Perhaps never a more truthful 'lifting-the-veil' paragraph has been written by the squid as the following discussion of just what NEW QE will consist of and what it will achieve; sad that our economy market has come to this.
"The form of any return to QE is less clear. The issue is not so much whether the Fed buys Treasuries or agency mortgage-backed securities; we are pretty sure that any new program would be primarily focused on agency MBS purchases. These should have a somewhat bigger per-dollar effect on private-sector demand and are probably less controversial with the public than Treasury purchases. They can be framed as help for homebuyers to achieve the American Dream, which sounds better than help for the government to run large budget deficits."
Former Reagan OMB Director David Stockman was 'allowed' on CNBC this morning - much to their chagrin now we suspect - and espoused his own brand of truthiness, starting with this epic tirade: "Ron Paul is the only one who is right about the Fed, and the Fed is the heart of the problem. They have destroyed the capital markets and the money markets; interest rates mean nothing; everything is trading off the Fed and Wall Street isn't even home - as it's now a bunch of computers trading word-clouds emitted by this central banker and that" In this environment, he goes on, everyone is being given the wrong signal - i.e. the Ryan/Romney campaign is abnout restoring vibrant capitalism; how can you do that when the financial markets are dead - the lifeblood of a capitalist system. And that is the problem today: "The Fed (and the lunatics that run it) are telling the whole world untruths about the cost of money and the price of risk." Must watch clip.
Europe's Most Parabolic Chart Resumes Climb As German TARGET2 Claims Rise To Just Shy Of $1 TrillionPerhaps one of the best advance indicators of the market respite that took place in August was the slowdown in Bundesbank TARGET2 claims, which until then had been rising at an exponential pace, only to see its first monthly sequential decline since 2011, dropping €1.4 billion. Now that August is gone, and the vacation that brought Europe to a merciful halt is over, the time to resume sucking Germany dry in order to fund current account (and other) deficits is back, and sure enough the just reported Bundesbank August update of TARGET2 claims shows that the increase is back. At a record €751.4 billion (or just shy of $1 trillion at today's exchange rate), Germany funded the periphery, mostly Spain with record €415Bn in liabilities, Italy with a record €280Bn, Greece at €105Bn, via the transfer of public risk to private sector benefit (sunk "public" Buba costs are a concurrent benefit to the German export sector) to the tune of over €1 billion each work day, with a total monthly increase of €24 billion in August. Look for this number to resume its astronomic rise as the periphery realizes its inventories needs restocking and that it needs to import German stuff using Bundesbank liabilities that will never be satisfied.
"Trenton makes, and the world takes", but the mob has dibs on everything. And by mob we mean the city's mayor, who in collaboration with a convicted sex offender, were just arrested by the FBI. At least we now have a reason why jobs in New Jersey are "confirming" the stock market "recovery."
ZNIRP, and $1.6 trillion in inert reserves, the bulk of which are used to buy TSYs, then promptly repo them back to the Fed and use the cash proceeds to buy 200x+ P/E stocks, imploding stock volumes mean only one thing - a collapse in revenues and profits, terminations of entire divisions, collapse in tax revenues for the US Treasury, an increase in deficit, the need for more debt issuance, and a green light for the Fed to monetizing even more supply. And just to avoid the noise from "unseasonal" Y/Y comparisons, in August total ADV dropped by 12.6% from July. ETF volume imploded by two thirds from last year, and 14% from last month. Cue the financial earnings forecast reductions ahead of Q3 results.
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Dante would be proud; the Baltic Dry Shipping Index has now plunged through at least eight levels of hell on its way to record lows as it drops to 666 today. This is the lowest since Feb 2012's Chinese New Year lows and is a stunning 55 percentage points lower than the normal seasonal shift in the global aggregate trade indicator (and down 69% from its Oct 2011 swing high). Whether its over-supply, under-demand, or too many Chinese New Years, it is unarguably the next level of hell for the global economy - that will surely bring all the bottom-callers out as this time is different.
Krimson Kardinals Of Karlsruhe, any association with other acronyms is purely accidental), will decide if Europe stays or goes. There is some possibility Karlsruhe may delay the September 12 decision even further, following a new complaint by a Merkel conservative, Peter Gauweiler who said in a statement on Sunday the fund should not be ratified unless the ECB rowed back on its plans to make unlimited purchases of sovereign bonds, since that he said, posed a major risk to Germany's own national budget. The Constitutional court is expected to opine on this latest hurdle today or tomorrow at the latest. However we doubt it. So what does the binary outcome ahead of Wednesday look like? Here are some Wall Street pundits opining. Curiously, while the market is also pricing perfection as the outcome to this event, there may be gray skies forming.
- China Output Growth Slows as Leadership Handover Looms (Bloomberg); Weak China trade data raises Beijing spending stakes (Reuters)
- Italy Q2 GDP revised down to -0.8% year-on-year on weak domestic demand (Economic Times)
- Troika disagreed with €2 billion in Greek "cuts" (Reuters)
- No Greek bottom in sight yet: Greek IP, Manufacturing Output plunge compared to year earlier (WSJ)
- France's Hollande sees 2013 growth forecast about 0.8 pct (Reuters), France plots tax hikes of up to 20 bln euros (Reuters)
- Euro Crisis Faces Tests in German Court, Greek Infighting (Bloomberg)
- Geithner sells more AIG stock (FT)
- Japan infuriates China by agreeing to buy disputed isles (Reuters)
- Euro crisis to worsen, Greece could exit euro: Swedish FinMin Anders Borg (Economic Times)
- ‘Lead or leave euro’, Soros tells Germany (FT)
- German MP makes new court complaint against euro plans (Reuters)
- Obama super-Pac in push to raise $150m (FT)
Israeli EMP Attack Could Throw Iran ‘Back to Stone Age’
Italy Has No Plans to Access European Central Bank Bond-Buying Plan
White House to Miss Deadline for Report On ‘Fiscal Cliff’ Budget Cuts
Does Explosion in Food Stamp Spending Contribute to Higher Food Prices?
Gun Sales Surge
Are You Better Off? 40 Statistics That Will Absolutely Shock You
1. Both political parties supported TARP and auto industry bailouts.
2. Both political parties support the unconstitutional Federal Reserve.
3. Both political parties support the unconstitutional Patriot Act.
4. Both political parties support the unconstitutional TSA.
5. Both political parties support the unconstitutional National Defense Authorization Act.
In short… Both political parties are bad for America.