Bonds beat stocks

Say What? In 30-Year Race, Bonds Beat Stocks

By Cordell Eddings

The biggest bond gains in almost a decade have pushed returns on Treasuries above stocks over the past 30 years, the first time that’s happened since before the Civil War.
Fixed-income investments advanced 6.25 percent this year, almost triple the 2.18 percent rise in the Standard & Poor’s 500 Index through last week, according to Bank of America Merrill Lynch indexes. Debt markets are on track to return 7.63 percent this year, the most since 2002, the data show. Long-term government bonds have gained 11.5 percent a year on average over the past three decades, beating the 10.8 percent increase in the S&P 500, said Jim Bianco, president of Bianco Research in Chicago.
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Comment: It is very unlikely that for the next 30 years could be said the same in the future. What will be the next mega investment? In order to find out, let's look for some of the more unlikely placesc in the coming months.

Euro may become Chinese

European Bailout Fund Could ‘One Day’ Issue Bonds in Yuan, Regling Says

Q

By Bloomberg News - Oct 29, 2011 5:22 AM GMT-0200

The euro area’s bailout fund could at some point issue bonds denominated in the Chinese currency, Chief Executive Officer Klaus Regling said in Beijing today.
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Comment: The euro becomes a Chinese currency

Euro fund under scrutiny

EU May Struggle to Keep Euphoria as Post-Summit Scrutiny Deepens

By Svenja O’Donnell 

European leaders may struggle to maintain the euphoria that drove the euro to its biggest one-day gain in more than a year as scrutiny deepens on their latest attempt to stem the region’s turmoil. 

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Comment: The opionion makers will continue with their mission to igrnore the facts.
See this comment by a Bloomberg reader:

in 30 minutes ago 1 comment collapsed CollapseExpand

What is curious to me is a picture with Cameron, given the fact Britain is not a member state of the Eurozone (Britain is only part of the E.U.) and didn´t participate in the important wednesday meeting.
Americans like the ones in Bloomberg get a distorted vision from the Eurozone because they have still their base in London instead of the Eurozone (Frankfurt and Brussels) In Britain the media ihas been always mostly Europhobic and doesn´t like the Federalist idea. An American would understand much better what is going on in Europe than a Briton, as in several areas it took place in the USA decades ago.
Neither Americans nor the Eurozone need a British intermediary to treat with each other.

A skeptical Economist

Economic crisis

Europe’s rescue plan

This week’s summit was supposed to put an end to the euro crisis. It hasn’t

... At this summit Europe’s leaders had hoped to prove that their resolve to back the euro was greater than the markets’ capacity to bet against it. For all the backslapping and brave words, they have once again failed. There will be more crises, and further summits. By the time they settle on a solution that works, the costs will have risen still further.
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Comment: That was to be expected. Sadly enough, The Economist may again induce investors to make wrong bets. 

Rogoffian nonsense

Greece Will Eventually Leave Euro, Rogoff Says

By John Detrixhe and Michael McKee

European leaders’ agreement to expand a bailout fund to stem the region’s debt crisis only buys time as Greece will likely still leave the euro in the next decade, Harvard University economist Kenneth Rogoff said.
“It feels at its root to me like more of the same, where they’ve figured how to buy a couple of months,” Rogoff said as a compensated speaker at the Bloomberg FX11 Summit in New York yesterday. “It’s pretty darn clear the euro does not work, that it’s not a stable equilibrium.”
European leaders bolstered their crisis-fighting toolbox by boosting the heft of their rescue fund to 1 trillion euros ($1.4 trillion) and persuading bondholders to take 50 percent losses on Greek debt. Measures also included a recapitalization of European banks and a potentially bigger role for theInternational Monetary Fund in strengthening the bailout fund.
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Comment: Being so often so wrong surely qualifies him for the next false prediction in the business that he's in.

Crescimento econômico - Prvisão Brasil

Baseado na teoria da complexidade
R A N K I N G  E X P E C T E D  G R O W T H  I N  P E R  C A P I T A  G D P   T O  2 0 2 0

48 BRAZIL BRA 2.73%

Fonte

Rerverse imperialism

Europe Looks to IMF, China for Rescue-Fund Cash

Q

By Bloomberg News

European officials are studying the idea of an International Monetary Fund channel for money for their enlarged rescue fund, as China said it needed more detail on any potential plan before deciding whether to contribute.
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Dollar, euro, yen

FOREX-Dollar falls to fresh record low against the yenOct 27 (Reuters)
- The dollar, which has hit a string of record lows this week against the yen, fell to a new low on Thursday as investors continued to test the resolve of Japanese authorities who have intervened twice in 2011 to date to stem the yen's strength. The dollar dropped as low as 75.668 yen on electronic trading platform EBS and was last down 0.6 percent at 75.72 yen.
The euro extended gains against the dollar after data showed U.S. gross domestic product growth posted at 2.5 percent in the third quarter, in line with economists' expectations.
The euro was last up 1.2 percent at $1.4061 from $1.4047 just before the release of the data.
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Comment: No surprise at all to the readers of this blog.

The new iron (chancellor) lady

Merkel Asserts EU Leadership, Seeks to Win Voters

By Leon Mangasarian and Patrick Donahue

Chancellor Angela Merkel emerged from 10 hours of negotiations in Brussels with a plan to stem the debt crisis that might as well have been written in Berlin.
The German leader forced French President Nicolas Sarkozyto bend to her will on using the European rescue fund only as a last resort, ruled out an automatic crisis-fighting role for theEuropean Central Bank and dragged banks back to the table to take greater losses on Greek debt. She even wrung further budget concessions out of Italian Prime Minister Silvio Berlusconi.
“Merkel got what she wanted,” Shada Islam, an analyst at the Friends of Europe policy-advisory group in Brussels, said in a telephone interview yesterday after the summit. “This has confirmed Germany’s role as the make-or-break player not only in the euro-zone crisis but in European Union affairs beyond Europe.”
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Comment: It took quite a while until she learnt the lesson all the while the rest of the gang began to forget it.

Japan spies a new haven

Yen Record May Encourage Japan to Aid Europe

By Aki Ito and Andy Sharp

Aiding Europe may be Japan’s best bet for weakening the yen after an expansion of central-bank stimulus yesterday failed to stop the currency from advancing to a postwar high.
The Bank of Japan added 5 trillion yen ($66 billion) to an asset-purchase program after Europe announced an enlarged rescue fund to counter the region’s debt crisis.
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European bailout fund

EU Sets 50% Greek Writedown, $1.4T in Crisis Fight

By James G. Neuger and Stephanie Bodoni

European leaders cajoled bondholders into accepting 50 percent writedowns on Greek debt and boosted their rescue fund’s capacity to 1 trillion euros ($1.4 trillion) in a crisis-fighting package intended to shield the euro area.
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Comment: A step taken back from the abyss.

With a little help from my (Chinese) friends

Sarkozy Said to Plan Plea to China for EU Fund

By Jonathan Stearns and Helene Fouquet

French President Nicolas Sarkozyplans to call Chinese leader Hu Jintao tomorrow to discuss China contributing to a fund European leaders may set up to bolster its debt-crisis fight, said a person familiar with the matter.
The investment vehicle was one of the options being considered by European leaders at a summit tonight to expand the reach of its 440 billion-euro ($612 billion) European Financial Stability Facility.
Sarkozy’s plea to his Chinese counterpart would come the day before a planned visit to Beijing by Klaus Regling, chief executive officer of the EFSF, to court investors.
The EFSF, established last year to sell bonds to finance loans for distressed euro nations, has since also gained the authority to buy sovereign bonds on the secondary and primary markets, offer credit lines to governments and recapitalize banks as the Greece-triggered debt troubles have spread. The EFSF said Regling’s visit to China this week is linked to the fund’s original debt-issuance role.
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Comment: This is actually very bad news for the US dollar.

Obamacure

Debt reduction plan for Greece

Greece Aims to Include All Sovereign Bonds to 2035 in Debt Plan

By Maria Petrakis and Marcus Bensasson - Oct 24, 2011 3:03 PM GMT-0300 

Greece’s government aims to include all sovereign bonds maturing up to 2035 in talks underway in Brussels to reduce the country’s debt burden, a Greek government official said today on the condition of anonymity...

The total amount of debt that is now being considered in the debt reduction plan is 205 billion euros, the official said. Greece is also seeking longer maturities and lower interest rates on the bilateral loans to be included in a new financing package, he said.

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Comment: For too long a time, more screaming and lamenting has been going on than is warranted. It's time to stop and move on. The euro won't fall apart, Greece won't leave the euro zone.

Euro on its way to 1.40

EUR-USD

1.3935

+0.0039

+0.28%

The loss of trust

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Once trust is lost, and it is lost, it takes a long time to regain it, and quite often it never comes back.

Doctor prescribes more poison for the deadly ill patient

Fed’s Yellen: QE3 May Be Warranted

By Scott Lanman and Jennifer Oldham

Federal Reserve Vice Chairman Janet Yellen said a third round of large-scale securities purchases might become warranted if necessary to boost a U.S. economychallenged by unemployment and financial turmoil.
Mais
Comment: One may as well define QE 3 as witchesbrew.

M2 goes vertical

Inflation is on its way

Euros create $ 1.3 tri bailout fund

Stocks, Euro Advance as European Leaders Craft $1.3 Trillion Bailout Fund

By Michael P. Regan and Rita Nazareth 

U.S. stocks and the euro rose, recovering from earlier losses, as European governments discussed deploying $1.3 trillion in funds to tame the sovereign debt crisis. Treasuries fell and commodities pared losses.  

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Heavy fall of the treasuries

Treasuries Tumble in Longest Weekly Losing Streaks Since April

By Cordell Eddings and Daniel Kruger - Oct 14, 2011 6:18 PM GMT-0300

Treasuries fell, with 10- and 30-year securities in their longest weekly losing streaks in more than six months, as European leaders’ efforts to resolve the sovereign-debt crisis damped refuge demand.
Ten-year yields approached a six-week high as U.S. retail sales rose more than forecast, easing concern the nation is headed for a recession. Group of 20 finance ministers began a two-day meeting in Paris amid speculation they’ll agree to give the International Monetary Fund greater firepower to resolve Europe’s debt woes.
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Comment: This is just the beginning. There is more to come. You can jump in safely. The ride will be a long ride.

Treasuries fall

Treasuries Tumble in Longest Weekly Losing Streaks Since April

By Cordell Eddings and Daniel Kruger

Treasuries fell, with 10- and 30-year securities in their longest weekly losing streaks in more than six months, as European leaders’ efforts to resolve the sovereign-debt crisis damped refuge demand.
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Comment: Was this the starting gun for the greatest bubble the world has ever seen to implode?

Hyperstagflation

It is said that history repeats itself, what at first was a tragedy comes back later as a farce. Yet maybe it is the other way around with stagflation: In the 1970s we experienced stagflation as a farce, now it is coming back to haunt us as a tragedy. In the 1970s we did not really suffer very hard from the stagflationary onslaught. Now we will really suffer from stagflation and many of us will actually perish.

Betting on the collapse

Bill Gross Just Made A Huge Bet On Economic Doom, And Nobody Seems To Care

Joe Weisenthal

Read more: http://www.businessinsider.com/the-irony-of-bill-gross-huge-bet-on-treasuries-2011-10#ixzz1aoFQfcQhThis week, bond god Bill Gross just made a super-long bet on the long end of the yield curve, coming right after a historic rally in fixed income.
It was a gigantic shift from his stance earlier this year, when he bet against Treasuries -- a bet that famously worked out badly for him.
The interesting thing about this is that his short bet got TONS of attention (including a big story in The Atlantic), whereas his new long bet is only getting a little.
The funny thing about this is that in terms of implication for the economy, the new long bet is much more significant. Going super-long on the long end of the curve implies that Gross thinks yields will collapse even more, which would likely happen in a major economic collapse of some sort.

Read more: http://www.businessinsider.com/the-irony-of-bill-gross-huge-bet-on-treasuries-2011-10#ixzz1aoFEVdou

Comment:  Bill may be wrong and right at the same time. He is probably right anticipating an economic collapse, yet he be wrong in his belief that therefore rates would fall. Even the best financial minds have difficulties to imagine extreme stagflation.

Join the revolution

Bill Bonner calls for the arms:

"Vive la revolution!

But the poor protestors are just victims of history. When the US embraced its empire it condemned its middle classes. Why? Because that’s how empires work. They bring in cheap goods — and sometimes money itself — from outside. Whether they are taken as booty or traded for the imperial currency, the effect is about the same; they undermine local industries and local wages.

Ancient Rome imported wheat from Egypt, by the boatload, and gave it to citizens (an early form of food stamps). Result: the price of wheat collapsed. Small farmers couldn’t compete with free wheat. They couldn’t earn a living.

The Romans also brought in slaves. Rich, politically-connected Romans took over the small farms, consolidated them into big plantations, and ran them with slave labor. Again, the local labor was out of luck.

Things got so bad for the small farmers that they sold their children into slavery…and then, themselves. Then, in alarm, an edict prohibited Roman farmers from selling themselves into slavery. They were required to remain on their farms…and at work.

Spain ran a very different, short-lived empire in the 16th century. It conquered New World civilizations and imported gold and silver on a colossal scale. It was as if they were printing money! This easy money made the Spaniards rich. They used it like America uses her dollars — to buy things from overseas. Pretty soon, the Spanish neglected their own manufactures and their own farming. Prices rose. Spain’s nascent middle class was smothered in the crib.

Are things so different now? The rich get rich. The middle classes get poorer; they have to compete with imperial plunder…riches coming from Asia, bought with dollars that were never earned…and never will be redeemed.

America’s middle classes were happy to sell their own children into perpetual debt servitude. The kids face obligations 5 to 15 times as great as annual output. Unless they revolt, they will have to work their entire lives to pay for their parents’ excesses.

But what will they do when future generations can take no more? They cannot sell themselves into slavery. They’ve already done so. Most face a lifetime of student debt, mortgage debt, and medical debt (aka Medicaid and Medicare), already.

What can they do? Join the revolution!

Read more: Vive La Revolution! http://dailyreckoning.com/vive-la-revolution/#ixzz1ao6XOHYu

Comment: Bill Bonner at his best.

Current rates

EUR-USD	1.3870	+0.0093	+0.67%
USD-JPY	77.2155	+0.3192	+0.42%
GBP-USD	1.5811	+0.0045	+0.28%

Who pays how much into the EFSF

Source

Enhanced Euro Bailout Fund in place

Slovakia Clears Road to Complete Approval of Enhanced Euro Bailout Fund

By Radoslav Tomek and Peter Laca

Slovakia will approve Europe’s enhanced bailout fund today or tomorrow, completing the ratification process across the 17 euro countries as the region’s leaders prepare for a summit this month...
 The expanded powers of the 440 billion-euro ($600 billion) EFSF would allow the fund to buy the debt of stressed euro-area nations, aid troubled banks in the region and offer credit lines to governments. The EFSF’s current role is to sell bonds to finance rescue loans...
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Comment: Lick your wounds, euro bears. 

Slvak vote will clear Greece rescue

Euro jumps as Slovak vote, economic worries ebb

NEW YORK (Reuters) - The euro rose on Wednesday to near one-month highs against the dollar and yen on hopes that Slovakia eventually would approve an expansion of a program seen critical to combat the euro zone debt crisis.
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Comment: Pressure is up for the Slovaks to give in, and they will. With the financial umbrella in place and with the green light given for the next tranche, there is no reason to worry anymore. As I said so many times before, the Greek drama is really a farce and the Greek tragedy a made-up nightmare. The media circus will now move on to scare another gullible crowd.

EUR-USD

EUR-USD

1.3799

+0.0159

+1.16%

Why it is so bad this time

Why the U.S. was better off in the Great Depression

By The Week's Editorial Staff | The Week – 

The Great Recession may have officially ended in June, but most people don't feel it. Household income is still dropping. Unemployment is stuck above 9 percent. And there's no end in sight, says David Leonhardt in The New York Times. Consider the Great Depression. People typically associate that era with broad suffering. But few today realize that the U.S. economy was actually revving up during the 1930s, and setting up a post-Depression era of dizzying growth. The current economic slump doesn't have that silver lining. In fact, if we don't right our ship or stumble onto the next growth engine, we might remember the Great Depression as the good times. Here, an excerpt:

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Got to NYT

Comment: A very good point. The big difference is not crisis or not - there is no personal life without crisis nor for nation - the major point is how we cope with the challenge.

It happened like I said it would

Euro Rises Most in a Year on Bank Plan

By Catarina Saraiva and Lukanyo Mnyanda - Oct 10, 2011

The euro rose the most in more than a year against the dollar after French and German leaders pledged to deliver a plan to support banks and repeated a commitment to keep Greece in the single-currency bloc.
The dollar dropped against all of its major counterparts as global stocks advanced, sapping demand for the greenback as a haven. German Chancellor Angela Merkel and French PresidentNicolas Sarkozy said in Berlin yesterday they have given themselves three weeks to devise a plan to recapitalize banks and find a “durable” solution for Greece’s debt load. Currencies of commodity-exporting countries rallied as raw materials gained...
Hedge funds and other large speculators increased their net short euro positions to 82,697 contracts in the week ended Oct. 4, the most since June 2010. A short is a bet the price of an asset will fall...
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Comment: There's also a massive short squeeze in the making. Too many want-to-be speculators are nothing more than sheep in a herd who confound the clap trap of the clattering class for reality. They play as long with other people's money until it's really all gone. In this respect they get they full support from our modern politicians who let themselves scare to death from the same media circus and spend the tax payers money until it is all gone. I was sure that Greece and the euro would be "saved" because I know how stupid many financial market operators  really are and even more so that they are just close behind in this respect to the political class with whom they also share the hunger for fortune and power. It is a system that is rigged from the ground up. It is a system that has been tuned ever more towards exploitation. It is a system that has moved far away from true capitalism.

Euro crisis

The fake euro crisis will soon be over. The clattering class will have to find another subject to spill the ink and many an economist may wish that nobody will read his silly opinions and predictions in the future. What I learned during the so-called "euro crisis" was that most of what you read in the media is a mixture of prejudice and ignorance with the additional insight that it gets dumber as we move up the scale of the media's perceived status. The same goes with some economists.

Paulson falls into his own trap

Reuters) - Hedge fund manager John Paulson lost more money in September thanks to ill-timed bets on an elusive economic recovery that left one of his biggest funds off 47 percent, two people who saw the numbers said on Saturday.

Paulson & Co, one of the world's five biggest hedge funds, released the numbers to investors late on Friday just hours before many on Wall Street headed off for a holiday weekend.
The Advantage Plus fund, which uses some borrowed money to help boost returns, tumbled 19.35 percent last month, leaving it off 46.73 percent for the year, the firm told clients.
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Comment: Some time ago at this blog we wondered how Paulson could fall into the trap of following the mainstream clap. Too late, now. Another one that bites the dust, and correctly so, because the clap trap of the media is so much b.s. than rarely before, and before there was a lot of b.s. Now, the assault against sound reasoning from academia and the media brings down even some of the best minds.

Blame the euros

Major U.S. Banks At Risk If European Debt Crisis Spreads

Although U.S. banks have limited their direct exposure to Greece, they have loaned hundreds of billions of dollars to European banks and governments that may not be able to pay them back, according to the Bank for International Settlements. If some European governments and banks are forced to default on at least part of their debt, American banks could lose a significant amount of money on that account alone.
The resulting panic from investors could compound the losses. Short-term borrowing costs would spike, bank stock prices would plummet and investors could demand their money from banks, several economists say. In a repeat of the liquidity crisis of 2008, some U.S. banks could run out of the money necessary to fund their day-to-day operations.
"We've seen this already," said Jay Bryson, global economist at Wells Fargo Securities. "Some sort of financial crisis in Europe would be enough to finally push the United States economy back into a recession."
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Comment: Together we stand, divided we'll fall.

Central banker predicts his own doom

World facing worst financial crisis in history, Bank of England Governor says 

The world is facing the worst financial crisis since at least the 1930s “if not ever”, the Governor of the Bank of England said last night.

Sir Mervyn King was speaking after the decision by the Bank’s Monetary Policy Committee to put £75billion of newly created money into the economy in a desperate effort to stave off a new credit crisis and a UK recession.

Economists said the Bank’s decision to resume its quantitative easing [QE], or asset purchase programme, showed it was increasingly fearful for the economy, and predicted more such moves ahead.
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Comment: At first central bankers provoked the crisis and since when it began to happen they make it worse with both their deeds and mouths.

Rebound is gaining speed

Asian Stocks Advance on Europe Optimism

By Shani Raja and Yoshiaki Nohara

Asian stocks advanced for a second day as optimism European officials will protect banks from the region’s debt crisis boosted the earnings outlook for lenders and exporters.
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Comment: The so-called "euro crisis" has really been a farce, a piece of theater enacted by commentators, journalists and investors who actually should know better. A lot of dumb ink has been shed. Yet what we must keep in mind is that with financial markets self-realizing prophecies can happen. As dumb as these prophecies may appear to the rational mind, the risk is always present that the silliest of the prophecies gains most of the attention and that it will be more likely get repeated in the press and in the end ever more adherents will follow the dumb prophecy because in the meantime it has become common knowledge and has gained the status of being almost certain.

The European Greenspan is about to go

Trichet’s Legacy Being Scripted by Crisis

By Jana Randow and Gabi Thesing

Jean-Claude Trichet’s legacy is still being scripted as he enters the final weeks of his eight-year term at the helm of the European Central Bank.
Chairing his last rate-setting meeting in Berlin today, Trichet may be forced to take the ECB further into uncharted waters before he hands the presidency to Italy’s Mario Draghi on Nov. 1, economists said. With Greece edging closer to default, the central bank is under pressure to deploy unlimited firepower to shore up the region’s bond markets either on its own or through Europe’s bailout fund.
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Comment: We have had Greenspan, and Trichet is about to go, but still we shall have Bernanke. All of these three have tried very hard to kill the middle class, to destroy our savings, to make us debt slaves. The first is gone, the second will soon follow. May they live the rest of their lifes in shame. Bernanke is still around. What an episode! What a deceit! What a rip-off! These guys were really up to their jobs: steal as much as you can from those who have worked their ass off all their life. And now they stand naked. Will there be revenge? Of course, there will be. Always there will be revenge. Unfortunately, however, it does not hit the true culprits on their heads. Nevertheless, let's preach the truth: let's call "j'accuse" for Greenspan, Trichet and Bernanke. Bad policies, and even more so: bad intentions.

Steve Jobs - Death of a (genial) salesman

Wed Oct 5, 2011 7:56pm EDT

(Reuters) Apple Inc co-founder and former CEO Steve Jobs, counted among the greatest American CEOs of his generation, died on Wednesday at the age of 56, after a years-long and highly public battle with cancer and other health issues. Jobs' death was announced by Apple in a statement late on Wednesday.
The Silicon Valley icon who gave the world the iPod and the iPhone resigned as CEO of the world's largest technology corporation in August, handing the reins to current chief executive Tim Cook.
Jobs, who fought a rare form of pancreatic cancer, was deemed the heart and soul of a company that rivals Exxon Mobil as the most valuable in America.
(Reporting by Edwin Chan; Editing by Gary Hill)
http://www.reuters.com/article/2011/10/05/us-apple-jobs-idUSTRE79472K20111005

Save our banks

EU preparing bank rescues amid Greece doubts
(Reuters) - European finance ministers agreed on Tuesday to safeguard their banks as doubts grew about whether a planned second bailout package for debt-laden Greece would go ahead. Hours earlier French-Belgian municipal lender Dexia SA became the first European bank to have to be bailed out due to the euro zone's sovereign debt crisis.
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Comment: The "saving" of the banks was how the problem started. The practice of bailouts was the mortal sin. The modern interventonist warfare-welfare state is coming to an end. Too much debt kills not only corporations and families, too much government debt kills all of us. That is the Keynesian legacy: Indeed, in the long run we are all dead.

Italy downgraded by Moody's

Moody's slashes Italy credit rating

(Reuters) - Moody's lowered its rating on Italy's bonds by three notches on Tuesday, saying it saw a "material increase" in funding risks for euro zone countries with high levels of debt and warning that further downgrades were possible.
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Comment: The piece is getting boring.

Greece will not default - at least not until mid-November

Greece Has Cash to Meet Needs Until Mid-November, Finance Minister Says

By Marcus Bensasson and Christos Ziotis

Finance Minister Evangelos Venizelos said Greece has enough cash to operate until mid-November, after euro-region finance ministers delayed a decision on the nation’s next emergency-loan payment.
With cash needs covered until then, Greece has time to carry out reforms demanded in return for a new bailout plan, Venizelos told reporters in Athens today after returning from the ministers’ meeting in Luxembourg. The new package “will give a more radical and more complete answer to our problems,”Venizelos said.
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The Second American Revolution

Occupy Wall Street: Mass Economic Riots Are Now Here And America Will Never Be The Same

October 2, 2011

By Michael Snyder
BlacklistedNews.com

Is Occupy Wall Street going to represent a major turning point in U.S. history? Over the past several years, many people have been warning that we would see mass economic riots in the United States if the economy continued to get worse. Well, the economic riots are now here and America will never be the same. The Occupy Wall Street protests are starting their third week and now similar protests have sprung up in major cities all over the United States. An increasing number of Americans have totally lost faith in the system and are looking for an outlet for their frustrations. Occupy Wall Street is a spark that has started a fire, but most Americans do not understand where all of this is going. In the years ahead, millions more Americans will lose their jobs, millions more Americans will lose their homes to foreclosure and millions more Americans will find themselves drowning in debt. As the economy continues to decline, millions upon millions of Americans will become even more frustrated. In particular, young Americans are really starting to become angryabout the economy and our deeply corrupt financial system. Eventually we are going to see an explosion of anger and frustration on the streets of America that is going to be absolutely unprecedented. Occupy Wall Street is just the beginning. If most Americans could see what is coming next, it would chill them to their cores.
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Comment: My feeling says that there is more to come.

The magic dollar

James Grant is in amazement about the role of the dollar in global finance:

“Dollars pile up in Asia. Merchandise piles up here,” says Mr. Grant, as America, in possession of the printing press, has tried to achieve the “ancient hope of mankind, to live without working.”
The “fiat” dollar, he adds ruefully, “is one of the world’s astounding monetary creations. That a currency of no intrinsic value is accepted as money the world over is an achievement that no monetary economist up until not so many decades ago could have imagined. It’ll be 40 years next month that the dollar has been purely faith-based. I don’t believe for a moment it’s destined to go on much longer. I think the existing monetary arrangements are so precarious, so ill-founded and so destructive of the economic activity they are supposed to support and nurture, that they will be replaced by something better.”
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Comment: The problem is that before it can get better it must get worse and who wants that?

Gloom & doom

Bloomberg Customers See a (Mostly) Grim Future: The Ticker
The quarterly poll of global investors, analysts and traders conducted by Bloomberg this week presents an almost unrelentingly gloomy picture.
Europe’s debt crisis, respondents said, is likely to morph into an economic slump that will drag the world into recession. Even the outlook for China, reliably an economic superstar in past surveys, is dire: growth there is expected to slow to less than 5 percent annually by 2016, half the pace of the past three decades.
Perceptions of U.S. President Barack Obama have plummeted since the last poll was conducted four months ago. Three-quarters of global investors now see his policies as a drag on the U.S. business climate, and 57 percent view him unfavorably, a reversal from a poll in May when 55 percent saw him favorably. The standing of the leader at the epicenter of the European crisis, Chancellor Angela Merkel of Germany, also has reversed course: 59 percent of investors say they are pessimistic about her policies. In May, 55 percent said they were optimistic.
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Comment: Too much gloom, so it seems - a fact which actually should speak in favor of a turn-around.

VIX indicates stock rebound

VIX Record Gain Signals Stock Rises Since 1990

By Whitney Kisling and Nikolaj Gammeltoft

The biggest quarterly increase ever in the Chicago Board Options Exchange Volatility Index pushed it above 40, a threshold exceeded only three percent of the time in 20 years and a level that has preceded stock rebounds. “A very high VIX level suggests investors have given up, they’re out of the way, and that’s a great entry point,” James Paulsen, chief investment strategist at Minneapolis-based Wells Capital Management, which oversees about $340 billion, said in a telephone interview. “It’s a contrary sentiment indicator, so when the VIX surges, it says bearish sentiment verging on panic is surging. And the market’s a good buy.”
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Comment: There is no such thing as a fully reliable indicator. Nevertheless, indeed, the market may be temporarily oversold.

Greek austerity policy

Greece Approves $8.8 Billion in Austerity

By Marcus Bensasson and Maria Petrakis - Oct 2, 2011 6:04 PM GMT-0300

Kostas Tsironis/Bloomberg

Greece’s government approved 6.6 billion euros ($8.8 billion) of austerity measures including firing state workers, to show it can trim its budget deficitenough to secure a pending aid payment and a second rescue package.
The measures will help reduce the deficit to 6.8 percent of gross domestic product, or 14.7 billion euros, from 8.5 percent of GDP this year, according to an e-mailed statement from the Athens-based Finance Ministry last night. That is more than the gap of 6.5 percent for 2012 and 7.6 percent this year agreed with the EU, International Monetary Fund and European Central Bank, the so-called troika, to secure emergency loans to prevent default.
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Comment: What really matters is not debt per se but whether a country and its government are capable of facing the challenge. Challenge and response. Greece is actually doing much better than most commentators like to admit. With a little bit of luck Greece will accomplish its turn-around.

Occupy Wall Street

Wall Street protesters: We're in for the long haul

By VERENA DOBNIK - Associated Press | AP

NEW YORK (AP) — Protesters who have been camping out in Manhattan's Financial District say their movement has grown and become more organized, and they have no intention of stopping as they move into their third week, following the second weekend in a row of mass arrests.

The Occupy Wall Street demonstration started out small last month, with less than a dozen college students spending days and nights in Zuccotti Park, a private plaza off Broadway. It has grown sizably, however, both in New York City and elsewhere as people in other communities across the country display their solidarity in similar protests.

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Comment: It surely looks as if something big is in the making.

Police state USA

The Police State Abolishes the Trial

Mises Daily:Friday, September 30, 2011 by Llewellyn H. Rockwell Jr.

Several years ago, the police entered the office of a young professor at a reputable university and arrested him for an online crime. They took the professor away, booked him, and then offered him a deal: admit guilt and get off easy.
The professor said to the few people to whom he was permitted to speak that this was crazy because he was innocent.
His lawyer warned him: fight this and you could get life; admit guilt and you will get a suspended sentence. He took the deal. It was a trick. Now he languishes in jail, his life wrecked as far into the future as he can see.
This doesn't happen in America, does it? Yes, it does. Not only that, it is increasingly the norm. Those raised on a steady diet of courtroom television shows believe that they are true to the way justice is meted out. This is completely naive. Trials in federal criminal cases are rare. Nine in ten cases are settled in pleas like the above case. Only 3 percent of the cases go to trial. Among those that go to trial, the defendant wins once in every 212 times.
What this means is that there is no way out for the accused. The prosecutors have all the power. Not even the judge has discretion, because lawmakers have mostly taken that liberality away in the name of cracking down on crime. This happened all through the 1980s and 1990s, and the prosecutorial dictatorship has entrenched itself to become the norm since 2001. For the last ten years, the police state has had free rein.
It was not "liberals" or "conservatives" who did this. It was both parties acting with the massive support of the American public, as tyrants in the public sector licked their chops. This was a result of security-minded madness, and even now hardly anyone cares.
Today, every single citizen, no matter how free he or she may feel in daily life, is in reality a sitting duck. You can be made to disappear. There is essentially no way you can escape once the feds sweep you into their net. There is no justice. The total states of the past used to pretend to have trial-based convictions. The total state of the present doesn't even bother. It just puts a sack over your head and takes you away...
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Comment: The US has been on a slippery slope to elected presidential dictatorship for a long, long time, but recently the ride gets really very fast.