SocGen Sums It Up: "The Time For Patching It Up Is Over"

While next to impossible, now may be a good time to ignore the constant barrage of meaningless noise and flashing red headlines, which not only are contradictory but prove that Europe is literally making it all up as it goes along. Today is a great case in point of a tangential detour which does nothing to change the reality that Germany no longer wants Greece in the Eurozone (remember, oh, yesterday), and that the ECB is merely playing possum with PSI creditors who will block the deal with even greater vigor than before (anyone recall the FT story about the PSI deal being on the verge of collapse not due to the ECB but due to private creditors?) as the ECB's even bigger subordination will simply make the amount of hold outs even greater. So while algos take the required 12-48 hours to figure out what just happened today, here is SocGen's Suki Mann stepping back from the endless daily din, and summarizing what is really happening in Europe.

While You Were Sleeping, Central Banks Flooded The World In Liquidity

There are those who have been waiting to buy undilutable precious metals in response to a headline announcement from the Fed that it is starting to buy up hundreds of billions of Treasurys or MBS.  This is understandable - after all that is precisely the trigger that the headline scanning robots which account for 90% of market action in the past year are programmed to do. And the worst thing that one can do is put on the right trade at the wrong time. Yet it may come as a surprise to some, that while the world was waiting, and waiting, and waiting, for Bernanke to hit the Print button, virtually every other central bank was quietly unleashing it own mini tsunami of liquidity. In fact, as Morgan Stanley puts it, "the Great Monetary Easing Part 2 is in full swing." But wait, there's more: in an Austrian world, where fundamentals don't matter and only how much additional nominal fiat is created is relevant, it is sheer idiocy to assume that the printers will stop here... or anywhere for that matter. They simply can't, now that the marginal utility of every dollars is sub 1.00 relative to GDP creation. This means that by the time the Global Weimar is in full swing, we will see much, much more easing. Sure enough, MS anticipates an unprecedented additional round of easing in the months ahead. So for those waiting to buy gold et al at the same time as DE Shaw's correlation quants do, the time will be long gone. Because slowly everyone is realizing that it is not the Fed that is the marginal creator of fake money. It is everyone.

America's Discretionary Spending Well Has Run Dry

The more we dig into the bones of President Obama's new budget plan, the more it becomes clear that, as JP Morgan's Michael Cembalest notes, the battles of the future (among our peak-polarized political class) will be between raising taxes and cutting entitlements as the discretionary spending well is empty. As the Budget Control Act cuts this discretionary spend to a 50-year low (close to only 5% of GDP), it is the rise in entitlements (and of course interest costs) that appear mandatory for now and will need to be 'balanced' with tax revenue growth that is expected to rise from 15% of GDP to 20% of GDP by 2022 (thanks largely to a belief that cyclical recovery will save us). As the real ranks of the long-term unemployed and now disabled benefits receivers swell, it seems clear how the entitlement-taxation see-saw will swing unless there is change everyone can believe in.

 

 

Debt End: ‘Greeks at the Cliff’

Greek party leaders have sent written commitments to Brussels saying they will stick to the agreed austerity measures even after the general elections in April. There are still EU demands Athens failed to fulfill, which led to the cancellation of a key meeting of Eurozone finance ministers. Greece is still struggling to secure the second bailout from its international creditors, without which it’s due to default next month. For more on that RT talks to Marshall Auerback, a portfolio strategist and hedge fund manager.

Battlefield USA 2012: Gerald Celente on Year’s Top Trends

 

MUST WATCH: Could Ron Paul Still Win Maine?

 

 

CFTC: Flawed Silver Investigations and Breaking The Law

OPEN LETTER TO THE CFTC
by Bix Weir, RoadToRoota.com:
February 16, 2012
Commodities Futures Trading Commission
3 Lafayette Center
1155 21st St. NW Washington, DC 50581
Re: Flawed Investigations and Breaking The Law
Dear Commissioners:
For over 2 decades a large group of silver investors have been yelling and screaming at the CFTC to stop the rampant downward manipulation of the COMEX silver market. On May 14, 2004 the CFTC released the results of their 1st investigation by Michael Gorham, Director of Market Oversight, saying they have not found any evidence of silver market manipulation.
Read More @ RoadToRoota.com

 

 

Targeting Iran: Israel Ramps Up Rhetoric

Thai police say Israeli diplomats were the target of a group of Iranians arrested after prematurely setting off explosives in Bangkok. The claims are expected to further fuel anti-Iranian rhetoric that Tel Aviv has ratcheted up after bomb attacks targeted Israelis in Georgia and India.
And another obstacle for Israel could come from Egypt, as the Muslim Brotherhood threatens to reconsider Cairo’s peace treaty with Tel Aviv.

The True Value Of Money – Or Why You Can’t Fart A Crashing Plane Back Into The Sky

Banknotes aren’t worth the paper they’re printed on. The entire economy relies on the suspension of disbelief
by Charlie Brooker, Guardian.co.uk
I’m no financial expert. I scarcely know what a coin is. Ask me to explain what a credit default swap is and I’ll emit an unbroken 10-minute “um” through the clueless face of a broken puppet. You might as well ask a pantomime horse. But even an idiot such as me can see that money, as a whole, doesn’t really seem to be working any more.
Money is broken, and until we admit that, any attempts to fix the economy seem doomed to fail. We’re like passengers on a nosediving plane thinking if we all fart hard enough, we can lift it back into the sky. So should we be storming the cockpit or hunting for parachutes instead? I don’t know: I ran out of metaphor after the fart gag. You’re on your own from hereon in.
Banknotes aren’t worth the paper they’re printed on. If they were, they’d all have identical value. Money’s only worth what the City thinks it’s worth. Or, perhaps more accurately, hopes it’s worth. Coins should really be called “wish-discs” instead. That name alone would give a truer sense of their value than the speculative number embossed on them.
Read More @ Guardian.co.uk

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ART CASHIN: Forget Greece, Traders Are Worried About Something That Could Send Us Back To The Middle Ages

by Sam Ro, BusinessInsider.com:
In this morning’s Cashin’s Comments, UBS’s Art Cashin addresses what worries traders these days.
A Greek default has been on everyone’s minds lately. But the traders Cashin has talked to think that it’s just the tip of the iceberg.
The bigger fear is what happens in the credit default swap (CDS) markets. No one knows how big it is, who the counterparties are, and, worst of all, whether the CDS contracts will actually trigger in what many would consider a default.
Here’s an excerpt from Cashin’s note:
Read More @ BusinessInsider.com

Consuming Kids: The Commercialization of Childhood (Trailer)

Guest Post: The Long Arm Of Uncle Sam Just Got Longer

This one's hot off the presses. Just yesterday, our friends at the Financial Crimes Enforcement Network (FinCEN) issued a press release on its latest ruling related to foreign 'money service businesses (MSBs).' An MSB is a private company that provides certain financial services like check cashing, money orders, title pawn, payday loans, travelers' checks, prepaid stored value cards, tax refund payments, etc. Frequently, traditional MSB clients tended to be individuals without bank accounts or access to credit. But increasingly, the US government is looking at companies engaged in electronic payments, crowdsourced funding, and even microcredit finance as money service businesses. The implication? They should all be regulated. Even if they're not even US companies. That's right. FinCEN's latest ruling suggests a foreign MSB may now be subject to US regulations AND CRIMINAL PENALTIES "even if none of its agents, agencies, branches or offices are physically located in the United States."

Goldman Raises Stop On Its Long Russell 2000 Reco, Cites Heightened Concerns Of Greek Default

Yesterday, it was Thomas Stolper who capitulated on his latest incursion into the field of 0.000 batting, when he closed his long EURUSD reco (only for the EUR to jump today of course). We can hardly wait for him to announce he is again long the EURUSD for the clearest EUR short signal possible. That said, it still left outstanding the Goldman Russell 2000 recommendation noted here previously. Sure enough, in the aftermath of yesterday's return of risk with a vengeance, Goldman is taking steps to make sure it locks in at least some profits on its RUT 2000 target of 860 by hiking the stop to 810 from 765. The reason? "What has clearly changed in the past week -- and the catalyst for this "leash tightening" -- is that European sovereign risks have reemerged, with continued near-term support for Greece now much more uncertain than we or the markets had previously assumed. With the amplification of these hard-to-assess risks emanating from Europe, and data continuing to support our main thesis, we think that protecting the gains at this point with relatively tight stop is prudent" But why if Europe is suddenly fixed, on the completely meaningless news that the ECB is funding Eurozone central banks with magic money on their Greek bond losses, even as the actual debt notional is not changing at all. At this point, we doubt we are the only one who no longer care.

The Reporter Is Either Wrong Or This Is A Bad Deal For Greece

If the ECB switches 50 billion of old bonds for 50 billion of new bonds, what does Greece get?  No notional reduction. Possibly a reduction in interest payments but that depends on the coupons on the bonds the ECB owns. The new bonds allegedly have some covenants and possibly other projections for the bond holders. That is a negative for Greece - they can default on these old bonds and the ECB can't do much about it. Maybe the reporter is wrong, but this is a good deal for the ECB, marginal for Greece, but does make it easier to jam holdouts. They can default on old bonds or retroactively CAC old bonds and the ECB won't be affected. This announcement is either marginally good or marginally bad depending on the details. It is not great or a game changer - except maybe the money printing angle.

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