Forget about a government shutdown. The quibbling over concessions to keep the government funded distracts from what might be the most predictable economic crisis. We have problems that may affect everything from the value of the U.S. dollar to investors’ savings, but also to national security.
In a presentation earlier this year, Erskine Bowles (of the Simpson-Bowles commission) explains why he travels around the country to drum up support for fiscal reform:
- We are doing this (traveling around the country to drum up support for fiscal reform) not for our grandkids, not even for our kids, but for us.
- If we don’t get elected officials to pull together, we face the most predictable economic crisis in history. The most predictable, but avoidable crisis.
Mr. Bowles is 68 years old; when someone his age says we need to get fiscal reform done for his generation, we should take note. The good news is that we see awareness increase. The bad news is that policy makers have an amazing ability to kick the can down the road. Former Bundesbank President Axel Weber has said policy makers choose the cost of acting versus the cost of not acting. We fully agree and would like to add that the bond market may be the one force powerful enough to get policy makers to make the tough but necessary choices. Unlike the Eurozone, however, we have a current account deficit in the U.S. which means that should the bond market apply pressure on policy makers, the U.S. dollar might come under far more pressure than the Euro has ever been.
full article at source: http://www.marketoracle.co.uk/Article42502.html
by Tyler Durden
Is the global economic downturn going to accelerate as we roll into the second half of this year? There is turmoil in the Middle East, we are seeing things happen in the bond markets that we have not seen happen in more than 30 years, and much of Europe has already plunged into a full-blown economic depression. Sadly, most Americans will never understand what is happening until financial disaster strikes them personally. As long as they can go to work during the day and eat frozen pizza and watch reality television at night, most of them will consider everything to be just fine.
Unfortunately, the truth is that everything is not fine. The world is becoming increasingly unstable, we are living in the terminal phase of the greatest debt bubble in the history of the planet and the global financial system is even more vulnerable than it was back in 2008. Unfortunately, most people seem to only have a 48 hour attention span at best these days. They don’t have the patience to watch long-term trends develop. And the coming economic collapse is not going to happen all at once. Rather, it is like watching a very, very slow-motion train wreck happen.
The coming economic nightmare is going to unfold over a number of years. Yes, there will be moments of great panic, but mostly it will be a steady decline into economic oblivion. And there are a lot of indications that the second half of this year is not going to be as good as the first half was.
The following are 19 reasons to be deeply concerned about the global economy as we head into the second half of 2013…
#1 The velocity of money in the United States has plunged to an all-time low. It is extremely difficult to have an “economic recovery” if banks are not lending money and people are not spending it…
full article at source:http://www.zerohedge.com/news/2013-07-05/19-reasons-be-deeply-concerned-about-global-economy
By David Mc Williams
In terms of reading the economic tea leaves, last week’s cup of data has left behind a perplexing residue, with some good bits, some bad bits and lots of confusing bits, which could go either way. However, it is a crucial week because the evidence suggests that something very odd is happening in Ireland. The Irish bond market is decoupling from the Irish economy. That sounds weird, but let’s dig a bit to explain.
The news from the financial markets – Ireland being able to borrow again – is unambiguously good. There are a few gripes, like the interest rates, but it would be churlish not to see this as a positive – and indicative of a likely bank deal which will see a dramatic easing in the overall debt position of the state.
Obviously, there is a long road still to go, but the markets clearly believe that the bank debt mutualisation deal hinted at in Brussels last month will be delivered.
So far so good, but at the same time, the data from the real economy was awful, and the news from the banking system, as well as local credit conditions, is equally desperate.
In another development which will form the background music to the next few months, ECB president Mario Draghi has signalled that he is going to take the Germans on and has fired the opening salvos in what will prove to be a titanic battle for the hearts, minds and balance sheet of the ECB. He will buy government bonds directly.
full article at source: http://www.davidmcwilliams.ie/2012/07/30/reading-the-tealeaves?utm_source=Website+Subscribers&utm_campaign=bf7581ddae-30072012&utm_medium=email
So it has been quite a week.
Let’s deal with the decoupling idea
A few years ago, when J.P. Morgan grew their derivatives book by 12 Trillion in one quarter[Q3/07] – I did some back of the napkin math – and figured out how many 5 and 10 year bonds the Morgue would have necessarily had to transact on their swaps alone – if they are hedged. The bonds required to hedge the growth in Morgan’s Swap book were 1.4 billion more in one day than what was mathematically available to the entire domestic bond market for a whole quarter?
Put simply, interest rate swaps create more settlement demand for bonds than the U.S. issues.
This is why U.S. bonds “appear” to be “scarce” – which the bought-and-paid-for mainstream financial press explains to us is “a flight to quality”. Better stated, it’s a “FORCED FLIGHT [or sleight, perhaps?] TO FRAUD”.
Assertions that netting “explains” this incongruity are a NON-STARTER. Netting generally occurs at day’s end – the math simply does not even work intra-day.
Further Evidence of Gross Malfeasance in the U.S. Bond Market
Back in 2008, at the height of the financial crisis, folks are reminded how the Fed and U.S. Treasury were unsuccessful in finding a financial institution to either acquire or merge with Morgan Stanley. Unfortunately, Morgan Stanley’s financial condition has continued to deteriorate:
Analysis: How Morgan Stanley sank to junk pricing
REUTERS | June 1, 2012 at 5:45 pm |
(Reuters) – The bond markets are treating Morgan Stanley like a junk-rated company, and the investment bank’s higher borrowing costs could already be putting it at a disadvantage even before an expected ratings downgrade this month.
Bond rating agency Moody’s Investors Service has said it may cut Morgan Stanley by at least two notches in June, to just two or three steps above junk status. Many investors see such a cut as all but certain
full article at source: http://www.marketoracle.co.uk/Article35164.html
By David Mc Williams
Let’s talk about Germany. What does Germany want? Why is it important? How does what the Germans want affect us?
This week, we have an American flavour to the column because I am writing this from southern California, where I have just had the pleasure of listening to probably the most important player in the global bond market, Mohamed El-Erian, the chief executive of Pimco, the world’s largest bond fund.
When this guy speaks and shares his view of the world, we should listen, not only because he is one of the most influential people in the market but because, unlike many financial market superstars, he is thoughtful, analytical and sensitive.
Equally significant is the fact that he is also addressing a group of investors who will have an impact on how the world reacts to political news from Europe and, to a small extent, from us in the months ahead. (The details are at https://hedge-fund-conference.com/2012/invitation.aspx.) Before we think they are worried about Ireland, they are not. However, they are concerned about Germany and the euro and what happens next.
full article at source:
As an Irishman living in Lubeck (northern Germany) and I would say your right on the Button. The ordinary Germans are wonderful people and I have made some great friends ,but there politicians are just the same as we have in the Dail gangsters, and out for themselves!
What was good for EU was always bad for Germany and what was good for Germany was bad for other EU countries. This could not have been more pronounced than yesterday Nov 23 2011 as Germany yields rose 11.3% and now are up another 4% for the day as Bond markets take a disliking to the German paper or rather the attitude. But what is interesting is that as the German yields rise, Italy and France continue to be falling in terms of spread. Is this why they say :Germany is the crux of the problem
If Germany is being clinically targeted, then Nov will be a month to remember as a month that brought back fear into the markets. We said on Nov 4, that markets are now going broke for Fear in Nov at a time when Markets had rallied hard in October which too was covered by us on Oct 2 and Oct 4 and Oct 8 articles.
Since the beginning of the Eurozone debt debacle, Germany benefited spectacularly from its reputation as safe haven. While yields were spiking in other Eurozone countries, German bond yields were dropping; and even 10-year bond yields dipped below the rate of inflation. So perhaps when it offered €6 billion in 10-year bonds at an average yield of 1.98%, a record low for auctions, it expected them to fly off the shelf. It was supposed to be a no brainer but has it stirred the hornets nest!!!
full article here: http://www.marketoracle.co.uk/Article31742.html
Wow!! The billboard signals of extreme crisis are overwhelming. Three years
of near 0% with no recovery. A full year of ample USTreasury and mortgage bond
monetization with no recovery. Tons of cash aid deliveries to the big US banks
with no recovery. Some key corporate nationalizations with no recovery. Oodles
of errant stimulus programs with no recovery. Some important misdirection in
home loan aid initiatives with no recovery.
The US Federal Reserve admits it can do nothing more as a recovery remains elusive. The USGovt is paralyzed by disguised fascist warmongers opposed by disguised marxist collectivists, but intent on maintaining the status quo among bank fraud. An approved accounting fraud directive is kept in place to present a picture of bank solvency.
Intermediate credit markets have come to a standstill.
The US stock market is in tatters. The USTreasury Bond market is the only
conventional rally at work. And with all these programs, developments, and
events, the USEconomy moves toward a recession with relentless determination
and purpose, In today’s age of lying about price inflation by at least 5%, that
means the recession is about to turn into a Minus 5% Recession after never
exiting the recession recognized in 2009.
The billboard messages are dire, ugly, dreadful, dangerous, and full of destruction, typical of systemic failure. Too bad the Keynesian textbooks do not have a chapter on banking
system insolvency, or one quarter of the households living in negative equity,
or central bank toxic paper pits, or global currency war, or confiscation of
tyrant accounts. The ineffective monetary & fiscal policy has ushered in
the nightmarish systemic failure. That is what is occurring.
Full article at source: http://www.marketoracle.co.uk/Article30577.html
By David Mc Williams
Anyone who worked in financial markets will know that — at its most base — the “market” is in fact only a coked up, whoring 28-year-old from Basildon on hyper-wages, with a Porsche and a Chelsea season ticket.
This is hardly the type of far-sighted leader that we should be depending on, nor the opinion we should be worried about. Has he become the arbiter of economic policy in the early 21st Century? Is this where we have got to? The young lad in London who is “shorting” the European bond market mightn’t easily find Florence on a map and his geopolitical interests might not go further than the price of a footballer’s transfer fees in the closed season and who won ‘The X Factor’…
full article at source:http://www.davidmcwilliams.ie/2011/08/10/banks-that-think-theyre-casinos-put-us-all-at-risk
Sunday, May 29, 2011 – 11:58 AM
According to the Examiner.ie .Minister for Transport Leo Varadkar has warned that Ireland may need another bailout. He is the first minister to make that admission.
Minister Varadkar said it was unlikely that Ireland would be able to raise money from the international bond markets next year as originally planned.
In an article published in the Sunday Times today, Minister Varadkar said we might be able to return to the markets “some time” in 2013.
That “would mean a second programme (would be required),” he said, “either an extension of the existing programme, or a second programme. I think that would generally be most people’s view.”
Former head of Libertas Declan Ganley said it had been obvious since before the General Election that a second bailout would be necessary.
“This is the cost of not purging the insolvency from our economy,” he said. “Ireland can pull out of this…but we have to get rid of the insolvency of the bank debt that has been left hanging over us because otherwise, of course we can’t revisit the markets.
“Government policy today says we should carry this millstone of bank debt around us…Who’s going to lend money to us in that case
Read more: http://www.examiner.ie/breakingnews/ireland/varadkar-we-may-need-second-bailout-506852.html#ixzz1NlVEVRSi
Just last week MR. Edna Kenny Stated in the Dail that there will be no need for Ireland to renegotiate its EU /IMF Bailout loans .There is no need for new loans and there is no need to extend the time we received to pay these loans back .I said then and I say again this is cloud chookoo land this man is living on .We then hear today not even a week gone by when the Minister for Transport Leo Varadkar comes out with this .You couldn’t write this stuff lads. Let this be yet again another warning the sh** is about to hit the fan and it’s all coming our way! The boys are getting ready to sell off anything that isn’t tied down, and I mean everything and anything!
It’s “devoid of any substance and verge on the ridiculous” according to the Greek finance ministry but as Greek 10-year bonds touch even greater highs this afternoon – presently trading at 14.9% mid-point – it seems that something may be afoot in bond markets. The claim is that a Citibank employee was responsible for an email which speculated that Greek authorities might seek to implement a restructure/default/burden-share scheme over the Easter holiday weekend.
Meanwhile, Ireland’s 10-year bond has reversed all the gains since the announcement of the stress test results on 31st March, 2011 and are presently trading at a record 10.28% mid-point compared with a previous record closing of 10.22% just before the announcement of the stress test results and details of the bank restructuring. Portugal’s 10-year bond is also in record territory trading at 9.5% mid-point. If there is any cheer it is thatSpain’s 10-year bond has eased back today to below 5.5%. It is still a mystery on here as to howSpain’s banks are so healthy and their property sector so relatively unscathed by the financial crisis and construction and housing bubble.
The concern is thatGreecewill default and thatIrelandwill follow closely on her heels. And if a default is inevitable forIrelandthere are actions that can be undertaken now to try to make the default as orderly and inexpensive as possible. Dealing robustly with bondholders (senior and subordinated) would fall into that category of discussion.
full article source: http://namawinelake.wordpress.com/2011/04/21/citibank-email-sparks-rumours-of-greek-default-over-easter-weekend/