09-18-10

GEO-POLITICAL TENSIONS - ISRAEL / KOREA / IRAN

IRAN

ISREAL

KOREA

 

SOVEREIGNS

 

GREECE Greece crime wave spells boom for security firms in debt crisis BL   BRAZIL Now Brazil Is Intervening To Weaken Its Currency, As The Competitive Devaluation Cycle Heats Up  BI   IRELAND Irish bonds fall on bail-out fears FT ECB intervenes to prop up Dublin market   Ireland bonds hit by bank, debt worries MW 'No truth' to aid rumor: Ireland Finance Ministry MW JAPAN Japan to seek global understanding on FX - Noda Reuters   Japan's solo act heightened concerns that countries would resort to competitive devaluations to support their own exports in the face of slowing global growth. Japan Intervenes In Foreign Exchange Market BCAR By drawing a ‘line in the sand’ the MoF is only persuading currency traders to test the BoJ’s resolve.

Zero percent for your money! MW

 

Nearly one in four taxable money funds has a current yield of 0.00%.

4- STATE & LOCAL GOVERNMENT

5- CENTRAL & EASTERN EUROPE

 SEC Eyes New Rules on Banks' Debt-Level Disclosure AP

Raising the curtain on the private nature of derivatives  FT

Many derivatives contracts are rarely, if ever, traded

Shadow Bank Liabilities Plunge By $700 Billion In Q2, $2.1 Trillion Year To Date  ZH

 

Continuing the analysis of today's Z.1 report, we next focus on recent developments in the shadow banking system. And it's a bloodbath: total shadow bank liabilities dropped by $680 billion in Q2, and a massive $2.1 trillion YTD. If one wonders why Ben Bernanke (yes, it's technically TurboTim) continues to print trillions and trillions of debt, and it is still doing nothing (yet) to stimulate the system, here is your answer. As credit will only exist if i) it is needed and ii) there are cash paying assets (or at least the myth thereof) to support its existence, the latest plunge in the shadow banking system is merely the most recent confirmation that the deleveraging in America is only just beginning. In fact, from the peak of the credit bubble in Q2 2008, through Q2, total bank liabilities (shadow and traditional) have plunged by $2.6 trillion, from $32.1 trillion to $29.5 trillion. Yet it is the collapse in shadow banking that was responsible, with shadow liabilities falling by a stunning 20% from $21 trillion to $17 trillion in just over two years even as banks have benefitted from the transfer of cheap government cheap on their traditional lending books (think Fed intervention and QE, leading to record low interest rates). What this means is very clear: the shadow banking system is collapsing, period. Yes, the rate of collapse is slower than in Q1, but the total plunge was still a whopping $4.2 trillion annualized for 2010. And the delta between Shadow Banking and Traditional liabilities has collapsed from $10.7 trillion at the peak in March 2008, down to under $4 trillion. This is a record amount of "money" being removed from the system, and explains why, for now at least, the velocity of money is nothing faster than a crawl. That said, if and when this indicator plateaus and recommences climbing, will be a very "sensitive" moment for all deflationists and inflationists as it will mark the inflection point from credit contraction to renewed credit creation. Alternatively, the Fed can merely force credit into traditional bank liabilities, which banks can then proceed to use and purchase stocks and commodities, at a zero cost of debt. What that will do to select asset prices, we leave to our readers' imagination. Chart 1: Total sub-components of the shadow banking system

 

7- RISK REVERSAL

8- COMMERCIAL REAL ESTATE

9-RESIDENTIAL REAL ESTATE - PHASE II

OTHER TIPPING POINT CATEGORIES NOT LISTED ABOVE

19-US PUBLIC POLICY MISCUES

24-RETAIL SALES

26-GLOBAL OUTPUT GAP

31-FOOD PRICE PRESSURES

32-US STOCK MARKET VALUATIONS

“Fiat money has no place to go but gold”

AUDIO / VIDEO

Llink to Pento post-mortem on King World News

 

Zero Hedge Commentary on CNBC Interview: For some, this week's incident on CNBC where Michael Pento was kicked off CNBC for daring to question the basic assumption that his host Erin Burnett presented as fact, was perplexing (to others, who are well aware of the modus operandi of the TV station is, not so much). In a follow up interview that was uninterrupted by commercial breaks and octoboxes, with King World News, Michael Pento gives a post-mortem of just what transpired: "I looked at it 4 times and I don't when I went off the rails, I thought it was a bit unwarranted. All I was doing was being very passionate about an issue I feel very strongly about." The core of the disagreement of course, is the underlying assumption which CNBC takes as gospel, which is that no matter what, interest rates will not, are not allowed to rise (which together with a failed treasury auction, will be the key indicators of the "beginning of the end"). And Pento is completely right to question this as the underlying "factual basis" of any rhetorical question: "We as Americans have no right to believe that interest rates on the 10 year, which are far below their historic 49 year average, 7.31%, are now on 2.7%, so the onus is not on me that interest rates will rise. The onus is on other people to convince me and the investing public that the US bond market will always be in a perpetual bubble that will never burst. And if you look at the data, it shows that this can not be a sustainable situation." Pento then goes on to highlight all the facts that certainly make his case, but that ultimately all collapse into one thing: that the Fed will be able to continue to control, and frankly, manipulate the rate market for perpetuity. This is a flawed assumption and sooner or later Ben Bernanke will lose control as with every system which is in disequilibrium, the snapback to a sustainable balance will occur, and the longer it is kept away from its natural state, the more violent the snapback will be. One point that Pento discusses that bears further attention, is his argument that governmental investment in the economy should decline and the private sector should be encouraged to pick up the slack. Of course, with the Balance of Payments equation which is now on the forefront of public attention, this means that unless the Current Account goes positive, the private sector is unlikely to be able to pick up the slack from a collapse in endless governmental stimulus (and thus constant debt creation). Which goes to the crux of the Keynesian-Austrian debate. Many would say here that instead of having funded the government apparatus, which as even Mort Zuckerman points out is beyond unwieldy and has grown excessively, the government should have instead have focused on making the US competitive from an international trade standpoint, a topic even Warren Buffett lamented in his non-corrupt days, when he was actually a voice of reason, and not just unbridled, government captured greed. Alas, that would mean a total break from the current Chinese trade surplus hegemony and realigning the US economy in a way that would result in a dramatic shock to millions of people who realize they are simply uncompetitive in the global picture (and thus redundant in the job market) but which would serve as another much needed reset to get America off on a way to long-lost prosperity with an attempt to reincarnate the American manufacturing sector while gradually phasing out the service sector (and especially its "financial innovation" component) . Yet as Gorgon T. Long also pointed out a few days ago, America is now dead set on repeating the destructive Keynesian mistakes of the past, and will continue to fund a broken model until one day, as Michael Pento all too correctly points out, it all snaps, and the "shocking" death of Keynesianism, as described a month ago by Eric Sprott, catches all so many completely unaware. Of course to explain all this to Erin Burnett, who still believes that the government has done a great job with the "fastest" recovery in the past 20 years, which would be correct if one could eliminate those little pesky things known as "facts", is beyond folly. All those who are invited to CNBC, and dare to explain the truth: you have been warned.

QUOTE OF THE WEEK

 

“The great enemy of the truth,” John F. Kennedy declared in a 1962 commencement address at Yale University, “is very often not the lie – deliberate, contrived and dishonest – but the myth – persistent, persuasive and unrealistic.”

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