiar and perhaps in very few forms, that will take place in all the areas of the world-economy.”

AFT reports German Foreign Minister Guido Westerwelle spoke before Brookings Institute saying The Debt Economy Itself Has Reached Its Limits.  And Doug Noland provides Thoughts On The Crisis Of Capitalism I am convinced that a capitalistic system must have a monetary anchor to be sustainable. Stable money and credit is a prerequisite. we live in period unique in financial history: There is globally no limits placed on the quantity or quality of credit creation. There is no gold standard; no Bretton Woods monetary regime; nor even an ad-hoc “dollar standard” working to regulate global Credit expansion. Markets for pricing finance and risk have turned progressively distorted and, in the end, dysfunctional. This was a predictable outcome for a global “system” bereft of a monetary anchor. Policymakers have repeatedly responded to dysfunction and inevitable booms-turned-bust with unprecedented market intervention. This continues to only exacerbate financial market pricing distortions and attendant imbalances. What began as tinkering has regressed to the point of policymakers attempting to take virtual command over the pricing of finance. Capitalism now hangs in the balance.

Massive fiscal and monetary stimulus, along with unprecedented market interventions, has completely overwhelmed the capacity of the markets to effectively price risk. Instead of learning from past mistakes, policymakers are more determined than ever to dictate market pricing. Rather than recognizing the prevailing role “activist” central banking has played in fomenting dysfunctional markets, policymakers believe market outcomes beckon for only greater activism. Until governments can begin to extricate themselves from the manipulation of interest rates and risk market pricing more generally, this long cycle of destructive booms and busts will run unabated.   

Regionalization will ever intensify, with an on going push to a one world economy. The position of president of the World Bank is currently open. Robert Wenzel of EconomicPolicy Journal writes, The latest rumor is the Summers may be named head of the World Bank, that colossal organization that acts as enforcer for elitist banksters and drives countries into poverty —- poverty which Summers will likely claim is the result of “weaknesses” in Capitalism. On this point, Wikipedia relates According to Gregory Mankiw, a New Keynesian economist, governmental intervention can improve on market outcomes under conditions of “market failure“, or situations in which the market on its own does not allocate resources efficiently. The goal of globalization is to eliminate national sovereignty, and create a global economic system, managed regionally by monetary cardinals. Globalist thought leaders such as the Council on Foreign Relations, that is the CFR, are showing the way forward suggesting regional integration.

Today’s news events are very much a fulfillment of bible prophecy as recorded in Revelation and Daniel. Angels delivered a dream to the apostle John in his 90s, while exiled to the Isle of Patmos. John The Revelator presents those things which most shortly come to pass, Revelation 1:1, meaning that events are going to fall rapidly in place, like dominoes falling one upon another.

The Sovereign Lord God, Psalm 2:4-5, ordained from eternity past, that the Beast regime of Neoauthoritarianism, Revelation 13:1-4, rise to replace the Banker regime of Neoliberalism. This monster of statism and collectivism is rising from the profligate Mediterranean countries of Italy and Greece. The Beast’s seven heads are rising to occupy in all mankind’s institutions, and its ten horns are rising to govern in all of the world’s ten regions. The Beast regime is coming like a terminator that can’t be bargained with. It can’t be reasoned with. It doesn’t feel pity, or remorse, or fear. And it absolutely will not stop, ever, until mankind is totally dominated and subdued, Daniel 7:7. This that one might come to trust in the sovereignty of God’s Son, Revelation 2:26-27, and the deliverance of His Kingdom, which will rule planet earth for a thousand years.  

Out of sovereign armageddon, that is a credit bust and global financial collapse, Revelation 13:3-4, Neoauthoritarianism’s ten toed kingdom of regional global governance is coming to rule govern the world, as foreseen by Daniel, as he spoke revealing the statue of the progression of kingdoms seen in Daniel 2:31-44.

The two iron legs seen in the statue of the progression of kingdoms, UK rule and US hegemony, are giving way to the ten toes of iron and clay regional global governance. The building materials of iron diktat and clay democracy are incompatible, and the attempt to form true socialism will fail. The Sovereign, Revelation 13:5-10, and the Seignior, Revelation 13:11-18, will gain the upper hand over the ten kings ruling the ten world regions, Revelation 17:12-14, and institute a one world government, Daniel 7:7, and a one world currency which provides global seigniorage, Revelation 13:17-18.

At the appointed time, God will open the curtains, and out onto the world’s stage will step the most credible leader. This Little Horn, the Little Authority, Daniel 7:24-25, will work behind the scenes in regional framework agreements to change our times and laws to provide order out of the chaos from a soon coming credit breakdown and financial system collapse. He will mandate sweeping economic and political changes, and he will substitute his word, will and way for the rule of law. Even now, the First Horseman of the Apocalypse, the rider on the white horse, who has a bow without any arrows, Revelation 6:1-2, is effecting a coup d etat in the Eurozone by transferring sovereign authority from nation states to sovereign leaders and bodies. In the supranational New Europe, national sovereignty will be seen as a relic of a bygone era. Europe’s Sovereign will have have EU wide sovereign authority.

A new dynamic and a new dynamo will produce a New Europe as part of a ten toed kingdom of regional global governance.  The dynamic of security and stability is replacing growth and prosperity, as destructionism is now operating to replace inflationism. Out of the failure of credit, destructionism will produce a region of global governance, where the dynamo of diktat will provide both moneyness and political rule. Catalysts of the loss of debt sovereignty and regional trade imbalances will cause EU leaders to meet in summits and waive sovereignty, what is euphemistically termed pooling of sovereignty. to establish a Federal Europe with a fiscal union and empower the ECB or the Bundesbank, that is BuBa, as the Euro’s Bank. Out of a global credit bust, fate will establish regional global governance in all of the world’s ten regions. The age of democracy is being replaced by the age of the ten toed kingdom of regional global governance.

Brookings Institute The Next President Must Solve the U.S. Deficit Crisis America is on the edge of a cliff.  Sue Chang and Deborah Levine of MarketWatch report Treasuries Fall.  Daniel Kruger of Bloomberg writes Dealer US Bond Holdings Top Corporates for First Time  For the first time, Wall Street’s biggest bond-trading firms hold more U.S. Treasuries than corporate securities, signaling concern the economy’s rebound will be too slow to sustain record demand for riskier assets. The 21 primary dealers that trade directly with the Federal Reserve held a total of $74.7 billion of Treasuries as of Dec. 28, compared with $61.1 billion of company debt. The aggregate position in U.S. government bonds has increased from a $38.6 billion bet against the securities in May, while corporate holdings have tumbled 50 percent from $121.8 billion.

Three black crows appeared in the chart of the Flattner ETF, FLAT, and the Steepner ETF, STPP, rose from a spiked bottom as the 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, rose in an Elliott Wave 3 Up. This steepening yield curve suggests that a US Treasuries are now longer a safe haven investment and that a global recession is on the way, as bond vigilantes are calling US Sovereign Debt interest rates higher and thus turning off the spigot of investment liquidity. The other spigot of investment liquidity, carry trade investing from Austrian banks, EWO, and the bank of Japan, especially through banks MFG, MTU, NMR, and SMFG, was turned off in July 2011, when investors fled the currency and stock markets when they feared that a debt union had formed in the EU. The chart of ZROZ, EDV and TLT shows this week’s flight out of US Government Debt. The monetization of debt, that is the debt debauchery, practiced the US Central bank, has finally produced debt deflation in US Treasuries. The benchmark ten year interest rate, $TNX, rose to close above 2% at 2.028%. Arthur Hill reports Treasury Yields surge ahead of Fed Meeting. The chart of bonds, BND, is bearish suggesting that peak credit has been achieved. The chart of gold, GLD, shows that gold broke out in January 2012.

There is no more safe haven in US stocks either as is seen in the chart of VTI , PKB, RZV, PBW, IPK, XLV, KBE, SDY, DVY topping out. Neo liberal finance, that is the seigniorage of the the US Federal Reserve, is failing, and as a result the Eurozone debt contagion rally is ending seen in the chart of VTI compared to ACWX, EWX,VSS, PKB, RZV; the latter two generally rise prior to market turns.

The seigniorage, that is the moneyness, of capitalism is dying. Capitalism is being replaced by regional global governance, and with it comes a new seigniorage, that is a new moneyness, the seigniorage of diktat. Under regionalization lengthy global supply chains will be shortened. Regionalization will be the new focus of economic activity, as regional stakeholders focus on regional trade with regional currencies and barter providing seigniorage.              

James Puplava, Financial Sense writes that it is financial repression that will lead to a bursting of the global sovereign credit bubble in article The Debt Supercycle Reaches Its Final Chapter We are now at a state where the sovereign bond market has grown to become the largest financial bubble in history; a bubble that could succumb to three potential market shocks.

The first type of shock would come from a spike in commodity prices triggered by additional rounds of quantitative easing. It could be as simple as an “act of God” such as an earthquake, tsunami, or the failure of an important agricultural crop. The bond market would react in fear that higher commodity prices would be absorbed in the price of goods and services via loose monetary policy.

A second shock could be triggered as a result of political instability and loss of confidence in government policy. An example is what is occurring right now in Europe regarding an attempt toward a fiscal union or the debt ceiling debate in the U.S. The bond market would view negatively a failure by governments to rein in spending and control their deficits.

The third shock would emanate from a potential default or restructuring of a sovereign debt that would lead to a domino effect in the banking system. A large international bank or group of banks might not be able to meet their obligations which would lead to a rise in fear of uninsurable losses among the banks or their counterparties.

As the bond market continues to expand through sovereign debt expansion and central bank monetization, it is moving further away from reality as a result of speculative activity. This makes sovereign debt extremely sensitive to any unanticipated event. The probability of another black swan or rogue wave is beginning to multiply; from a failed bond auction, to larger than expected deficits, to political rancor over spending cuts. Sovereign debt can no longer be looked upon as a risk free asset. For the reasons cited above I continue to avoid U.S. treasury debt as the rates of return bear no resemblance to reality or are commensurate with the risk they entail. Caveat emptor!

Martin Armstrong of Armstrong Economics writes of The Evolution Of The US Dollar  The term “Greenback” became the name of notes that neither were backed by gold nor paid interest as a hybrid bond. Thus, the term “Greenback” referred purely to the lack of anything on the reverse but green ink. Here we also see a $5 Louisiana note that also paid interest and note the coupons attached to the right side. In 1863, to encourage the sale of government bonds, the government created the National Banking Act. Individual banks could issue their own currency according to standardized federal designs up to 90% of their holdings of federal bonds. Thus, they were monetizing the debt in a very clever manner as illustrated here.  

The Federal Reserve Act of December 23, 1913 also authorized the first issue of Federal Reserve Bank Notes.

After the enactment of the Gold Reserve Act of 1933,the obligation was changed to read: “This note is legal tender foe all debts, public and private, and is legal tender for all debts, public and private, and is redeemable in lawful money at the United States Treasury, or at any Federal Reserve Bank.” Of course gold was no longer lawful money domestically, so exactly what could the notes be redeemed for was at best coins.

Here we have the interest rates between 1800 and 1991 showing the spikes during the Civil War and World War I. This was neutralized during World War II but the political usurpation of the Fed. Our problem is NOT the Fed, it is the role it keeps being forced into.

Now the Fed is in charge of the economy and it can bailout anything, not just banks. So you can see that we have gone from the plain and simple role of J.P. Morgan into a complex entity that keeps being changed and reshaped by people who have no clue what they are doing.

There have been many attempts to create a monetary system within the United States which have plagued politicians resulting in a highly tortured past. The US dollar currently is the established de facto World Reserve Currency ever since 1944 and Bretton Woods. However, it has been our misconception of money that has driven these failed attempts at creating some sort of superpower within the economy, and then we yell and scream that the Fed is own by bankers. It was not created for the purpose it is being used today. Because the US dollar is the Reserve Currency, our domestic policy objectives in the USA are exported via the currency to the entire world  making this entire system completely nuts. We are far beyond any rational design here. This is because politicians keep tinkering with the role of the Fed for political objectives, not sound economics.

The establishment of the US dollar as the reserve currency at Bretton Woods in 1944 illustrates the inability of government to honestly create a stable monetary system. When politicians are an elite separate class and not mere citizens who reresent the people, Democracy crumbles into a Public v Private confrontation. While some see the gold standard as a symbol of stability, they have failed to realize is that the professional political class does not function in the same manner as directors of a private corporation. Government devolves always into a confrontation over power between the people and the government. They have the tanks, the guns and the courts to enforce their decrees and see themselves as law givers-not public stewards of our Liberty.  The gold standard of Bretton Woods collapsed because this professional political class continued to spend money without any link to the convertibility of paper dollars into gold.  Once we allow a professional political class to emerge that becomes the elite, our lives change forever. Their survival depends on our subjugation.

While it is true that the gold standard aspect of Bretton Woods collapsed, it is NOT true that the entire structure created in 1944 collapsed. To the contrary, everything else remains in place from the World Bank and IMF to the fact that the dollar remains as the Reserve Currency of the world. However, this monetary system of 1944 remains as the chicken that is still running even though the head (gold standard) was cut off.

This gave birth to the Floating Exchange Rate System we have today that was not designed and is simply ad hoc. This is also why it has not been taught in any university because nobody designed it. The dollar is no longer an IOU for gold representing some Tangible Asset.

Money has transcended beyond that Western tradition of being a receipt for something tangible and has thus undergone a metamorphosis evolving into a completely new medium of exchange that nobody has quite fully understood, Virtual Money That Pays Interest.

The dollar has become precisely as illustrated here-an 1864 Compound Interest Note with the schedule of payment on the reverse. Therefore, this whole idea that we can live the high-life, be whatever we dream and never have to pay the consequences is simply dead wrong. The confusion that the Gold Standard advocates have created is this misconception that we print money and that is “fiat” that results in inflation. The debt is on automatic pilot. It will grow at the expense of everything else until it defaults. The US Dollars still remains the best of the three ugly sisters. Japan and Europe are in far worse shape than the United States. We will see both Europe and Japan collapse before the United States, so prepare for the worst, yet hope for the best.

NYT writes Egypt’s Economic Crisis. The collapsing economy is a serious threat to democratic institutions. The country’s foreign currency reserves fell from a peak of $36 Billion to about $10 Billion.

Floyd Norris of the NYT writes In Debt-Laden Europe, New Cars Stay in Showroom.  Romania, Hungary, Latvia, Greece, and Bulgaria led the decline in new car registrations between 2007 to 2011. Signs of a recovery in automobile vanished  in late 2009 as the sovereign debt crisis emerged in Greece and spread to other countries.

The CFR relates The Robina Foundation has awarded the Council on Foreign Relations (CFR) a five-year, $10.3 million grant to expand its activities on international cooperation. This award is one of the largest operating grants in CFR’s history and will support its International Institutions and Global Governance (IIGG) Program.. In its first three years, the IIGG Program has tracked and mapped the landscape of international organizations through its multimedia interactive, the Global Governance Monitor. IIGG has also produced over twenty reports on priorities for institutional reform, and provided policymakers with concrete recommendations for more effective management of the world’s most pressing problems. CFR Senior Fellow Stewart M. Patrick leads the IIGG Program. Previously, Patrick was a member of the U.S. Department of State’s policy planning staff, where he helped formulate U.S. policy on Afghanistan and worked on a range of other global issues.

4) … Conclusion
Capitalism and the moneyness that came through sovereign debt and carry trade investing is history. Credit is exhausted. Regional Global Governance will provide diktat as both credit and as currency. The new money of diktat is coming soon to replace fiat money. Public private partnerships will manage the factors of production and natural resources. Economic activity will no longer focus on growth and return on investment; but rather it will focus on regional security and stability. Political capital will replace investment capital. The democratic nation-state is dead and gone. I recently wrote the only way one can live free, is in Jesus Christ and in Him alone.

Destructionism is the natural result of inflationism, with the result that the new dynamic of security and stability together with the new dynamo of diktat will establish regional global governance to replace capitalism.

We are witnessing the death of capitalism. A credit bust is going to cause Capitalism’s stock stars, seen in this Finviz Screener, to go supernova; these include KMP, NICK, ORLY, APOL, NEU, FTI, DY, FAST, ROLL, NTGR, KMB, RS, FLR, LECO, MTH, LII, CCO, IP, LPX, MON, AMGN, AXL, AME, ROP, SBUX, RLJ, DXPE, CRMT, AGP, AMT, AGCO, GBX, MHK, RAI,  MTX, BLK, MIC, MTW, EXP, TBI, INTC, ALK, HIBB, GPC, CTAS, AAPL, RCII, GCA, ESRX, FUN.
 
The death of fiat money and capitalism has created an investment demand for gold. The chart of gold, GLD, shows that gold broke out in January 2012. Wealth can only be grown and preserved by investing in and taking possession of gold bullion.  

This article is available on Google Docs: Capitalism Dies As The US Federal Reserve’s And ECB’ Monetary Policies Have Destroyed The World’s Currencies 

A New Dynamic And A New Dynamo Will Produce A New Europe As Part Of A Ten Toed Kingdom Of Regional Global Governance

January 19, 2012

Financial market report for Wednesday January 18, 2011

1) … Introduction
The new dimension of globalism, is security and stability, replacing growth and prosperity, as destructionism is now operating to replace inflationism. Out of the S&P sovereign downgrade and the soon coming default of Greece, the dynamic of destructionism will produce a region of global governance where the dynamo of diktat will provide both moneyness and political rule. Catalysts of the loss of debt sovereignty and regional trade imbalances will cause EU leaders to meet in summits and waive sovereignty to establish a Federal Europe with a fiscal union and empower the ECB or the Bundesbank, that is Buba, as the Euro’s Bank. Out of a global credit breakdown and financial collapse, fate will establish regional global governance in all of the world’s ten regions. The age of democracy is being replaced by the age of the ten toed kingdom of regional global governance.

2) … A new dynamic and a new dynamo will produce a new Europe as part of a global scheme of regional global governance.  
Political conflicts in Europe may mean that Angela Merkel and Nicolas Sarkozy will not be able to stay in office, but this does not mean the destruction of the Euro zone, as the First Horseman of the Apocalypse, Revelation 6:1-2,  is effecting a coup d etat,through the destruction of fiat money. The death of fiat money commenced in July 2011 with world currencies, DBV, and emerging market currencies, CEW, trading lower as investors became concerned that a debt union had formed in the EU. This has caused the investment, economic and political tectonic plates to shift, with the result that an authoritarian tsunami is on the way.

Phillip Lane in Irish Economy provides a review of the S&P European Sovereign Downgrades

Countries such as Greece have lost their monetary sovereignty.  Portugal as it is now in default, and     Spain and Italy have lost their monetary sovereignty as well, this being acknowledge by the S&P sovereign debt ratings downgrade. Investment capital is being destroyed by debt deflation, that is currency deflation; and now, political capital is rising in its place.

The dynamo of choice provided by the Milton Friedman Free To Choose Script, that governed for the last forty years is history. Now the dynamo of diktat, implied in the 1974 Clarion Call by the Club of Rome for regional global governance, is rising to govern human economic and political activities.

Regionalism is replacing capitalism. The loss of debt sovereignty will be a catalyst for the formation of a European Super State based upon unified fiscal rules. Regional bank failures and national Treasury auction failures will be several of the defining issues of the year, as the decade long debt trade is collapsing in unresolvable trade imbalances. The debt trap is coming forth in collapsing growth. Through creative destructionism, a Joseph Schumpeter term, banks will be nationalized, better said regionalized.  According to Irving Fisher’s theory of debt deflation, Europe’s excessive credit will lead to a new beginning: the seigniorage of diktat, that is the moneyness of diktat.

Excessive corporate and public debt that has come via neo liberal finance is the highway to depression. Stephen Kinsella writes in Irish Economy Evidence from the UK on the link between Debt and Depression. The new issue of the Economic Journal carries the fascinating John Gathergood study Debt and Depression: Causal Links and Social Norm Effects from the the UK on the links between increased debt burdens and depression. And Charles Hugh Smith from Of Two Minds writes You Can’t Fool Mother Nature For Long: The Substitution of Debt for Productivity.  The “big story” of the U.S. economy is that we have substituted expansion of debt for meaningful increases in productivity.

For the past 30 years, the U.S. economy has become increasingly dependent on explosive debt expansion for its “growth” rather than on meaningful rises in meaningful productivity. Growth is in quotes because growth based on secular increases in productivity–that is, the same investment of labor and capital produces goods and services of greater value–is qualitatively different from “growth” based on a pyramiding of debt.

Real growth based on rising productivity is sustainable, “growth” based on ever-greater expansions of debt is not. This substitution of public debt for private debt is simply an attempt to fool Mother Nature. The justification of the Status Quo for impoverishing future generations is the massive expansion of Federal debt is needed to “kick start” the economy, i.e. “get us through a rough patch.”

That’s what happens when you try to fool Mother Nature by substituting debt expansion for increases in meaningful productivity. Eventually the surplus that is being leveraged into debt reaches the point where it cannot leverage any more debt, and the over-leveraged borrower defaults at the first financial bump. An economy that is dependent on constant massive increases in debt to fund its “growth” is not sustainable. In a very real sense, the U.S. has been fooling Mother Nature for 30 years. Now we’ve over leveraged the nation’s shrinking pool of surplus capital and assets, and the last rabbit has been pulled from the magician’s hat. Mother Nature (i.e. reality in the form of a transparent, marked to market balance sheet) is about to take her revenge on all those who reckoned she could be fooled forever by ever-expanding debt.

Reuters reports of the beginnings of economic diktat and fiscal diktat, ECB Mulling Alternatives to Bond-Buy Plan. The European Central Bank is exploring alternatives to its controversial bond-purchase program but has yet to decide on any replacement policy tool, ECB Governing Council member Ewald Nowotny told a German website in comments published on Tuesday. Nowotny, who is also Austria’s national central bank chief, said there was skepticism on the policymaking Council about the bond-buy program “because we fear the market imperfections that we want to correct with this could emerge in another area.” … “We are discussing possible alternatives. But this discussion is not so far developed that we can dispense with the SMP (bond-buying program),” Nowotny told the Wall Street Journal’s German website. He declined to say what direction the talks were heading in, adding only: “That is a discussion that encompasses the whole monetary policy spectrum.” “The need for some type of intervention is widely recognized,” he said.

Reuters continues, On one hand, the ECB is under political pressure to take more aggressive action to put an end to Europe’s debt crisis. On the other, many voices inside Germany, led by the Bundesbank, oppose both bond-buying and anything beyond that. The Bundesbank feels the bond-buying program – never mind the outright “quantitative easing” that many economists have called for – takes the ECB into the realm of fiscal policy and away from its core role of delivering stable prices. The ECB more than tripled its bond purchases last week to the highest level since late November, spending 3.77 billion euros as a calm start to the New Year gave way to an intensification of the euro zone debt crisis. The bond purchases face renewed scrutiny after Standard & Poor’s mass euro zone rating downgrades on Friday, though the ECB has resisted political pressure from within and beyond the euro zone to step up the program on a major.

Regional trade imbalance is another catalyst for a Federal Europe. Germany exports products to the peripheral European countries, which run trade deficits. Greece has a trade deficit of about 10% of GDP. Greece must have a trade surplus if public debt as well as business credit and stock leverage is to be reduced. Until Greece runs a trade surplus, Greece cannot get their government and private budgets under control. Greece must cut its fiscal expenditures and/or raise taxes even further. As Greece does this, the Greek economy will continue to shrink, making it more difficult buy foreign goods. This leads to a deflationary spiral. And that same deflationary spiral will spin up to take in all of Europe. German excess export capacity will encounter dwindling demand in peripheral Europe in an ever increasing way.

Being part of the EU, Greece cannot print its own money, so unless it leaves the Eurozone, it’s stuck. A default by Greece is being reported by many as coming soon. Bloomberg reports Pimco’s Bill Gross Says Greece To Default Followng Downgrades. Rachel Donadio and Niki Kitsantonis of the NYT report Europe Now Doubts That Greece Can Embrace Reform.

Sovereign default is imminent for Greece. A default by Greece means that it will be shut out of the bond market and will need seigniorage aid, that is fiscal aid, from the EU ECB and IMF Troika. Greece does not now have, nor will it have after its soon coming default, debt sovereignty, as it is a hopelessly insolvent nation. Greece will massively lay off state workers as its constitutional prohibition on dismissal of public workers is abandoned. Structural reforms will open closed professions and dishonor national wage contracts which will reduce private industry wages by least by 30%. What little state industry exists in Greece will be eliminated or privatized. Greek socialism is a bankrupt economic policy. Greek Socialism soon and European Socialism eventually are going to the slaughter house.

As the deflationary spiral spins up, eating away at the core nations, Germany will have fewer exports. This productive powerhouse, with its technology, industrial, natural resource and culturally productive workers will forever be out of balance with its periphery peers. The Nordic Latin gulf in the factors of production and the resulting trade imbalances is now and will always be stunningly significant. The German to continent economic differential is the propelling factor for a European political union, where a German led European Superstate will emerge out of the current trade, banking and government debt crisis. The Eurozone economic divide is leading to a Euro zone political union.

The spectre of sovereign default in the EU periphery has become more real. Financial Times reports Portugal Moves Into Default Territory. Portugal is trading in default territory after investors offloaded the country’s bonds this week amid rising fears of contagion. Worries are mounting that the private sector and Greece will fail to agree a restructuring package for Athens’ debt. The sovereign debt bubble is bursting.

These two catalysts, the loss of debt sovereignty and regional trade imbalances, will cause EU leaders to meet to establish a unified federal authority, mandate a European fiscal union, and establish either the ECB or the Bundesbank, that is Buba, as the Euro’s Bank. EU leaders are going to waive national sovereignty and create a One Euro Government where the economy will be directed by fiscal, credit and resource cardinals who work for the the security and stability of the Euro zone. Along this line of thought Jean Pisani-Ferry writes the policy paper A New Trinity in Irish Economy suggesting a broader European Central Bank mandate, the building of a banking federation, and fiscal union with common bond; and  presents a limited, experimental scheme through which trust could be rebuilt. Yes, a New Trinity for a New Europe.

Phillip Lane of Irish Economy relates that European Federalist thought leaders David O’Sullivan and Joschka Fischer recently presented their thoughts at the Henry Grattan Lecture The End of the European Project?

Bible prophecy foretells that a world wide credit bust and global financial collapse is coming, Revelation 13:3-4. This Eurodämmerung, and Global Götterdämmerung, that is a clash of the current sovereign authorities with investors, will destroy credit and money, as they have been known. Out of the ensuing chaos, fate is working through destructionism, to establish regional global governance as presented in Daniel 2:31-33 and Revelation 13:1-4.

God purposed from eternity past for kings to rule mankind as is communicated in the progression of kingdoms seen in Daniel 2:31-44. These have included Nebuchadnezzar ruling Babylon; Cyrus and Cyrus and Darius ruling Merdo Persia; Charlemagne ruling Rome; Tony Blair ruling Great Britain, Angela Merkel ruling the EU, and George Bush, The Decider, ruling America with Unilateral Authority. Soon ten kings will come to rule, each in his own regional power base. Most recently two iron kingdoms, the combine of the UK and European rule, and the US Hegemony, have governed the world; their power is now flowing into a ten toed kingdom of regional global governance, Daniel 2:31-33.

God’ Sovereign Will, Ephesians 1:1-11, not any human action, will bring forth a revived Roman Empire, that is a German led Europe. In the supranational New Europe, national sovereignty will be seen as a relic of a bygone era.

Matthias Matthijs and Mark Blyth of The Council on Foreign Relations, CFR, weigh in relating Why Only Germany Can Fix the Euro. Throughout much of the twentieth century, the “German Problem” — the fact that Germany was too strong, too powerful, and too economically dynamic for the rest of Europe — bedeviled European elites. “Keeping Germany down” through NATO and European integration was seen as the solution. The problem today is not German strength but German weakness — a reluctance to take up its hegemonic role. It is not too late for Germany to change course. Even though they have profited handsomely so far from the current arrangement, they must realize by now that its model was always based on shaky foundations, cannot be generalized to all states, and has reached the limits of its sustainability. If the euro ends up collapsing, and the European Union with it – Germany will clearly be much worse of. Many of its markets will disappear while the new deutschmark soars to unknown heights. In such a world, the ‘old’ German problem would be back at the heart of the New Europe.  Former U.S. Secretary of State Dean Acheson once observed that the United Kingdom had lost an empire but had yet to find a role. In a way, by signing the Maastricht Treaty in the early 1990s, Germany has accidentally grown an economic empire. It has a role,  a leader, not a rule maker, but is clearly not yet conscious of it.

Europe’s Leader, the Sovereign, Revelation 13:5-10, and Europe’s Banker, the Seignior,Revelation 13:11-18, will have have EU wide sovereign authority. The seemingly Little Authority,Daniel 7:25, will work behind the scenes in regional framework agreements to change our times and laws. He will mandate sweeping economic and political changes. And he will substitute his word, will and way for the rule of law. People will be amazed by this, and place their faith and trust in the Sovereign; they will give their allegiance to his diktat.

Life in Europe will be characterized as a totalitarian collective. Totalitarian collectivism is the EU’s future. European Socialism will die in 2012. Diktat will provide seigniorage to replace the seigniorage of treasury bonds. Diktat will become a currency, that is a payment used in the exchange of goods or services.

The seigniorage of fiat money is failing, and the seigniorage of diktat is rising in its place, as is seen in the rise of power of the EU ECB IMF Troika to appoint technocratic government in Greece and Italy. Choice came by Milton Friedman; it is now an epitaph on Neoliberalism’s tombstone. Libertarianism’s desire for Freedom and Free Enterprise is a mirage on the Neoauthoritarian Desert of the Real. There will never be a free market monetary system, as hoped for by F.A. Hayek, Murray Rothbard and other Libertarians.

The Beast regime of Neoauthoritarianism, Revelation 13:1-4, is rising to replace the Banker regime of Neoliberalism. This monster of statism and collectivism is rising from the profligate Mediterranean countries of Italy and Greece. The Beast’s seven heads are rising to occupy in all mankind’s institutions, and its ten horns are rising to govern in all of the world’s ten regions. The Beast regime is coming like a terminator that can’t be bargained with. It can’t be reasoned with. It doesn’t feel pity, or remorse, or fear. And it absolutely will not stop, ever, until mankind is totally dominated and subdued.

3) … Mario Draghi has engineered a Eurozone 3 Year bond yield decline … A possible One Trillion LTRO operation on February 29, 2012 may further monetize debt resulting in a even lower Euro, even though at this time European Financials are rising strongly on credit liquidity.
Tyler Durden in Zero Hedge asks A Shocking €1 Trillion LTRO On Deck?  Chris Wood of CLSA’s famous Greed and Loathing newsletter, in which the noted skeptic does an about face on his existing short European financial trade and covers such exposure, while observing the much-discussed major shift in ECB liquidity provisioning as the catalyst. As he says, “the main reason to do [cover the Euro short fin trade] is the potential for a benign interlude provided by the ECB’s increasingly aggressive liquidity support for the European banking system.”

What is interesting is the basis for the material change in exposure which to Wood is explained simply by the dramatic shift in the ECB approach toward monetary generosity, courtesy of the arrival of ex-Goldmanite Mario Draghi. The basis is the first noted here massive surge in the European balance sheet (Figure 2) which while not engaging in prima facie monetization, has done so via indirect channels, in the form of an LTRO, which is basically a 1%, 3-year loan, but more importantly, a balance sheet expansion which while having failed to increase the velocity of money in any way (with all of the LTRO and then some now having been redeposited back at the ECB as reporter earlier), has at least fooled the market for the time being that any sub 3 Year debt is “safe” as seen by Figure 1.

Chris Wood: “By creating a massive incentive for European banks to buy their government’s debt issuance up to three years maturity, the new ECB leader Mario Draghi is clearly seeking to get control over the direction of Eurozone government bond yields. The dramatic decline in Eurozone bond yields up to three years suggests he is getting some traction (see Figure 1). It is also the case that absolute-return investors may be tempted to “front run” coming bond auctions if they think the ECB policy is working. On this point, market talk is focusing on an even bigger amount to be borrowed at the next 3-year longer-term refinancing operation (LTRO) due on 29 February. GREED & fear has heard guesstimates of up to €1tn!”

Tyler Durden; “The result is an exploding balance sheet controlled, of course, by an ex-Goldmanite, which can only be halted by Germany, but why when the EUR is crashing, keeping the German export economy vibrant”

Chris Wood: “Draghi’s responsibility is monetary policy not fiscal policy. And based on GREED & fear’s observations thus far, it is clear that former investment banker Draghi is a smooth if not slick operator who is adept at saying one thing and doing another. He will also understand that the goal of monetary easing will be undermined if it arouses German opposition. For that reason investors should assume for now that he will have the political skills to keep the Germans onside. Meanwhile, for the moment it is politically correct in Berlin to keep the banking system liquid via ECB extension of credit courtesy of dramatically relaxed collateral standards, even if it is not yet “PC” to monetise Eurozone government debt outright. The resulting backdoor quanto easing in Eurozone is clear from the recent surge in the ECB’s balance sheet relative to the Fed’s.”

4) …. A top is forming in Financials And Semiconductors suggesting a top is near for the S&P.
OptionTraders relates Strong Dollar And Weak Earnings Report Indicate A Top A Top Is Near For The S&P. The XLF and SMH daily charts illustrate that a major top may be forming in both sectors.
It is common knowledge that broad indexes such as the S&P 500 and the Dow Jones Industrial Average struggle to rally when the financial complex lags. The same can be said for the semiconductor sector as well. Recently financials, XLF, and the semiconductor, SMH, sectors have worked considerably higher on relatively light volume. Both XLF and SMH are trading into major resistance and both are starting to show signs that they are nearing a potential top. The Volatility Index is trading up from recent lows … Finviz VIXM and VIXY  … Yahoo Finance VIXM and VIXY … MSN Finance VIXM and VIXY … Google Finance VIXM and VIXY

Earnings releases have been revised lower in the 4th quarter of 2011. In fact almost 3.5 companies have announced earnings revisions to the downside for every company that has indicated a stable to rising earnings announcements. This type of scenario has not been present since the first quarter of 2008 which as we know was not exactly a great time frame to be looking to put cash into risk assets. Furthermore, Goldman Sachs analysts came out with the following commentary, “While the 4th Quarter is typically the strongest quarter for earnings, estimates have fallen 9% since the summer and are now below both realized 2nd and 3rd Quarter results.” Goldman Sachs is also expecting significant price pressure coming from a weak U.S. economy and the fears of a European recession in 2012. Overall, the estimates are far from bullish and are in fact quite concerning when looking at the current valuation of U.S. equities. The impact that a stronger U.S. Dollar, $USD, UUP, will have on domestic companies which are used to having a competitive advantage when looking at earnings due to currency adjustments could produce negative surprises. Typically positive earnings adjustments are likely to be revised to the downside as the U.S. Dollar has rallied sharply higher in light of the weakening Euro currency. The U.S. Dollar Index is consolidating directly beneath resistance which is generally seen as a bullish development. I expect a breakout over new highs is only a matter of time.

5) … Brazil took the lead over Argentina in the January 2011 emerging markets and global  Neoliberal credit death rattle rally.
Brazil banks, ITUB, BBD, BFR, BMA, BRAF, mining shares VALE, utilities, EBR ,SBS, CIG, CPL, Wireless Communications, TSU, Brazil Small Caps, BRF, Brazil Pulp Producer, FBR, rose taking Brazil, EWZ, the BRICS, EEB, and the Emerging Markets, EEM, EWX, EMFN, Turkey, TUR, Indonesia, IDX higher.

Argentina banks, GGAL, have risen, taking Argentina, ARGT, higher and India Banks, EPI, IBN, HDB, have risen, taking India, INDY, SCIF, TTM, higher.

Russia, RSX, Poland, EPOL, Russia Small Cap, ERUS, Eastern Europe, CEE, Vietnam, VNM, Egypt, EGPT, Developing Asia, GMF, New Zealand, ENZL, Latin America Small Caps, LATM, Peru, EPU, and Chile, ECH, rose.

Emerging Market Small Caps, EWX, World Small Caps, VSS, Small Cap Pure Value, RZV, RPV,  and Small Cap Revenue, RWJ, rose taking World Shares, ACWI, ACWX, VT, EPP, SPY, DIA, QTEC, IWM,  DVY, KRE, VTI, PFF, higher. Regional banks BK, STT, NTRS trade lower. Pittsburgh Tribune Review reports BNY Mellon’s profit fell 26 percent; 900 jobs cut, including 100 in Pittsburgh and The Chicago Tribune reports Northern Trust to cut 700 jobs.

The chart of VTI, RZV, RPV, IJS, IJR, IWN, IWD, RWJ, show that the small cap value shares have been outperforming the US Shares in the Dollar Rally includes ALK,SKYW, GPN, GCA, ORLY, FUN, CRMT, HIBB, RCII, RJL, TBI, SHFL, PSEC, DUF, NGPC, SNX.  The small cap value shares have been a safe haven rally from Eurozone debt contagion as they are like dividend payers in that they have cash flow, and are very liquid, and being small cap are easy for the traders to run up.  These selected stocks are in hot sectors like travel, cash payment, auto parts, gambling, regional airlines, business services, asset management, and retail.

Technology shares SOXX, XSD, SMH, SKYY, IGN, FONE, IGV, led by TSM, NTGR, JBL, AAPL, rose.

Wood, WOOD, manufacturers seen in this Finviz Screener, IP, DEL, WY, LPX, PCL, UFPI,  rose, taking the commodity timber, CUT, higher. Gary of Between The Hedges reports  Lumber has declined -11.0% since Dec. 29th and is at the lower end of its recent range, near a multi-year low, despite better US economic data, improving sentiment towards homebuilders, stock rally and decline in eurozone debt angst.

A number of North American Design, Construct and Build Companies, seen in this Finviz Screener, rose, continuing their Dollar Rally, CX, URS, NX, USG, NCS, TRN, MTW, GLDD, SXI, CLNE, AEGN, DY, PRIM, BECN, GVA, CAT.

Retailers, CVS, PETM, BKE, ORLY, TJX, HIBB, BEBE, HD, LOW, led Retail, XRT, higher.

Industrial Office REITS, FNIO, led Real Estate, IYR, higher.

Small Cap Industrial, PSCI, traded higher on a rising price of HEES, WTS, BRC, ROLL, and DCI.

Small tool manufacturers, LECO, SNA, SSD, SWK, rose.

Synthetic manufacturer, MTX, and chemical manufactures DD, ALB, ASH, CYT, RPM, rose.

Business Services, WXS, and TBI, rose.

Home builder, ITB, rose strongly, taking HD and LOW higher.

Copper, COPX, led by SCCO, Aluminum, ALUM, led by AA, Uranium, URA, Coal, KOL, Rare Earths, REMX, taking, S&P Materials, MXI higher. Biotechnology, XBI, led by AMGN, and MON,  rose.

Global Financials, IXG, led by Swiss Banks, UBS, CS, and Bank of America, BAC, rose.

Growth shares, Steel, SLX, and Metal Manufacturing, XME, NUE, STLD, RS, rose.  These, and solar, TAN, which rose strongly today, will soon be falling quickly lower.

Cement Manufacturer, CX, rose strongly taking Mexico, EWW, higher. US Cement Manufacturer, EXP, also rose strongly. The rise in the Mexico Peso, FXM, today was largely attributed to the rise in these cement shares.

Debt laden IP and MTW rose.

Special Eatery and Dollar Stock Rally leader, SBUX, rose, continuing its strong ascending wedge rally

Money firms GPN, and GCA, led small cap revenue RWJ higher.

A number of automobile parts manufacturers, TRW,  JCI, DAN, TEN, MGA, TWI, SMP, WBC, WPRT, PCAR, CVGI, ALV, GPC, BWA, MOD, led Ford, F, General Motors, GM, and Autos, VROM, higher.

Automobile dealers KMX, SAH, ABG, LAD, GPI, rose. Automobile parts, AAP, AZO, ORLY, GPI, rose.

Shipping stocks, SEA, ESEA, NAT, CPLP, DCIX, rose strongly. This as Zero Hedge reports Baltic dry index slumps to lowest since January 2009.

Global Agriculture, PAGG, and US Agriculture, MOO, rose, taking  AGCO, LNN, DE, TSCO, NC, CASC.

Transportation, IYT,  Manufacturing, IYJ, Consumer Services, IYC, RRR, URI, Biotechnology, IBB, Telecom, IYZ,  all rose.

Deutsche Bank, DB, rose taking European Financials, EUFN, Europe, VGK, Germany, EWG, Italy, EWI, Spain, EWP, higher.

China Financials, CHIX, and China Materials, CHIM, rose taking China, YAO, and China Small Caps, HAO, higher.  However, the Shanghai shares, CAF, traded lower.  Gary of Between The Hedges reports Shanghai Copper Inventories are up over 300.0% ytd to the highest level since March of last year. Moreover, China’s ChiNext Index (China’s Nasdaq) plunged another -5.7%(at lowest since inception in June 2010). This index is down -32.1% since Nov. 15 and down -14.3% ytd,

Japanese Banks KB, NMR, took Japan, EWJ, and Japan Small Caps, JSC, higher.

Australian Bank Westpac, WBK , took Australia, EWA, higher.

Korean Banks, SHG, WY, took, South Korea, EWY, higher.

The chart of King of Dividends, PHI, shows what may turn out to be an evening star candlestick.

National Bank of Greece, NBG, popped higher to resistance.

Education Shares, seen in this Finviz Screener, APOL, DV, ESI, BPI, STRA, LOPE, plummeted.

Today was a case of stocks, VT, taking world major currencies, DBV, and emerging market currencies, CEW, higher.  The flight to safety curve in small cap value shares, RZV:RZG, was drawn up by the world currencies FXA, FXE, FXM, FXC, ICN, FXS, SZR, FXF, BZF, FXRU, that is by Brazilian Real, BZF, Russian Ruble, FXRU, Indian Rupe, ICN, Mexico Peso, FXM, Swiss Franc, FXF, Swedish Krona, FXS, Euro, FXE, British Pound, FXB, Australian Dollar, FXA, and a Canadian Dollar, FXC. The rise in currencies today forced the US Dollar, $USD, UUP, lower.

Tin, JJT, and Copper, JJC, led base metals, DBB, higher. Commodities, DBC, and US Commodities, USCI, rose a tad higher.  Financial Times reports Oil Demand Falls for First Time Since 2009. Oil demand has fallen for the first time since the 2008-09 global financial crisis, a result of the weakening economy, a mild winter and high crude prices, according to new estimates from the International Energy Agency (Hat Tip to Gary of Between The Hedges)

Debt leverage is no longer possible as currencies are falling in value. The leverage of debt is near an end. Junk Bonds, JNK, and Leveraged Buyouts, PSP, rose on today’s rise in the risk trade. Municipal Bonds, MUB, California Municipal Bond, CMF, Build America Bond, BAB, Michigan Municipal Bonds, MIW, Short to Medium Duration Corporate Bonds, LQD, Long Duration Corporate Bonds, BLV, appear to be topping out. Total Bonds, BND, appears to be peaking out. The world is passing through peak credit. World government bonds, BWX, has turned lower on rising sovereign default globally. The global government debt bubble, that is the sovereign credit bubble, has burst. Emerging Market Bonds, EMB, rose today on rising emerging market currencies, CEW, but these have also turned lower.  International corporate bonds, PICB, rose today, but these have also turned lower on the death of fiat money.

The US sovereign debt yield curve is steepening. The Steepner ETF, STPP, rose and the Flattner ETF, FLAT, traded lower, as the 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, steepened signaling a recession is on the way. The rise in stocks today finally dislodged US Treasuries, TLT, EDV, ZROZ, from their status of being a totally safe haven investment.

Gold, GLD, being both a commodity and a currency, rose. In the age of sovereign default, it and diktat are the sole forms of soveign wealth.

The global credit bubble that has been growing under Milton Friedman’s Free To Choose floating currency regime for the last forty years is about to burst.

The January 2011 rally is Neoliberalism’s death rattle rally. Excessive bank credit and municipal debt   caused the 1929 through 1932 collapse. Today it is excessive Neoliberal finance, carry trade lending, securitization of corporate and sovereign credit, that will cause yet another global collapse, and out of this will come the ten toed kingdom of regional global governance with diktat as a currency.

6) … Do hedge funds have human rights?
Landon Thomas writes Hedge Funds May Sue Greece if It Tries to Force Loss.  The European Court of Human Rights may have to determine if capital rights are human rights. And Mike Mish Shedlock relates vulture capitalists fight Greek nation for spoils of debt.  Greek Bond Talks Edge Toward 68% Haircut Deal; Will the Deal Be Accepted?

7) … In today’s news
Yves Smith of Naked Capitalism post the Wold Richter article Greece – Disagreement Everywhere, Rift In The Troika.

Athens News reports “The three Troika inspectors, oul Thomsen from the IMF, Mathias Morse from the EU, and Klaus Mazouch from the ECB, are supposed to head to Greece next week to inspect its books; the budget deficit is once again higher than the revised limit that Greece had vowed to abide by. And they’re supposed to negotiate additional ‘structural reforms.’ But there probably won’t be three inspectors, according to senior IMF sources. Missing: Poul Thomsen. The IMF has had enough.

Handelsblatt reports “Already, according to more leaks, IMF Managing Director Christine Lagarde had warned German Chancellor Angela Merkel and French President Nicolas Sarkozy that the fiscal and economic situation in Greece had deteriorated. Hence, the ‘voluntary’ haircut on Greek bonds held by private sector investors should be increased to more than 50% to maintain the goal of bringing Greece’s debt load down to 120% of GDP. And the second €130 billion bailout package, agreed upon on October 26, should be enlarged by ‘tens of billions of euros.’

Manager Magazine Germany reports “The German reaction was immediate. ‘There has to be a line somewhere,’ said Michael Fuchs, deputy leader of Merkel’s party, the CDU. ‘This cannot be a bottomless barrel.’ Even if Merkel were amenable to committing more taxpayer money to bail out Greece, she’d face a wall of opposition in her own party. And he wasn’t brimming with optimism: ‘I don’t think that Greece, in its current condition, can be saved,’ he said.”

Bullion Vault relates Current price a chance to buy gold

The Guardian reports China’s skyscraper craze may herald economic crash

HamptonRoads reports Home sales rise in December as prices slide

TestosteronePit reports the susceptibility of Germany’s export driven economy to deflationary economic trends Germany’s Export Debacle. Germany’s export economy is an export growth trade that operates off of currency carry trades, such as the Yen and Swiss France carry trades, debt carry trades, such as the fall in Eurozone sovereign interest rates with the introduction of the Euro, and US Federal Reserve credit stimulus, such as its ZIRP, QE1, and QE2.

Reuters reports US Natural Gas Prices at 10-Year Low as Warm Weather Weakens Demand

Economic contraction is underway. Reuters reports World Bank Slashes Global GDP Forecasts, Outlook Grim. And Annie Lowrey of NYT reports World Bank Warns Developing Nations Of Slowing Growth.  In the report, the biannual Global Economic Prospects, the bank predicted that high-income countries, including the United States, France, Japan and Germany, would grow 1.4 percent in 2012. It forecast a mild contraction of 0.3 percent in the 17 countries that use the euro. Developing countries will grow 5.4 percent, down from a forecast of 6.2 percent in June, the bank said.

The reason for the global slowdown is twofold, said Andrew Burns, head of global macroeconomics at the World Bank and the main author of the report. First, developing countries like Turkey, India, Russia and Brazil were “overheating” in the rebound after the recession and have tightened monetary policy to help curb inflation, he said. Second, he added, the euro zone crisis has frightened investors, and austerity budgets adopted in countries, including Italy and Greece, have weighed on growth.
Mr. Burns said those trends created a “dangerous dynamic,” with the slowdown in emerging economies sapping growth from advanced economies, and the downturn in advanced economies worsening prospects for emerging markets. “The events are feeding off of one another,” he said.

Last summer, the World Bank noted significant “contagion from Europe to developing countries,” Mr. Burns said. Risk-averse investors slashed financing to emerging markets, with gross capital flows falling to $170 billion in the second half of 2011 from about $309 billion in the same period in 2010. In addition, borrowing costs began to rise in developing countries. The bank said developing economies should prepare for declining investment from abroad, less-robust exports, and reduced remittances.

The bank also warned of the continued threat of a global financial shock “similar in magnitude to the Lehman crisis,” because of the possibility that a major European economy could be shut out of the global debt markets. In that case, the bank estimated the damage to the world’s economic growth would rival the recession of 2008 and 2009. “The largest economy in the world is weakening,” Justin Yifu Lin, the bank’s chief economist, said in an interview, referring to the European Union. “The message for developing countries is to start preparing now.”

Mr. Lin said advanced economies should consider more immediate fiscal stimulus to support growth, locally and globally. “They need to carry out structural reforms in the long-term,” he said. “But in the short term, they need an intervention to provide a short-term boost to demand.”

He warned that emerging markets have less room for fiscal and monetary stimulus than they did in 2008 and 2009, even though they have more capacity than many developed countries. Many high-income countries, including the United States, are already struggling with heavy debt loads, limiting the possibility of fiscal stimulus.

Bloomberg reports Spain is providing emergency credit line to regions settle their outstanding bills and payments to suppliers and the central administration so as to prevent default by the Valencia regional government and others.

Bild reports European Parliament Martin Schulz is going to be proactive for the sovereignty of the EP, as power in the EU and the eurozone has been taken away from democratically elected European institutions by Angela Merkel and Nicolas Sarkozy.  “We have not been able to sufficiently make our influence visible“,  He said. “I believe the people want someone who fights for their interests. For that reason I will be more confrontational in the future and I will pick a fight with the European Commission or the head of government with individual member states, if necessary. I will not hide away.” He added.

A stronger US Dollar, falling world currencies and emerging market currencies, as well as a rise in the M2 Money supply has boosted US factory output. Bloomberg reports Factory Production in U.S. Climbed by Most in a Year Last Month. Factories in the U.S. churned out more computers, cars and construction material in December as manufacturing remained at the center of the expansion. Output (IPMGCHNG) climbed 0.9 percent last month, the biggest gain since December 2010, according to Federal Reserve data issued today in Washington. And MarketWatch reports Home-builder Gauge Hits 4.5-year High. A measure of builder confidence in the market for newly built single-family homes rose in January to the highest point since June 2007, according to a closely-followed index released Wednesday. The National Association of Home Builders/Wells Fargo housing market index rose 4 points to 25, the fourth consecutive rise. Economists polled by MarketWatch had expected only a 1-point improvement to 22. Every region rose, including a 9-point surge in the Northeast and a 5-point advance in the West, and each component, current sales conditions, sales expectations in the next six months and traffic of prospective buyers, rose 3 points.

Ambrose Evans Pritchard reports The Euro Is Pushing Italy Into A Depression.  (Hat Tip to Gary of Between The Hedges)

James Hurley of The Telegraph reports Euro Crisis Puts UK Companies In Vicious Cycle

The Eurozone debt crisis is creating a “vicious cycle” of delayed payment among UK companies, an analysis of foreign exchange payments reveals. (Hat Tip to Gary of Between The Hedges)

The Telegraph reports Hungary Faces Ruin as EU Loses Patience. The European Commission has launched legal action against Hungary’s Fidesz government for violations of European Union treaty law and erosion of democracy, marking a dramatic escalation in the war of words with the EU’s enfant terrible.   (Hat Tip To Gary of Between The Hedges)

Dr. Housing Bubble relates the Vancouver Housing Bubble Is Topping Out

Melinda Burns writes in Miller McCune How Foreclosures Feasted on Some Cities, Not Others And presents the case of Lake Elsinore, CA 92503, and Hesperia, CA, 92340 where pro residential growth policies favoring flipping, without an underlying economic base, and predatory lending to minorities, fostered high rates of foreclosure.

The Automatic Earth covers the extensive UK debt and shrinking economy Quo Vadis,Britannia? The only core issue in the UK is its outsize financial sector with its outsize debt. From time to time, however, news articles pop up that seem to indicate there’s more going on than trouble in the City of London.

A Global Eurasia War is coming. Business Insider reports Russia Is Preparing For A Possible US-Israeli Attack On Iran. and Greg Hunter of USA Watchdog reports Iran War Is Only A Matter Of Time.

The S&P Downgrade Of Nine European Nations Terminates The Age Of Liberal Finance And Commences The Age Of Sovereign Default ….. And Terminates Democracy And Commences Regional Global Governance

January 16, 2012

Financial Market Report for Friday December 13, 2011

1) …  The S&P downgrade of nine European nations terminates the age of liberal finance and commences the age of sovereign default.
Bloomberg reports  “France and Austria lost their top credit ratings in a string of downgrades that left Germany with the euro area’s only stable AAA grade as Standard & Poor’s warned that crisis-fighting efforts are still falling short. France and Austria were cut one level to AA+ from AAA and face the risk of further reductions, the rating company said. While Finland, the Netherlands and Luxembourg kept their AAA ratings, they were put on negative watch. Spain and Italy were also among the nine nations downgraded.”

The WSJ reports the reason for the S&P European sovereign downgrade, “In our view, the policy initiatives taken by European policymakers in recent weeks may be insufficient to fully address ongoing systemic stresses in the euro zone,” S&P said in a statement released after the close of New York trading.

CNBC with Reuters reports “The consequence (if France is downgraded) is that the EFSF cannot keep its triple-A rating,” said Commerzbank chief economist Joerg Kraemer.” That may irritate markets in the short term but wouldn’t be a big problem in a world where the U.S. and Japan also don’t have a triple-A rating anymore. Triple-A is a dying species,” he said. John Wraith, Fixed Income Strategist at Bank of America Merrill Lynch told CNBC the confirmation of a mass downgrade would be another serious step in the crisis and would lead to a serious worsening of sentiment. “It clearly deteriorates still further the credit worthiness of a lot of the European banks and just keeps that negative feedback loop between struggling banks and the sovereigns that may have to support them if things go from bad to worse in full force,” Wraith added.

Tyler Durden in article S&P’s Mass Downgrade FAQ May Have Just Hobbled The European Sovereign Debt Market writes of the existing high economic priest John Maynard Keynes and his Keynesian economics religion relating, “The Eurozone’s foundation was laid out by academic wizards who thought that Keynesianism was a great idea (and continue to determine the fate of the world out of their small corner office in the Marriner Eccles building), the imminent downfall of Europe will only precipitate the final unraveling of the shaman economic religion that has taken the world to the brink of utter financial collapse and, gradually, world war.”

Reuters reports Debt talks break down, Greece warns of disaster. “Talks between Greece and its creditor banks to slash the country’s towering debt pile broke down on Friday, with the Greeks warning of catastrophic results if a deal to swap bonds is not reached soon.”

TheStreet reports Morgan Stanley’s net income from investment banking operations dropped 56%.

WSJ reports Bank of America is considering leaving certain regions of the country as its financial problems deepen.

The World Major Currencies, FXA, FXE, FXM, FXC, ICN, FXB, FXS, SZR, FXF, BZF, FXRU, and the World Emerging Market Currencies, CEW, turned lower in competitive currency devaluation, turning the World Shares, ACWI, EWX, EEB, EPP, EEM, VGK, VSS, VT, VTI, MXI, DVY, RZV, RZG, the Country Shares, EWW, EWL, EWC, EWA, RSX, EWD, INP, EWU, EZA, EWZ, and the Country Small Cap Shares, IWM, KROO, ENZL, BRF, HAO, SKOR, LATM, CNDA, CEE, GMF, EPOL, TUR, ARGT, EWO, lower. The Euro, FXE, closed lower at 126.33, a sixteen month low against the US Dollar, which closed up at 81.51; the USD/JPY closed up, and its inverse, JYN, closed down. The chart of the US Dollar, $USD, shows a cup and handle breakout pattern, with the handle forming in December 2011.

Financials, EUFN, XLF, IXG, RWW, RWJ, KRE, and most of the banks seen in this Finviz Screener, led by BFR, HDB, ITUB, C, BAC, BPOP, traded lower.

Transportation, IYJ, and Manufacturing IYJ, traded lower,

The world’s major stock sectors, TAN, XME, KOL, ITB, XME, XME, KOL, ITB, SLX, COPX, REMX, WOOD, XSD, SIL, GDX, GDXJ, IGN, MXI, PAGG, FAA, SEA, ALUM, IEZ, OIH, CHIM, PAGG, PSCE, IEZ, OIH, ENY, XLE, traded lower.

Natural Gas, UNG, led commodities, DBC, SLV, GLD, CUT, DBB, JJA, lower.

Insightful SPY chart articles are provided by Greg Harmon and MyETFHedgeFund and BrandNet as does chart rambings.

In commentary of the charts presented by TheWaveTrading on Safehaven.com, and the Current Weekly Commentary, I believe that the last week of April 2011 commenced an Elliot Wave 2 Up in the $SPX at 1363, and the chart for the last week of October 2011 of $SPX at 1292 is an Elliott Wave 2 of 2 up, and the chart for the second week of January of the $SPX again at 1292  is an Elliott Wave 2 of 2 double top up, with the result that the $SPX, is going to enter an Elliott Wave 3 of 3 of 3 down for the week ending January 20, 2011 when options expire. These are the most destructive of all economic waves as they for all practical purposes destroy all economic wealth built on the five waves up. This coming down wave is going to take out even the yet to be established ten toed kingdom of regional global government, at which time the Sovereign will take the upper hand and establish a world one world government, with a one world currency and provide global seigniorage.

US Federal Reserve monetary policies, insolvent sovereigns and insolvent banks are causing debt deflation, that is currency deflation, which is in turn is causing disinvestment out of stocks, VT, and deleveraging out of commodities, DBC. Bonds, BND, peaked out on December 19, 2011.

All forms of fiat wealth are dying, as fiat money is dying. The chart of the US Dollar, $USD, UUP, shows that it is in breakout. The Milton Friedman Free To Choose Banker Regime that began 40 years is dead, as major world currencies, DBV, and emerging market currencies, CEW, are sinking, being led so by the Euro, FXE, and the British Pound Sterling, FXB. This caused debt deflation in world government bonds, BWX, in September 2011, and emerging market bonds, EMB, beginning in January 2011. Debt deflation commenced in world stocks, VT, and emerging market stock, EEM, beginning in November 2011. Bonds, BND, peaked on December 19, 2011. Junk bonds, JNK, peaked on January 3, 2011. Risk aversion has come to all forms of fiat wealth. Although gold, GLD, traded lower today, gold commenced a breakout in early January 2011, and its value has outperformed stocks ever since as is seen in the chart of gold relative to stocks, GLD:VT. An investment demand for gold will carry gold to levels seemed unthinkable today.

US Federal Reserve monetary policies, ZIRP, QE1, QE2 and Dollar FX Swaps, coupled with the ECB’s LTRO facility have made money bad. Bad money is the reason why stocks turned down today. The only form of money good is gold bullion.

Insolvent sovereigns, such as Greece, have lost their debt sovereignty and rely upon the kindness of strangers, particularly the EU ECB and IMF Troika for seigniorage aid. Insolvent sovereigns and insolvent banks are unable to sustain infrastructure, risk, growth, wealth, or order.

Railroad stocks seen in this Finviz Screener, KSU, UNP, CSX, NSC, GWR, turned lower,

The risk stocks seen in this Finviz Screener, BHP, CLF, AA, SCCO, RIO, MXI, MCP, BTU, FBR, VALE, ZINC, turned lower. The S&P European sovereign downgrade announcement means an end to the risk on trade.

The growth stocks seen in this Finviz Screener, which rose with the rally in the US Dollar, turned lower. Intel, INTC, led ROLL, IP, BA, TRN, ETN, LII, MU, JBL, LECO, LPL, WBC, SBUX, EXP, MON, WXS, RS, MTH, lower. Amgen, AMGN, which rose today will be falling sharply lower soon, as in the age of deleveraging all stocks, even biotechnology stocks, XBI, and IBB, such as ACHN, EXAS, ARIA, IDIX, VPHM, GEVA, CBST, SLXP, unless bought out, will be falling lower in value.  Tesla Motors, TSLA, fall of 19%, has proved this investment to be just a flash in the pan. The S&P European sovereign downgrade announcement means an end to growth investing.

The popular small cap consumer discretionary stocks, PSCD, seen in this Finviz Screener, will be turning lower,  NUS, TUP, DLB, ACAT, PII, IMAX, WGO, THO, SBUX, WTW, HANS, PSCD, RCL, PANL, HLF, CVCO, POOL, SHFL, LII,

The popular small cap industrial stocks, PSCI, seen in this Finviz Screener, will be turning lower, WTS, HEES, ROLL, AIT, BRC, CLC, DCI, PLL, FAST,

The failure of neo liberal finance means destruction of the fixed income investor. The utilities, XLU, have already turned lower. The electric utilities seen in this Finviz Screener, are now toxic investments as the once lucrative and beneficial spigots of investment liquidity have turned off by bad credit, and are now running toxic, DTE, D, SO, DUK, XEL, AEP, EIX ,NEE, HE, CNL, POR,

The S&P announcement of the failure of sovereign authority in the Euro zone marks a historic inflection point. The age of neo liberal finance is over, and all types of credit will become more dear. The S&P European sovereign downgrade announcement makes it more expensive for all to borrow. It gives the bond vigilantes reason to call interest rates higher globally. The profit margins of lenders seen in this Finviz Screener, will be under increasing pressure, and as a consequence these companies will be losing market value, AXP, NNI, COF, NICK, MA, V, AMT ADS ,CATM, ARCC, GPN, AEA, RWJ, WRLD, RCII,

With credit more expensive and currencies falling in value, the agricultural equipment manufacturers  seen in this Finviz Screener, will be seeing sales and profit decline; these companies will be falling lower in value, AGCO, LNN, DE, TSCO, NC, CASC,

With credit more expensive and currencies falling in value, the bedrock of growth has turned to quicksand, and the Industrial Electrical Equipment manufacturers seen in this Finviz Screener, will have fewer sales and will be less profitable, ETN, ROK, AME, ENS, NB, AIMC, AMRC,

Growth has been dependent upon cheap credit coming from US central bank monetary policy, such as QE1, QE2, and Dollar FX Swaps, as well as from carry trade lending from the Bank of Japan, Austrian Banks, and the City of London Financial District. This flood of credit liquidity created the  inflationism that underwrote economic advancement and investment profitability. But now credit contraction stemming from the European sovereign debt crisis, and the downturn of currencies that commenced in July 2011 that came with investor’s fears that a debt union had formed in the EU, is causing destructionism resulting in economic contraction.

Infrastructure of all types relies upon a heavy use of borrowing. With interest rates rising and currencies falling in value, the foreign utilities seen in this Finviz Screener, will be come less profitable and less desirable investments, EDN, EOC, EBR, SBS, CIG, CPL.  Tonic Books reports the S&P European sovereign downgrade announcement also included state owned utility and infrastructure companies like ANA – Aeroportos de Portugal, Energias de Portugal, Redes Energéticas Nacionais, and Brisa – Auto-estradas de Portugal, despite claims to having solid financial profiles and significant foreign revenue.

India suffers from a lack of capital investment in infrastructure. The S&P European sovereign downgrade announcement is the nail in the coffin for the ability of India’s infrastructure companies to raise capital.

Brazil Infrastructure, BRXX, will be a much less desirable investment from now on out. The loss of debt sovereignty that is implied by today’s announcement marks a historic turning point in mankind’s experience. Humanity will increasingly suffer from the debt debauchery, that is the liberal credit policies of Neoliberalism, as the debt burden of infrastructure becomes more expensive, and infrastructure improvements are not undertaken.  The US Federal Reserve monetary policies of ZIRP, QE1, QE2, and Dollar FX Liquidity, together with the ECB’s LTRO facility have finally destroyed the value of money and the ability of government and private investors to finance infrastructure improvements and development.  The S&P European sovereign downgrade announcement terminates investment in infrastructure.

The S&P European sovereign downgrade announcement terminates value investing, as how can there be any value when stocks are continually eroded by debt deflation, that is by currency deflation and an ever increasing cost of money. Inveterate value investors will continually be catching a falling knife.

Simon Johnson in Reuters Blog says, “Treasury bonds are the ultimate global asset class: they’re the epitome of risk-free safety for investors all over the world. the triple-A credit rating is not a credit rating like any of the others. It’s basically a sign saying “no credit risk here”, a way of investing in fixed-income assets without taking credit risk. Triple-A bonds are in this sense a pure interest-rate play, while they can rise or fall in value, and they can get illiquid at times, the idea is that they’ll never default.”

The significance of the loss of AAA rating on sovereign debt is that the “full faith and credit” contract between a country and those who purchase its debt, can no longer be assured.

The S&P European sovereign downgrade announcement calls into question the capability of the countries involved to honor the most sacred of human contracts, and means the end of moneyness as it has been known. Fears of debt contagion, not greed, or speculation, will be driving all currencies, stocks, and bonds lower. Downgrade shock from the S&P European sovereign downgrade announcement, will flow outward to all investment asset classes and credit instruments.  The European sovereign downgrade announcement will have a knock-on effect of driving all currencies, stocks and bonds lower in value. Risk appetite will change to risk avoidance.

The S&P European sovereign downgrade announcement is an inflection point in human experience, which pivots humanity experience from growth to contraction, from democracy to diktat, and from trust in fiat money to debt servitude. The US Federal Reserve monetary policies which were a path for some to prosperity, now constitute the road to serfdom for all.

The moneyness, that is the seigniorage, of Neoliberalism will be failing; and the seigniorage of Neoauthoritarianism will be increasing. The moneyness of the former provided choice; while the moneyness of the latter provides diktat.

The January 2011 stock market rally was a false flag rally, instigated by wall street bankers. The January 2011 rally is Neoliberalism’s death rattle rally; given that fiat currencies are dead, the rally cannot be sustained. It is simply a wall street wizards’ zombie rally. The coming investment downturn will propel the world from democracy and capitalism into diktat and regional global governance.

Charts show volatility rising, confirming that  disinvestment out of stocks is now underway again. Finviz VIXM and VIXY  … Yahoo Finance VIXM and VIXY … MSN Finance VIXM and VIXY  … Google Finance VIXM and VIXY

The S&P European sovereign downgrade announcement is a pivotal event in human experience as it brings forward sovereign armageddon, that is a credit bust and investment breakdown, that has been simply inevitable. This Eurodämmerung, a Götterdämmerung, that is a clash of the current sovereign authorities with investors, will destroy credit and money, as they have been known.

The S&P downgrade of nine European nations terminates the age of neo liberal finance and commences the age of sovereign default. The S&P European sovereign downgrade announcement pivots the world from an age of sovereign solvency into the age of sovereign insolvency. The S&P announcement pivots humanity from the age of neo liberal finance into the age of sovereign default, where out of sovereign bankruptcy, stakeholder credit, that is stakeholder finance, flows from sovereign bodies, such as stakeholder committees, that is public private partnerships comprised of business and government. These sovereign bodies will act for a region’s security and stability, as the world pivots from capitalism to regional global governance. The S&P European sovereign downgrade announcement marks an inflection point from democracy into diktat.

The S&P’s European sovereign downgrade announcement terminates capitalism, and introduces a new epoch for humanity where regional statism and regional totalitarian collectivism rules worldwide. Greeks cannot become Germans. The former are of the olive republic and the latter of the industrious state; yet they will both be one living in debt servitude in a EU super state, as there will be no debt jubilee for the profligates.

2) … The S&P downgrade of nine European nations terminates democracy and commences regional global governance.
The death of fiat money in July 2011 with world currencies, DBV, and emerging market currencies, CEW, trading lower, has caused the investment, economic and political tectonic plates to shift with the result that an authoritarian tsunami is on the way.

Countries such as Greece have lost their monetary sovereignty, and Spain and Italy have as well, this being acknowledge by the S&P ratings cut.

Oezazaxa3205 writes in review of Benjamin J. Cohen book The Future of Money, “Should governments defend their traditional monetary sovereignty, or should they seek some kind of regional consolidation of currencies?”

Indeed, the death of fiat money means that nations will be seeking some kind of regional consolidation of currencies, and consolidation of credit and natural resources as well.

Regional cooperatives have already formed. The Shanghai Cooperative Organization has been established in Asia and CELAC in South and Latin America. These promote regional cooperation based on a non-dollar basis of exchange.  Regionalism is the new paradigm in globalism.

Of note, the US relinquished monetary sovereignty, as Andrew du Boulay relates “The US government relinquished monetary sovereignty to a consortium of private banks (predominantly owned by the House of Rothschild) in 1913 when President Wilson signed the Federal Reserve Act into existence.”

Investment capital is being destroyed by debt deflation, that is currency deflation; and now, political capital is rising in its place.

The dynamo of choice provided by the Milton Friedman Free To Choose Script, that governed for the last forty years is history. Now the dynamo of diktat, implied in the 1974 Clarion Call by the Club of Rome for regional global governance, is rising to govern human political and economic activities.

The seigniorage of fiat money is history. Now the seigniorage of diktat is rising in its place. Regional global governance is rising to replace sovereign nation states, as nations loose their debt sovereignty. The only two forms of sovereign wealth are gold bullion and diktat.

The global government finance bubble has burst, as the world Treasury bonds, BWX, have entered an Elliott Wave 2 Down. History’s largest debt bubble is deflating. Europe is at the epicenter of the soon coming sovereign armageddon, that is a credit bust and financial system breakdown.

Sovereign insolvency will spread from the EU periphery, that is Greece, Italy, Spain, to the EU core. The loss of debt sovereignty will be a catalyst for the formation of a European Super State based upon unified fiscal rules. Bank failures and EU Treasury auction failures, will be one of the defining issues of the year. These will cause leaders to meet in summits, waive national sovereignty, establish a unified federal authority, mandate a European fiscal union, and establish either the ECB or the Bundesbank, that is Buba, as the Euro’s Bank.

Life in Europe will be characterized as a totalitarian collective. Totalitarian collectivism is the EU’s future. European Socialism will die in 2012. Diktat will provide seigniorage to replace the seigniorage of treasury bonds. Diktat will become a currency, that is a payment used in the exchange of goods or services. Gary of Between relates that Welt reports Europe’s interbank market is frozen and the continent’s banks are only lending to each other through the ECB due to a lack of confidence within the financial industry, World Bank President Robert Zoellick was quoted as saying. If European banks don’t lend to each other, how can others in the U.S. or in China be expected to do it, Zoellick said.

Tyler Durden writes Greek Debt Likely Unsustainable Even With Haircuts. I comment, assuming that Greece stays in the EU, Greece’s level of unsustainable debt means that structural reforms, coming via a ceding of sovereignty, such as an over-ride of the Greek constitution restriction of termination of employment, that has provided lifetime employment, is coming, as EU leaders meet in summits and waive national sovereignty and establish unified fiscal rul. Substantial fiscal changes are coming. European Socialism, particularly Greek Socialism, grew via the Euro, as the global government finance bubble expanded. Substantial numbers of people were placed onto the public employment rolls as the Euro came on line in 1998, and as Greece’s sovereign interest rate fell lower. Now severe fiscal adjustments will be coming, that greatly reduce state worker employment levels.

The seigniorage of fiat money is failing, and the seigniorage of diktat is rising in its place, as is seen in the rise of power of the EU ECB IMF Troika to appoint technocratic government in Greece and Italy. Diktat is rising as a currency to dominate mankind.  Choice came by Milton Friedman and is now an epitaph on Neoliberalism’s tombstone. Libertarianism’s desire for Freedom and Free Enterprise are a mirage on the Neoauthoritarian Desert of the Real. There will never be a free market monetary system, as hoped for by F.A. Hayek, Murray Rothbard and other Libertarians.

A world wide credit bust and global financial collapse is coming, and out of it, fate is directing that regional global governance be established. Daniel’s interpretation of Nebuchadnezzar’s dream presents the statue of the progressions of kingdoms, Daniel 2:31-45. Kings have ruled mankind throughout history; these have included Nebuchadnezzar ruling Babylon; Cyrus and Cyrus and Darius ruling Merdo Persia; Charlemagne ruling Rome; Tony Blair ruling Great Britain, Angela Merkel ruling the EU, and George Bush, The Decider, ruling America with Unilateral Authority. Soon ten kings will come to rule, each in his own regional power base. Most recently two iron kingdoms, the combine of the UK and European rule, and US Hegemony, have governed the world; their power is now flowing into a ten toed kingdom of regional global governance.

God’s Sovereign Will, Ephesians 1:1-11, not any human action, will bring forth a revived Roman Empire, that is a German led Europe.

The Sovereign Lord God, Psalms 2:4-5, will open the curtains, and out onto the world’s stage will step the most credible leader. This Little Authority, Daniel 7:24-25, will work behind the scenes in regional framework agreements to change our times and laws to provide order out of the chaos from a soon coming credit breakdown and financial system collapse. The existing rule of law will be replaced by his word, will and way, as the First Horseman of the Apocalypse is effecting a coup d etat in the Eurozone, Revelation 6:1-2, by transferring sovereign authority from nation states to sovereign leaders and bodies. In the supranational New Europe, national sovereignty will be seen as a relic of a bygone era. Europe’s Sovereign, Revelation 13:5-10, and Europe’s Seignior, Revelation 13:11-18, will have have EU wide sovereign authority. The people will be amazed by this, and place their faith and trust in the Sovereign; they will give their allegiance to his diktat, Revelation 13:3-4.

The Banker regime of Neoliberalism came via the Free To Choose floating currency script of Milton Friedman. The currencies are no longer floating, they are now sinking, causing global disinvestment out of stocks and deleveraging out of commodities. The natural result of destructionism is the rise of despotism.

The Beast regime of Neoauthoritarianism, Revelation 13:1-4, is rising to replace Neoliberalism. It comes via the 1974 Club of Rome’s Clarion Club for regional global governance. This monster of statism and collectivism is rising from the profligate Mediterranean countries of Italy and Greece. The Beast’s seven heads are rising to occupy in all mankind’s institutions, and its ten horns are rising to govern in all of the world’s ten regions. The Beast regime is coming like a terminator that can’t be bargained with. It can’t be reasoned with. It doesn’t feel pity, or remorse, or fear. And it absolutely will not stop, ever, until mankind is totally dominated and subdued.

Banks will be nationalized in 2012; perhaps better said banks will be regionalized as Bloomberg reports Too-Big-to-Fail Definition May Be Expanded.  “Global regulators may expand the definition of a too-big-to-fail financial firm, signing up domestic lenders, clearing houses and insurers to capital rules designed for the world’s biggest banks. The “framework should be in place for domestically systemically important banks by the end of the year,” Mark Carney, chairman of the Financial Stability Board, said yesterday after a meeting of the group in Basel, Switzerland. Deutsche Bank AG (DBK), BNP Paribas SA (BNP) and Goldman Sachs Group Inc. (GS) were among 29 banks subject to the so-called capital surcharge on globally systemic financial institutions drawn up by the FSB in November. Banks will have to boost reserves by 1 to 2.5 percentage points above minimum levels agreed on by international regulators”.  The European Financial Institutions, EUFN, before the S&P European sovereign downgrade announcement were insolvent banks. They could not then, and can not now find funding. The entire eurozone banking system has already been regionalized, first by ECB “loans” under Mr. Trichet, and now by LTRO “loans” under Mr Draghi. These banks will be nationalize, or better said regionalized, and will be known as the government banks. Integration of banks and government will be a global experience.

In a bank insolvent and sovereign insolvent world, regional stakeholders will be appointed to stakeholder committees, that is regional public private partnerships, for management of the factors of production and oversight of credit.

Public private partnerships, such as Macquarie Infrastructure, MIC, will take the lead in managing the factors of production. Canadian Energy Income Companies, ENY, and Canadian Oil and Pipeline Companies such as Enbridge, ENB, will for all practical purposes, be regionalized, that is something akin to being nationalized. There will be New Credit for the New Europe, it will be stakeholder credit coming from the stakeholder committees, as they meet in working group conferences. This stakeholder credit will complement regional global governance to provide financing for the operations of industry critical to the EU’s security and stability. As for the people, the residents of the New Europe, the prevailing concept will be, let them eat diktat.

The S&P European sovereign downgrade announcement was both a investment Black Friday, and an impact event, that is going to transform mankind’s economic and political activities.

Of note, it seems that the earth is experiencing apocalyptic events.

Huffington Post recently reported Dead Birds Fall From Sky In Sweden, Millions Of Dead Fish Found In Maryland, Brazil, New Zealand

CNN Money Video reports Ohio’s Mysterious Earthquakes.

Laywoman Helen Barratt writes of The Earth’s Weakening Geomagnetic Force and Possible Polar Reversal. There is further hypothetical evidence that we are already in the transition phase that precedes a polar reversal, as shown in the growing areas of magnetic anomaly, field lines that are moving the wrong way and signaling an ever weaker and chaotic state for our protective magnetosphere shield. NASA has verified that there is evidence of a positive magnetism energy at the south pole, which is normally supposed to exist in the north pole only. The South pole is supposed to only have a negative magnetic charge. In the past 150 years, it has also been claimed that there has been a migration between the north and south poles and their respective magnetic charges of positive and negative magnetic reversal.

According to a report issued by the British Geological Survey (BGS), there is evidence to suggest that the magnetic reversal has begun. The BGS has taken this position after careful analysis of a region of the Earth known as the South Atlantic Anomaly (SAA). It’s an area where the magnetic field is in a state of flux and has weakened noticeably. The data shows the anomaly is growing rapidly and spreading west from South Africa, indicating that the Earth’s liquid core is changing. “This may be early evidence of a forthcoming reversal in the direction of the Earth’s internal magnetic field,” states the article on the BGS website.

Scientific opinion is divided on what hypothetically causes geomagnetic pole reversals and flips. Some theories hypothesize that they are due to events internal to the system, that generate the Earth’s magnetic field, others propose that they are due to external events.

3)  … Suggested  related reading

3A) … Let them eat diktat, as in capital controls.
Detlev Schlichter in Paper Money Collapse writes When They Stop Buying Bonds, The Game Is Over I have long maintained that government bonds are a bad investment because the endgame for them will either be outright default or inflation. In both cases, as a bondholder, you lose. To be precise, the outcomes are either default or default. The idea that these debt loads could be elegantly inflated away is nonsense. They are already too big for that. So either you face outright default or, if authorities try to inflate, hyperinflation and currency disaster, and then default. In either case, you will not be repaid with anything of real value.

But are default or inflation and then default really inevitable? What if the present scenario continues forever? This seems to be the new ‘hope’, if you like. It is not a pretty scenario in that it involves the ongoing confiscation of wealth from bondholders but it seems to be less drastic than default or hyperinflation. Could we not work off the excessive stock of debt by suppressing bond yields below (moderate) inflation rates for an extended period of time? Of course, we cannot rely on the self-sacrifice of the bondholder, although he appears rather willing of sacrifice at present. So the government will have to use all its might to force bond-investors into accepting zero or negative returns for an extended period of time. After all, the state is the territorial monopolist of coercion and compulsion. It makes the laws. And controls the banks.

As I stressed many times, in a state fiat money systems banks must ultimately cease to be private, capitalist enterprises. Many banks have already been fully or partially nationalized. The remaining private ones are under tight, and ever tighter, regulation by the state. Should it not be easy for the state to force banks to invest more in government bonds, even at low or negative real returns? Should it not be possible to redirect whatever saving and credit there is from the private to the public sector?

Such a strategy has been outlined, not advocated, by Russell Napier of CLSA. He calls it ‘repression’. It ultimately involves rather draconian market intervention in order to continuously force the diversion of capital from private use to public use at artificially low levels of compensation. At some stage it will require capital controls. But let’s face it: most of what we have experienced over the past three years in terms of government intervention would have been simply unimaginable only five years ago. We should therefore not be surprised if market intervention becomes ever more heavy-handed and is used increasingly to favour the funding of the public sector. Gillian Tett in one of her recent Financial Times articles, Ties Between Sovereigns And Banks To Deepen, also discusses the strategy of ‘repression’ and predicts that we will see more of it.

(She writes, Now, these days, it is hard to imagine any western government overtly calling for a second wave of such “repression”. After all, as Kevin Warsh, a former Fed governor, recently pointed out, the drawback of financial repression is that it curbs private sector investment and credit growth. And in any case, it is a moot point whether such repression could even be implemented today, given the globalised nature of markets. Nevertheless, the political incentives to flirt with this concept are clear. After all, the beauty of a stealth subsidy is precisely that: it is too subtle for most voters to understand. It is also arguably a more equitable form of burden-sharing, and thus less politically divisive, than, say, state spending cuts. Moreover, governments do not necessarily need to be “repressive” to achieve the “repression” trick; as the economist Alan Taylor observes, if investors are so terrified that they cannot see alternative investment choices, they may end up buying government bonds by default – even at unattractive prices. Indeed, that is arguably what is already occurring today in the Treasuries market, or the world of JGBs. And, perhaps, in the eurozone too; after all, when eurozone banks were given €442bn of ECB money two years ago, they used half of this to buy government bonds – without compulsion at all. Whatever you want to call it, then, the state and private sector finance are becoming more entwined by the day. It is a profound irony of 21st century “market” capitalism. And in 2012, it will only deepen.)

That such a policy will be implemented, and ever more boldly, I have no doubt. In fact, I predicted it in my book. See chapter 10 of Paper Money Collapse The Folly Of Elastic Money And The Coming Monetary Breakdown, in particular pages 226 to 228, I called it ‘the nationalization of money and credit’. It is a phase in the crisis but it is not an endgame.

Where I disagree with the above mentioned writers is the following: Repression, to the extent that it works, will not reduce government debt, and besides, it won’t work.

Consider the recent environment: Certain governments have been able to borrow directly from their central banks via quantitative easing and in the bond market at low or even negative real interest rates. Does that mean they have reduced the amount of outstanding debt? Are such hugely advantageous conditions used to cut back the debt load? No. The opposite is the case. Access to cheap credit, whether that credit was provided by the printing press, obedient bond investors or hyper-regulated banks, has allowed states to run larger budget deficits and accumulate more debt.

Remember, we are not talking here about the workout of a debt-situation resulting from a war, a natural disaster, or some other one-off event. We are talking about the modern welfare state with its ever-growing commitments and increasingly out-of-control spending. Only cutting off the state from cheap funding will ever constrain it, not giving it access to more resources more cheaply.

And then there is this: We do not live in Paul Krugman’s parallel universe of Keynesian fiscal stimulus, where every dollar spent by the government magically translates into 2 dollars of real GDP growth. Here, on planet Earth, the constant shift of resources from private markets to the state bureaucracy weakens the economy. Shrinking the private sector and growing the public sector kills economic growth. In the perverse logic of the modern welfare state, this then requires even more state spending in the next period. As the economy continues to struggle, public sector outlays will grow while tax receipts will shrink.

‘Repression’, to the extent that it succeeds in shifting resources from the private market to the state, makes the crisis worse. It must lead to more debt, more capital misallocation and a weaker economy. We will not save our economy by trampling on the remaining bits of functioning capitalism and by confiscating more resources from the private sector. ‘Repression’ is self-defeating.

Additionally, it won’t work. Private wealth-holders will not sit on their hands forever while their hard-earned savings are being confiscated by the state. If banks become mere tools to fund the state and thus provide zero or negative real returns to shareholders and depositors, shareholders and depositors will pull their money from the banks.

But there are no alternatives for the depositors, are there? Of course, there are: Gold.

As the enemies of gold in the establishment financial press never tire of reminding us, gold pays no interest and no dividend. Because of storage and insurance costs, it is a ‘negative carry asset’. But in an environment of ‘repression’, so are government bonds and bank deposits. With zero or negative returns guaranteed on supposedly ‘safe’ government bonds and bank deposits, ever more investors, including small savers, will turn toward gold which has the additional advantage that its upside is practically unlimited – its price can double, triple or quadruple (all of which I expect) as long as paper money debasement continues, which I consider a near certainty.

Of course, a determined state will counter any evasion of controls with more controls. Maybe we will see taxes on gold investment or even restrictions on trading and owning gold. Via capital controls the country could be locked down. All of this is, of course, hugely destructive for the economy and ultimately self-defeating. I expect that we will see quite a bit of this stuff in coming years. Try and be prepared! But this will not be part of the solution. It will make matters worse. And it means that the endgame is still either voluntary default or hyperinflation and default. ‘Repression’ or ‘nationalization of money and credit’ is a policy of desperation. It is not a solution. It won’t be the endgame.

3B) … An investment demand for gold will arise out of a liquidity trap and the ongoing process of disinvestment and deleveraging.
Neil Charnock writes We Find Ourselves In A Liquidity Trap and therefore, against all logic austerity is currently the wrong solution. The time for austerity and balanced budgets was during the growth years, during the building of the debt bubble not now. This horse bolted long ago.

Liquidity traps are characterised by: 1) failure of stimulus (QE, Twist etc.) to create growth  2) low interest rates failing to stimulate growth  3) private and corporate savings rise in response to fear; money hoarding  4) expansion of the money base fails to translate into inflation 5) unlimited demand for money – in this case mostly in the Government sector for Public Sector payrolls, QE in various forms, debt servicing and debt roll overs.

The US Fed has changed their definition of a liquidity trap and if anybody can make sense of their document on the subject they are doing extremely well. In my understanding; if a thesis is not succinct and easily understood it is not worth the paper it is written on. In my end of year briefing to clients I explained all this and stated that “it quacks, walks and looks like a duck – therefore it is a duck”. Yes we are in a liquidity trap. Right now the government sector demand for borrowings is choking off growth and so many B list clients fail to get funding. The A list gets the cash and the B list doesn’t sending some companies to the wall. We are seeing more of this now and it will continue in 2012. Gold stocks that are not funded to production are at increased risk although I have noticed an unsurprising ability for solid gold stocks and even exploration plays to attract adequate funds in this economic environment.

Due to the existence of the liquidity trap and associated economic conditions it seems obvious that low interest rates and various incarnations of QE will need to continue. Of course the spread paid by lower class borrowers, over and above the Fed rate can grow larger pushing up stress levels for these borrowers. Continued capital destruction will offset new cash creation which will be soaked up by government demand. This creates all sorts of challenges and extreme risk of major upheaval, not just default as sovereign borrowing costs soar.

We also have a banking crisis due to sovereign debt exposure in this sector in addition to the deleveraging process itself. As certain asset values fall loans flip to negative equity. As the spread on loans increase for SME’s and other clients the debt servicing stretches the business or individuals to the limit. This is not a good environment for business expansion and jobs growth.

What does this have to do with gold? Everything. Gold was sought as a safe haven and will be again. As upheaval increases the environment for gold improves. Then you have negative real interest rates. The interest rates are lower than cost inflation even if many asset prices are falling (deflation). Inflation for energy and food combines with deflation to create stagflation. Negative real interest rates are great for gold.

The current stagflation will be met by QE, read that as money printing which will also be needed to fund government debt roll over. Governments will not unwind this it has to blow up first; this has been the way of history and I see no change due here. I interviewed an officer of a major London bank who confirmed this ‘distress and deleveraging’ thesis recently. They are offloading assets and talking clients into allowing same. They are taking 50%+ haircuts and glad to get this level of return while they can. Their view on the coming few years is for a protracted period of deleveraging and default. Other costs are rising, which combines to increase foreclosures and bankruptcies which are still very high and this will continue also.

The Ratings agencies faced a major change to their business model (legal and in effect operational) in 2010 so they are now forced to apply more honest assessments on their own clients and financial products. This was seen as disruptive, for instance USA down grade from AAA mid last year and the recent threat of a down grade on France and several banks. However they have no choice so expect this to continue to create ‘news headline volatility’ and reflect risk more appropriately.

There was also serious trouble in the Credit Default Swap markets in 2011 as Greece was classified as a voluntary restructure which the banks decided did not trigger payouts ‘on default’ to bond holders. This caused bond yields to rise and increased doubt in the inherently risk adverse debt markets. Debt markets are in a bubble in the stronger economies as capital was hoarded in this asset class for ‘safer’ keeping during 2011. A major top has been formed or is forming signalling the end of this Bull Run for this asset class.

This no longer remains safe when rates are at record lows, nothing but down side risk for bond holders. This can create a massive wave of capital and disrupt the debt roll over process forcing monetization of national debt to continue. This can be classified as QE. Defaults and haircuts will result in massive capital destruction.

3C) … The economies of the Eurozone have never been able to support the current level of sovereign debt … the bill for European socialism has come due.
Marxist Update details The Age of Sovereign Insolvency, and writes of the ongoing European saga.

Whenever the US financial pundits feel the need to cheer themselves up, they take a look at what is happening in Europe and console themselves that things in the US could, after all, be worse.

At the heart of the crisis are the various countries in the eurozone whose economies are clearly unable to generate sufficient income to keep up their debt interest and repayment obligations. This pushes down their credit ratings while the rates of interest they have to pay move vertiginously in the opposite direction. Sovereign debt on which interest rates reach 7% are generally deemed to be unserviceable. This of course is what gave rise to the need for rescues for Greece, Ireland and Portugal.

The cure was seen in gigantic amounts of money being made available from a pool created by the various European governments for lending at relatively reasonable rates of interest to the afflicted countries. However, these rescues are always accompanied by the familiar demands for really severe cuts in public spending which in every case have of necessity caused GDP to shrink and the country’s debt, therefore, to increase as a percentage of GDP even while the absolute amount of the debt was being reduced. The shrunken economies became even less able to pay their debts than they had been previously, calling for yet more rescues, as is currently the case with Greece.

In other words, to borrow a metaphor coined by one Yanis Varoufakis, an Athens economist, “if you keep cutting like this you start to cut into muscle, which affects your growth and your tax revenues” (quoted by Landon Thomas Jr in ‘Austerity Plan Might Not Work for Spain and Italy’, New York Times of 9 August 2011).

As Greece’s desperate situation, notwithstanding (or rather because of) the stringent cuts that were forced on it, became apparent, what happened was that first one of the credit-rating agencies, Moody’s, downgraded Greece’s creditworthiness yet again to the second lowest rating available – in effect its sovereign debt was classified as junk. This pushed up Greek borrowing costs beyond the affordable and Greece to the edge of default, owing various European banks so much money that the default threatened various banks’ solvency, or certainly the sufficiency of their capital base to maintain confidence in their various banking activities. As a result there was a panic summit held on 21 July of various heads of eurozone states to rustle up some kind of response that would, hopefully, minimise the damage that was threatening the entire eurozone banking system.

What did the European states decide? The deal contained three main elements: 1. reduced interest rates on the bail-out loans to Greece, Ireland, and Portugal; 2. some losses for private investors to reduce Greece’s debt; and 3. a transformation of the euro zone’s temporary bailout fund, the EFSF, into a cash-point that banks and possibly Spain and Italy could tap, but so far without the necessary funds.

These decisions indicate a belated realisation by the various European banks that there is no way they are after all going to be able to force the Greek masses to pay back all that is owed. When the money was originally borrowed, it was assumed that Greece would be able to continue selling commodities all over the world in order to generate the necessary income to repay the loans with interest at the rates then applicable. It is not Greece’s fault that, as a result of a crisis of overproduction within the capitalist system as a whole, it is not after all able to sell its commodities to the extent that had originally been envisaged. Greece is in the situation of a worker who is unable to pay his mortgage once he has, through no fault of his own, lost his job.

The hope is that by accepting today small reductions in what is owed to them, the banks will avert much greater losses in the future. The financial number-crunchers have, however, expressed the view that this mouse of a rescue plan that the mountain of European heads of state managed to give birth to after a fraught labour will have no such effect. Ambrose Evans-Pritchard points out in the Telegraph of 2 August (‘America is merely wounded, Europe risks death’):

“As the details dribble out from the summit deal, we can now see that Greece will enjoy no debt relief despite having been pushed into default. Citigroup said the net effect will increase Greece’s debt by a further 4pc of GDP to more than 160pc next year. Since this is obviously untenable, Greece will need a third rescue. “The EU has brought about the first sovereign default in Western Europe since the Second World War and set a fateful precedent without actually resolving the Greek problem. This is the worst of all worlds.”

In the Irish People’s Movement article cited above it is estimated that to return Greece to solvency at least a 40% “haircut” to the country’s debt is needed. But the plot hatched up by the European heads of state achieves a mere 7½% debt reduction, according to most estimates. In other words, Greece’s problems are by no means over.

However, Greece’s problems do not stop in Greece. Because so many European banks are holding Greek bonds, they themselves risk being driven to insolvency by Greek default, and it is all too likely that the various European states will feel constrained to rescue their banks at huge cost to the public purse because of the need to maintain the essential services that the banks provide in a capitalist system. Investors do not require a crystal ball to be able to foretell that this will of necessity cause these countries’ sovereign debt to escalate – to the point that they will be unable to meet their obligations.

Spain, Italy, Cyprus and to some extent France are already feeling the fallout, and the EU has been struggling for months to avert Spain being sucked into the morass. In the past few weeks, Italy too has been sliding closer and closer to the abyss, with the interest rates both countries have to pay in order to borrow the money they need gradually edging up towards the fateful 7% mark. Spain and Italy are countries that are regarded to some extent as “too big to bail”. Nevertheless, some thought is currently going in to how that might be done:

“The bond vigilantes broadly agree that the EFSF needs €2 trillion in pre-emptive firepower to forestall a twin crisis in Italy and Spain [as compared to the $440 bn of which it disposes at present], though quite how France might pay for this without being drawn into the maelstrom itself is an open question.” (Ambrose Evans-Pritchard, op. cit.). Italy, it is estimated, would cost $1.4tr to bail out and Spain $700bn.

But who would provide this money which is, after all, to be invested in risky holdings at rates of interest below the market rate? As the various national states within the European Union try to work out how they can individually save themselves from being swallowed up in the crisis, it becomes hard for them to reach agreement on any kind of collaborative effort.

3D) … A Greek default is coming … An inquiring mind asks, will it be hard or will it be soft?
Mike Mish Shedlock writes Greek 1-Year Bond Yield Tops 408 Percent; Hard Default Appears Imminent.

3E) … Central bankers have developed and sustained moneyness through a sovereign credit boom; that boom is now over; the sovereign credit boom is turning to sovereign credit bust.
Doug Noland writes in Safehaven.com More On Moneyness The perception of ongoing dollar devaluation has been a critical factor for global sovereign “moneyness” (helping explain why negative U.S./dollar fundamentals have been generally viewed bullishly with respect to global risk markets).

A weak greenback ensures the ongoing recycling of dollar liquidity by (primarily Chinese and Asian central banks) global central banks back to the Treasury market. Ongoing dollar devaluation would also continue to entice huge speculative flows to “undollar” assets, including the emerging markets and commodities – fashioning an unusual degree of “moneyness” for securities issued by countries with unimpressive histories of monetary management. And the worse things look for the dollar, the more the world’s new financial powers (accumulators of massive international reserves) would have a vested interest in supporting the euro as a competitive store of value to dollars.

So, the markets’ hardened perceptions of “moneyness” owe a great deal to the notions 1) that the Fed will buy as many Treasurys as it deems necessary to sustain abundant market liquidity and support economic recovery; 2) that “developing” economy Credit systems will continue enjoying unprecedented flexibility and capacity; 3) that Asian central banks have too much invested to back away from dollar and Treasury market support; and 4) that China and others will bolster an increasingly fragile euro as a critical counterbalance to the dollar. In sum, markets have viewed global central bankers as sharing a unified interest in sustaining the sovereign Credit boom.

I really worry when I see divergences between headstrong market perceptions of “moneyness” and a marked deterioration in the trend of underlying creditworthiness. Such “gulfs” are the trappings of market dislocations and crises of confidence. I believe this is especially the case currently. Emboldened by past successes, market perceptions have been driven by unrealistic assumptions of the efficacy of government policymaking.

3F) … Thoughts on gold and fiat money
Peter Schiff relates Gold puts the power to the people, fiat money gives the power to the government so that’s the reason they oppose it. I comment that gold provides people economic sovereignty; but fiat money hands sovereignty to dictators.

Tiny URL for this article http://tinyurl.com/7fey9j3

The Time Of Jacob’s Trouble Has Commenced With The S&P Downgrade Of Nine European Nation’s Sovereign Debt

January 16, 2012

The age of liberal finance came to an end with the Friday January 9, 2011, S&P downgrade of nine European nations. Bloomberg reports “France and Austria lost their top credit ratings in a string of downgrades that left Germany with the euro area’s only stable AAA grade as Standard & Poor’s warned that crisis-fighting efforts are still falling short. France and Austria were cut one level to AA+ from AAA and face the risk of further reductions, the rating company said. While Finland, the Netherlands and Luxembourg kept their AAA ratings, they were put on negative watch. Spain and Italy were also among the nine nations downgraded.”

The WSJ reports the reason for the S&P sovereign downgrade, “In our view, the policy initiatives taken by European policymakers in recent weeks may be insufficient to fully address ongoing systemic stresses in the euro zone,” S&P said in a statement released after the close of New York trading.

Tyler Durden in article S&P’s Mass Downgrade FAQ May Have Just Hobbled The European Sovereign Debt Market communicates Eurozone sovereign insolvency as he writes of the existing high economic priest John Maynard Keynes and his Keynesian economics religion relating, “The Eurozone’s foundation was laid out by academic wizards who thought that Keynesianism was a great idea (and continue to determine the fate of the world out of their small corner office in the Marriner Eccles building), the imminent downfall of Europe will only precipitate the final unraveling of the shaman economic religion that has taken the world to the brink of utter financial collapse and, gradually, world war.”

Simon Johnson in Reuters Blog says, “Treasury bonds are the ultimate global asset class: they’re the epitome of risk-free safety for investors all over the world. the triple-A credit rating is not a credit rating like any of the others. It’s basically a sign saying “no credit risk here”, a way of investing in fixed-income assets without taking credit risk. Triple-A bonds are in this sense a pure interest-rate play, while they can rise or fall in value, and they can get illiquid at times, the idea is that they’ll never default.”

The significance of the loss of AAA rating on sovereign debt is that the “full faith and credit” contract between a country and those who purchase its debt, can no longer be assured.

The S&P European sovereign downgrade announcement calls into question the capability of the countries involved to honor the most sacred of human contracts, and means the end of moneyness as it has been known. Fears of debt contagion, not greed, or speculation, will be driving all currencies, stocks, and bonds lower. Downgrade shock from the S&P European sovereign downgrade announcement, will flow outward to all investment asset classes and credit instruments. The European sovereign downgrade announcement will have a knock-on effect of driving all currencies, stocks and bonds lower in value. Risk appetite will change to risk avoidance.

The S&P European sovereign downgrade announcement is an inflection point in human experience, which pivots humanity experience from growth to contraction, from democracy to diktat, and from trust in fiat money to debt servitude. The US Federal Reserve monetary policies which were a path for some to prosperity, now constitute the road to serfdom for all.

The moneyness, that is the seigniorage, of Neoliberalism will be failing; and the seigniorage of Neoauthoritarianism will be increasing. The moneyness of the former provided choice; while the moneyness of the latter provides diktat.

The January 2011 stock market rally was a false flag rally, instigated by wall street bankers. The January 2011 rally is Neoliberalism’s death rattle rally; given that fiat currencies are dead, the rally cannot be sustained. It is simply a wall street wizards’ zombie rally. The coming investment downturn will propel the world from democracy and capitalism into diktat and regional global governance.

Charts show volatility rising, confirming that disinvestment out of stocks is now underway again.
Finviz VIXM and VIXY … Yahoo Finance VIXM and VIXY … MSN Finance VIXM and VIXY
… Google Finance VIXM and VIXY

The S&P European sovereign downgrade announcement is a pivotal event in human experience as it brings forward sovereign armageddon, that is a credit bust and investment breakdown, that has been simply inevitable. This Eurodämmerung, a Götterdämmerung, that is a clash of the current sovereign authorities with investors, will destroy credit and money, as they have been known.

The S&P downgrade of nine European nations terminates the age of neo liberal finance and commences the age of sovereign default. The S&P European sovereign downgrade announcement pivots the world from an age of sovereign solvency into the age of sovereign insolvency. The S&P announcement pivots humanity from the age of liberal finance into the age of sovereign default, where out of sovereign bankruptcy, stakeholder credit, that is stakeholder finance, flows from sovereign bodies, such as stakeholder committees, that is public private partnerships comprised of business and government. These sovereign bodies will act for a region’s security and stability, as the world pivots from capitalism to regional global governance. The S&P European sovereign downgrade announcement marks an inflection point from democracy into diktat.

The S&P’s European sovereign downgrade announcement terminates capitalism, and introduces a new epoch for humanity where regional statism and regional totalitarian collectivism rules worldwide. Greeks cannot become Germans. The former are of the olive republic and the latter of the industrious state; yet they will both be one living in debt servitude in a EU super state, as there will be no debt jubilee for the profligates.   

Our times are best understood through the lens of bible prophecy.

The Sovereign Lord God, Psalm 2:4-5, is acting to bring forth a revived Roman Empire, that is a German led Europe.

At the appointed time, He will open the curtains, and out onto the world’s stage will step the most credible leader. This Little Horn, or Little Authority, Daniel 7:25, will work behind the scenes in regional framework agreements to change our times and laws to provide order out of the chaos from a soon coming credit breakdown and financial system collapse. The existing rule of law will be replaced by his word, will and way, Revelation 13:5-10, as the First Horseman of the Apocalypse, the rider on the white horse, who has a bow without any arrows, Revelation 6:1-2, is effecting a coup d etat in the Eurozone by transferring sovereign authority from nation states to sovereign leaders and bodies. In the supranational New Europe, national sovereignty will be seen as a relic of a bygone era. Europe’s Sovereign will have have EU wide sovereign authority. The people will be amazed by this, and place their faith and trust in him; they will give their allegiance to both the Beast regime and the Sovereign’s diktat, Revelation 13:3-4.

The Banker regime of Neoliberalism came via the Free To Choose floating currency script of Milton Friedman; but these are now sinking, causing global disinvestment out of stocks and deleveraging out of commodities. The natural result of destructionism is the rise of despotism.

The Beast regime of Neoauthoritarianism, Revelation 13:1-4, is rising in its place. It comes via the 1974 Club of Rome’s Clarion Club for regional global governance. This monster of statism and collectivism is rising from the profligate Mediterranean countries of Italy and Greece. The Beast’s seven heads are rising to occupy in all mankind’s institutions, and its ten horns are rising to govern in all of the world’s ten regions. The Beast system is coming like a terminator that can’t be bargained with. It can’t be reasoned with. It doesn’t feel pity, or remorse, or fear. And it absolutely will not stop, ever until mankind is totally dominated and subdued. The Beast regime is synonymous with the ten toed kingdom of regional global governance seen in Daniel’s interpretation of Nebuchadnezzar’s dream where the statue of the progressions of kingdoms is presented, Daniel 2:31-45.    

Bank nationalization is coming world wide. Banks will be nationalized in 2012; perhaps better said banks will be regionalized as Bloomberg reports Too-Big-to-Fail Definition May Be Expanded. Global regulators may expand the definition of a too-big-to-fail financial firm, signing up domestic lenders, clearing houses and insurers to capital rules designed for the world’s biggest banks. The “framework should be in place for domestically systemically important banks by the end of the year,” Mark Carney, chairman of the Financial Stability Board, said yesterday after a meeting of the group in Basel, Switzerland. Deutsche Bank AG (DBK), BNP Paribas SA (BNP) and Goldman Sachs Group Inc. (GS) were among 29 banks subject to the so-called capital surcharge on globally systemic financial institutions drawn up by the FSB in November. Banks will have to boost reserves by 1 to 2.5 percentage points above minimum levels agreed on by international regulators. The new banks will be known as government banks.

In a bank insolvent and sovereign insolvent world, regional stakeholders will be appointed to Stakeholder Committees, that is regional public private partnerships, PPPs. Public private partnerships, such as Macquarie Infrastructure, MIC, will take the lead in managing the factors of production. Canadian Energy Income Companies, ENY, and Canadian Oil and Pipeline Companies such as Enbridge, ENB, will for all practical purposes, be regionalized, that is something akin to being nationalized. There will be New Credit for the New Europe, it will be Stakeholder Credit coming from the Stakeholder Committee, as it meets in working group conference. This Stakeholder Credit will complement regional global governance to provide funding for the operations of industry critical to the EU’s security and stability. As for the people, the residents of the New Europe, the prevailing concept will be, let them eat diktat.

The time of Jacob’s Trouble, Jeremiah 30:1-7, has commenced.  

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