Report on the birth pains of the Ten Toed Kingdom of Regional Economic Government for August 31, 2011.
1) … European Financials rise in short squeeze.
European Financials, EUFN, rose today, taking world stocks, ACWI, 0.9% and world small cap stocks, VSS, 1.9% and European shares, VGK, 2.4% higher. Stocks rising included FAA, 1.5%, ALUM, 2.1%, CARZ, 2.3%, COPX, 2.6%, EMMT, 2.8%, CHIM, 3.4%.
The New York Times reports Expanded euro bailout fund clears hurdle in Germany but Wall Street Journal reports Rescue fund hits snags in Germany and Finland. German Chancellor Angela Merkel is weighing whether to yield to a demand by some lawmakers for a bigger voice in future debt bailouts as a condition to win her party's approval for a stronger euro-zone rescue fund, as a parliamentary vote on the issue was delayed a week. Granting the German parliament the right to approve or reject future bailouts could trigger similar demands from parliaments across the euro zone, whose lawmakers are closely observing Berlin's actions. That could lead to further delays in the EU's approval for the Greek rescue.
CNBC and Reuters reports Three-month interbank dollar lending rates also rose again on Tuesday to their highest in over a year. With rising interbank borrowing costs, futures contracts have also been implying three-month loan rates could rise as high as 60 basis points in December. This suggests nerves that funding pressures could increase over the new year period, when many banks reduce lending to tidy balance sheets for year-end. Commercial paper loans to banks have dropped by 15 percent, or $90 billion, since the beginning of June and lending to European banks has dropped 20 percent, according to Barclays. This has left European banks struggling to obtain the dollar funding they need to finance U.S. exposures, and sent the cost of swapping euros to dollars to post-crisis highs. "This could be Europe's 2008. That's probably the major concern for the market, what does that mean for the ripple effect on our capital markets and globally," said Mikelic. A CDS index based on of 25 European financials is also reflecting elevated concerns over their credit quality. The index traded on Tuesday at 242 basis points, just under last week's record 260 basis points and much higher than the 210 basis point peak reached at the height of the financial crisis, according to data by Markit.
Automatic Earth reports Europe squanders its last shred of credibility.
Mike Mish Shedlock reports Eurozone retail sales drop 4th straight month; Confidence drop most since 2008; EU GDP .2%; leading idicators ngative;
Wall Street Journal reports Italy living on borrowed time
2) ... After a soon coming global economic collapse, seigniorage, that is moneyness, will come by diktat, specifically, the word, will, and way, of a European Chancellor and His Banker.
Allen Mattich of the Wall Street Journal reports Choice for EU: Bail out Greece or bail your banks. European governments are being forced to face up to the significance of a Greek default. This is perhaps the underlying message from International Monetary Fund Managing Director Christine Lagarde's warning that Europe's banks "need urgent recapitalization. She may have been warning about the costly alternative to a solution to the Greek sovereign crisis. But it could well be too late.
Unfortunately, the time for private-sector recapitalization has probably passed. European banks might have raised sufficient funds a year ago when the first round of stress tests left investors feeling a warm glow, but there's much less enthusiasm about the banking sector these days.
And if investors are likely to be reluctant to pump more capital into banks, governments will be equally nervous. It's unlikely any will have forgotten the painful lesson Ireland learned when it offered its banking sector a blanket guarantee in the midst of the financial crisis. Not only did it fail to shore up the banks but they dragged the Irish economy down with them when they sank.
European politicians have been weighing the unpalatability of rescuing their banks relative to that of rescuing peripheral European economies. The advantage of the Greek rescue has been that it mostly involved promises and guarantees rather than actual taxpayer money.
Bank recapitalizations, on the other hand, are likely to go straight onto the national balance sheets.Of course, banks unable to recapitalize either through the private or public sector face the third alternative of having to limp along as best they can. This would result in a significant credit contraction, which would depress growth in core Europe.
Ms. Lagarde argued that the "most efficient solution would be mandatory substantial recapitalization, seeking private resources first, but using public funds if necessary."
And because one of the few positives for peripheral euro-zone countries has been to expand exports to the healthy bits of Europe, a slowdown in the core could cause a downward spiral throughout the single-currency region.
European governments are unlikely to reach a consensus on how to respond to their domestic banking problems. Some are likely to do everything they can to encourage a private-sector recapitalization. Others will use public funds. And still others will stand back, hoping the European Central Bank comes up with something.
What's almost certain is that it will create further strain within the euro zone. Tensions over whether further lending to Greece can be collateralized are "just a foretaste of how serious the friction could be" once the issue turns to bank rescues, especially if a country feels it is disadvantaged by another, Monument Securities' Mr. Lewis adds.
The post-Lehman banking crisis could yet prove to have been just the foreshock
Mr. Mattich relates “foreshock”. This is just one of many foreshocks, that is birth pains, of the Ten Toed Kingdom of Regional Economic Government. The beast regime of Neoauthoritarianism is replacing the Milton Friedman Free to Choose Neoliberalism, and is manifesting as state corporatism, in all of mankind’s seven institutions, and in the world’s ten regions.
The state corporatism aspect of the Beast System is seen in the Wall Street Journal report Exxon(NYSE:XOM) Wins Arctic Deal, Gives Russia U.S. Access where the oil giant sells oil projects it owns in the US. The national sovereignty of America is violated by this agreement as state and business operates to plunder national resources that belong to the people.“Exxon Mobil Corp snatched away a major Arctic exploration deal with Russia's OAO Rosneft from competitors including BP PLC in a sweeping agreement that for the first time gives a Russian state-controlled company access to energy projects in the U.S. Exxon, entering a country where energy investments are fraught with political risk, agreed to invest $2.2 billion to explore potentially giant oil fields with state-run Rosneft in the ice-choked Kara Sea. It also finalized a deal to spend $1 billion looking for oil in the Black Sea.”
Tyler Durden reports Berlusconi risks the Bond Vigilantes wrath, by reneging on all austerity promises ahead of refi heavy September.
Recapitalizations of banks will not be forthcoming as they are recognized as insolvent, and black holes of sovereign debt that cannot be repaid. For the most part Austerity Measures are disdained and are painfully slow in coming; those which have come, are coming too little and to late. Failure of Austerity Measures will be inducing more foreshocks, that is birth pains of the Ten Toed Kingdom of Regional Economic Government, specifically regional European Economic Government.
Moneyness will not come from the EFSF Monetary Authority, there are just too many complications surrounding this Monetary Agency; and frankly its a super CDO; money cant be created by a non sovereign body out of sovereign country ever weakening capability.
Moneyness will be coming instead from a European Fiscal Union and the word, will, and way of a European Chancellor and His European Banker. Debt burden will be falling on Germany and it will insist on fiscal rules coming from a fiscal authority, that is a fiscal body with authoritarian powers. The fiscal authority of the periphery, that is the PIIGS, will be sacrificed to a troika of Brussels, Paris and Berlin. And institutional holdings surrendered to a Eurozone Economic Government.
The 1974 Clarion Call of the Club of Rome for regional economic government, is now effecting a bloodless EU coup de etat. Mrs Merkel recently spoke with its Authoritarian Imperative, as Bloomberg reports Merkel rejects euro region breakup. And Handelsblatt reports Angela Merkel saying, “All times have their own specific demands.” The Chancellor is keenly attuned to the fact that the global economic, investment and political teutonic plates have shifted, as the Milton Friedman Free To Choose Floating Currency regime ended when world stocks turned lower in May 2011, and when investors became aware that a debt union has formed in Europe, they fled the stock market on Black Thursday. Chancellor Merkel’s and President Sarkozy’s Joint Communique of August 2011, calling for “true European Economic Government”, reflects the political realty of regime change.
The One Euro Government will have a leader. Neoliberalism featured wildcat finance, a Doug Noland term. But Neoauthoritarianism will feature wildcat governance, where leaders bite, tear and rip one another, as the most fierce rise to the top, as governments created under Neolilberalism fail. In an interview with FAZ, French Foreign Minister Alain Juppé warned, “The dissolution of the eurozone is not acceptable, because it would also be the dissolution of Europe. If that happens, then everything is possible. Young people seem to believe that peace is guaranteed for all time. But if we look around in Europe there is new populism and nationalism. We cannot play with that.”
Moneyness will come from a European Fiscal Union and the word, will, and way of the European Chancellor, that is the Sovereign, and His European Banker, the Seignior.
3) … Intensified purchasing of copper evidences a China shadow banking and China shadow credit system.
CNBC and Reuters reports China Intensifies Purchases of Copper. Chinese companies and investors are stepping up their purchases of industrial commodities such as copper, in a show of confidence in the global economy that stands in contrast to the turmoil in western markets. The wave of buying is providing support for metals and minerals prices after commodities prices fell this month at worries about a double-dip. Senior executives at trading houses, mining companies and banks said Chinese consumers had used the recent drop in prices to rebuild stocks. “China is significantly less pessimistic relative to people in the western world,” said Raymond Key, head of metals trading at Deutsche Bank. “On dips they are restocking, especially in copper.” An executive at an important Chinese trading house added: “There is no doubt some traders have been buying [copper] recently.”
4) … The Daily Beast reports America's Secret Libya War.
The U.S. military has spent about $1 billion on Libya’s revolution, and secretly helped NATO with everything from munitions to surveillance aircraft. John Barry provides an exclusive look at Obama’s emerging 'covert intervention' strategy.
5) … The Foreclosure Pipeline in New York is 693 months (over 57 years) and 621 Months (over 51 years) in New Jersey reflects the power of the Banking Cartel and strategic defaulting loan holders living payment free in bank owned homes.
Mike Mish Shedlock reports First Time Foreclosure Starts Near 3-Year Lows, However Bad News Overwhelms; Foreclosure Pipeline in NY is 693 months and 621 Months in NJ and Irvine Renter relates In an effort to stop the double dip from getting worse, lenders are slowing foreclosure activity nationwide. their efforts will delay the market bottom and extend real estate squatting benefits.