• Bittersweet victory Merkel’s real difficulties start now FT 09-23-13
• Merkel begins hunt for coalition partners FT
• Merkel’s almost total political triumph FT
• Election Triumph:Merkel Victorious But Faces Tough Talks Spiegel
• Merkel Wins Big in German Election WSJ Angela Merkel's conservatives won a resounding victory in Germany's elections, despite a surge by an anti-euro party that helped push her junior coalition partner out of parliament.

Merkel Wins Federal Election But Coalition Partner Below Bundestag Threshold: Final Outcome Too Close To Call 09-22-13 Zero Hedge

While the outcome of the election from the perspective of "the grand coalition" is still too close to call, Exit polls make it clear that Merkels CDU/CSU party has won the election with 42.5% of the vote. However, there are some very interesting results that could be a problem for Europe's 'program-based' nations:

• GERMAN AFD TAKES 4.8% IN FEDERAL ELECTION, ZDF EXIT POLL SHOWS
• GERMAN FDP TAKES 4.5% IN FEDERAL ELECTION, ZDF EXIT POLL SHOWS

So the anti-Euro party has more votes (nearly the 5% required to enter the Bundestag) than Merkel's current coalition partner FDP party which creates major uncertainty over the forming of a coalition (which took 3 weeks in 2005) - which as we noted seemed to priced into Greek stocks on Friday. The pirate party is projected to have 2.5% of the vote. If the anti-Euro AfD enters the parliaments, a "Grand Coalition" appears inevitable. However, if it does not cross the 5% threshold, Merkel may end up with an absolute majority in the Bundestag and will not nead a coalition partner.

The results so far at 1810 German time...

MONETARY EXPANSION - Extremely Difficult to Stop Once Started

Gold And Monetary Inflation Prospects 09-22-13 Alasdair Macleod via GoldMoney.com

VENEZUELA - Shortages & Hyperinflation

Venezuela Seizes Toilet Paper Factory Amid Fears Of US Sabotage 09-22-13 Zero Hedge

The Venezuelan government is in a bind. They realize that 'the people' will stand-by idly as the nation's currency is devalued, as inflation soars, and blackouts continue as food shortages grow...(and the stock market soars) but take away a critical personal care item and the riots will begin. As Yahoo Maktoob reports, Venezuela's leftist government said Saturday it temporarily seized a major toilet paper factory hoping that it can end troublesome shortages of the staple personal care item. "The temporary occupation of [the toilet-paper manufacturing plant] is aimed at verifying that toilet paper industry production, marketing and distribution" are all in line with state policies, Vice President Jorge Arreaza said on Twitter, without indicating how long the takeover would last. This action follows 'nationalization' of large farms amid President Maduro's claims that the White House is plotting the "collapse" of his government next month by sabotaging food, electricity and fuel supplies.

But, of course as we noted previously, none of that matters - as the Venezuelan stock market is surging (which, if American talking heads are to be believed judging from thei reaction to US equity markets) must mean the country is doing great... The Caracas Stock Index is +270% YTD...

Via Yahoo Maktoob,

Venezuela's leftist government said Saturday it temporarily seized a major toilet paper factory hoping that it can end troublesome shortages of the staple personal care item.

"The temporary occupation of Manpa (Manufactora de Papel) is aimed at verifying that toilet paper industry production, marketing and distribution" are all in line with state policies, Vice President Jorge Arreaza said on Twitter, without indicating how long the takeover would last.

He said the decision had been taken by an economic panel sworn in last week by President Nicolas Maduro, a close ally of Communist-ruled Cuba.

OPEC member Venezuela has vast crude oil resources, sitting atop the world's largest proven reserves.

But efforts to centralize its economy like Havana have seen the country reach an inflation rate of 32.9 percent, and a toilet paper shortage rate of 20 percent, according to government data.

Even hospitals have reported food shortages, while citizens routinely deal with shortages of coffee, flour, sugar or personal care basics like toilet paper.

Venezuela imports half the food it consumes, and the government also has been taking over large farms hoping it can boost domestic production and supply.

Maduro last week claimed the White House is plotting the "collapse" of his government next month by sabotaging food, electricity and fuel supplies.

MONETARY POLICY - Below the Event Horizon

The Fed's "Renormalization" Shock (All 600 bps Of It) 09-21-13 Barclays via ZH

Bernanke's actions this week make it very clear that between "financial conditions" and the fragility of growth, the US is incapable of surviving without ZIRP and QE (for now). As Barclays notes, ultimately, normalisation should proceed according to a timeline that does not threaten recovery, yet will result in a neutral monetary policy by the time the economy reaches full capacity and the desired inflation rate. However, there are many uncertainties along this path.

Chairman Bernanke has said it might take "two or three years after 2016" to reach a 4% fed funds rate (the FOMC’s ‘longer-run’ expectation), but, as the disturbing chart below highlights, even an adjustment to 2.0% (the median FOMC expectation for December 2016) entails formidable adjustment of monetary policy once allowance is made for the tapering of QE. Given we now know that 'tapering is tightening', the implicit rate hike from a reduction in QE will mean a 600bps tightening in financial conditions. Do you believe in miracles?

There is a wide variation of econometric estimates of the impact of LSAP, but one rule of thumb is that net purchases of $800bn have, very approximately, a similar impact on US GDP to a 100bp reduction in the fed funds rate.

This implies that the Fed’s cumulative LSAP (set to approach $3.0trn by Q1 2014) might be considered equivalent to lowering the fed funds target rate by 370bp. We have tried to represent this in terms of a negative equivalent fed funds rate in the chart above, which illustrates that a return to ‘normality’ in terms of the Fed’s balance sheet and reaching even a 2-2.5% fed funds rate would represent a formidable tightening of US monetary conditions.

Simply put - how do you think our easy-money, share-buying-back, leverage at all-time highs corporations will cope with a 600bps rise in the cost of capital over the next three years?

Source: Barclays