Financial market report for the week ending November 4, 2011
1) … Currencies, World Government Bonds, Oil And Stocks traded lower today.
Between The Hedges reports The Italian 10-year yield jumped +17 bps to 6.37% today. The Italian German 10 Year Yield Spread is soaring +26.47 bps to 454.64 bps, which is another new all-time high. The TED spread continues to trend higher and is near the highest since June 2010. The Libor-OIS spread is still very near the widest since July 2010. The 2-Year Euro Swap spread is still very near cycle highs, which is also noteworthy considering the recent strong equity advance. China Iron Ore Spot has plunged -35.90% since February 16th and -32.0% since Sept. 7th
AP reports Oil price slides on concerns about Europe. Oil prices slipped Friday after world leaders disagreed on further steps to deal with the European financial crisis.
European shares, EWI, EWG, EWQ, EWP, FEU, VGK, traded lower, turning World Shares, ACWI, Emerging Markets, EEM, Small Caps, VSS, Emerging Market Small Caps, EWX, and the BRICS, BIK, lower.
German Bank Deutsch Bank, DB, and Argentina Bank, Banco Marco, BMA, Banco Bilbao Vizcaya Argentaria, BBVA, and Grupo Financiero Galicia, GGAL, led World Financials, IYG, European Financials, EUFN, and Emerging Market Financials, EMFN, lower. The leading carry trade banks seen in this Finviz Screener traded lower. Banks, KBE, traded 1% lower.
World government bonds, BWX, turned lower on falling world currencies, DBV, and emerging market currencies, CEW.
Health Care REITS, HCN, HCP, NHI, LTC, seen in this Finviz Screener and and in this on going Yahoo Finance Chart traded lower.
Railroad, KSU, rose to a new high. The Railroads KSU, UNP, CNI, CSX, CP, NSC, GWR, seen in this Yahoo Finance Chart and in this Finviz Screener have been rallying strongly as of late.
Open Europe relates that over on his BBC Blog, Robert Peston, cites some of our figures on the shares of Greek debt, so we figured we'd put up our full break down of who owns Greek debt. Given the problems in Greece its interesting to see where the debt is held and who could be exposed to losses in a disorderly default. I relate that a disorderly default would wipe out Greek Banks, such as National Bank of Greece, NBG.
The gold mining stocks, GDX, will falling lower, as the seigniorage of Neoliberalism has failed; it is being replaced by the seigniorage of diktat. The HUI precious metal mining stocks always make turns lower with US Treasuries, debt, this is seen in the ratio of GDX:EDV, which rose to 50 day moving average, communicating that both will be turning lower soon.
A number of energy stocks are trading at or near their recent highs which includes the following: XOP, WCAT, PSCE, DNR, VLO, PXD, EOG, QEP, NBL, EQT, RRC, ENI, SM, ROSE, ATLS, OIS, TSO, CVX, CRR, CLR, HFC, GPOR, BRS, EXXI, REXX, as is seen in this Finviz Screener.
A number of service companies are trading at or near their recent highs which include SPSC, CSGP, ABCO, MELI, VVI, WNS, HCSG, ROL, EXLS, IILG, WXS, VPRT, MMS, TSS, FISV, CASS, GPN, CGX, PRAA, SNX, STMP, TSS as seen in this Finviz Screener.
A number of small cap leaders are at or near their recent highs which includes CVCO, HANS, BEAV, FIO, ACAT, DECK, AMSG, DY, OXM, CRI, GAME as seen in this Finviz Screener.
A number of farm and agricultural equipment manufacturers are at or near their recent highs which includes MTW, CMCO, TEX, AGCO, CASC, ASTE, LNN, JOYG, CNH, CAT ,DE ,NC, CMI as is seen in this Finviz Screener.
A number of shippers are at or near their recent highs which includes NMM, TEU, GLF, HOS,B ALT, ISH, as is seen in this Finviz Screener.
A number of small tool manufacturers are trading at or near their all time highs which includes LECO, SNA, SSD, as seen in this finviz Screener
A number of credit service companies are at or near their recent high which includes PHH, AXP, NNI, COF, SLM, ECPG, NICK, MA, V, AMT, ADS, CATM, as seen in this Finviz Screener.
These industrial component manufacturers are at or near their recent high which includes WTS, HEES, PPO, NPO, SNHY, PH, PNR, TRS, SXI, EMR, ROLL, RLI, AIT, BRC, CLC, DCI, PLL, as seen in this Finviz Screener.
A number of heavy construction companies are at or near their recent high which includes GLDD, GVA, TPC, MTZ, PWR as seen in this Finviz Screener
A number of health care REITS are at or near their recent high which include HCN ,HCP, NHI, LTC, as seen in this Finviz Screener.
A number of railroads are at or near their recent highs which includes KSU ,UNP, CNI, CSX, CP, NSC, GWR, as seen in this Finviz Screener.
Bloomberg report “The cost of insuring Argentina’s debt against default is rising more than that of any other major emerging market except Venezuela on concern measures to stem rising capital flight will backfire. The cost of five-year credit-default swaps on Argentina’s bonds surged 51 bps to 987 bps yesterday.” Argentina, ARGT, and Argentina Banks, BMA, and BBVA, traded lower this week.
I believe that the US Dollar, $USD, is headed higher from its close today at 76.96 to its late April, 2011 high of 78.50, and that competitive currency devaluation, that is competitive currency deflation, will resume in the world’s major currencies, DBV, and emerging market currencies, and in the commodity currencies, CCX, driving commodities, DBC, lower. The US Dollar, $USD, rallied 2.5% this week to 76.91 as the world’s major currencies, DBV, and emerging market currencies, CEW, traded lower, these included FXA, FXE, FXM, FXC, ICN, FXB, FXS, SZR, FXF, BZF, FXY, BNZ, FXRU, the South Korean won 0.5%, the Taiwanese dollar 0.6%, the British pound 0.6%, the Indian rupe 1.4%, the Singapore dollar 1.9%, the Russian ruble, 2.0%, the South African rand 2.3%, the Swiss franc 2.4%, the euro 2.5%, the Danish krone 2.5%, the Canadian dollar 2.7%, the Swiss franc 2.7%, the Swedish krona 2.9%, the Australian dollar 3.0%, the Japanese yen 3.1%, the Norwegian krone 3.2%, the New Zealand dollar 3.3%, the Mexican peso 3.6%, the Brazilian real 4.6%. Commodities, DBC, slipped 0.6% this week; silver dropped 3.1%, copper, JJC, fell 4.3%, as commodity currencies, CCX, traded 2.95 lower. Hat Tip to Doug Noland.
Chris Marsden of WSWS reports National Unity Government Formed In Greece At Behest Of The Banking, EU, and IMF Troika. Greek Prime Minister George Papandreou survived a vote of no confidence last night, but only by pledging immediate moves to form a national unity government. Papandreou won by 153 votes to 145, after insisting to parliament that the agreement signed with the “troika” — the European Union, the IMF and the European Central Bank — for a package of 110 billion euros of bilateral loans must be accepted. Not to do so would be “catastrophic”, he argued. To secure its passage he proposed a new national coalition. He would visit the president today to inform him “that I am moving forward with all the parties for a broader coalition government,” he said. Papandreou will reportedly step down in favour of his finance minister, Evangelos Venizelos.Pasok will now join with smaller parties in the 300-seat parliament to give it a larger majority, of a possible 180 seats. The coalition will not include its right-wing opposition, New Democracy, which demanded early elections. A crucial lesson must be understood from the events of the past week. Every political development in Greece now proceeds at the behest of the financial speculators, the major powers in the European Union and the IMF.
Merkel threatened that Greece’s membership in the EU was on the line, “We would rather achieve a stabilization of the euro with Greece than without Greece, but this goal of stabilizing the euro is more important,” she said. Abandonment of the referendum was duly promised by Papandreou on Thursday and ratified Friday. Much did happen as Papandreou had anticipated. Samaras abandoned his pose of opposition to the troika’s demands, admitting in parliament that he had in fact agreed to the conditions of Greece’s latest bailout on October 27 and insisting that parliament approve the austerity measures demanded by the EU. But Samaras took a hard line against forming a government of “national responsibility” under Papandreou, demanding a caretaker government chosen by President Karolos Papoulias in preparation for early elections. Papandreou also faced an escalating rebellion from within his own party—favouring his resignation and the formation of a national government. Evangelos Venizelos opposed the referendum and reportedly urged Papandreou to resign in cabinet. Energy Minister George Papaconstantinou called for “a broader government that takes on board other political forces” in order to secure “broader support and approval for the kind of measures that were taken.”
Education Minister Anna Diamantopoulou urged Papandreou to immediately begin forming a government of “national responsibility.” This demand was taken up by European Commission President Jose Barroso who said he expected a government of national unity to approve the terms of the bailout, or Greece would run out of funds by December 15. “They’re really on the verge of being unable to pay for their schools and hospitals,” he said. “Obviously this is the type of situation that requires national unity.” Already by Thursday, Papandreou had made clear he was ready to fall on his sword, but insisted that Greece could not afford the political vacuum created by the immediate fall of the government. The hostility of the entire range of official politics to working people reaches its high point in Greece. It is what government by the global financial oligarchy looks like. From the standpoint of the elementary concerns of Greek workers for their jobs and livelihoods, there is no difference between any of the protagonists in yesterday’s heated debate. Pasok, having won the confidence vote, will now ratify the austerity measures with the support of the opposition parties. If Pasok had fallen, however, then any newly elected government would have passed the same measures. Massive opposition exists to Pasok and the troika’s austerity agenda. Syriza, the Coalition of the Radical Left, belatedly called for elections but it is now in the front rank of possible coalition partners for Pasok. In all things it has acted as a loyal defender of Greece’s “national interests”. This reached its most craven expression following Papandreou’s decision Tuesday to sack the heads of Greece’s armed forces. Speculation was widespread that he had acted out of fear of a possible military coup. However, Syriza responded with a pledge of loyalty to the military, warning that the government’s decision “gives the impression that it wants to create a highly politicized armed forces that it can control at a time of political crisis.”
The net result of such an opposition to politics is to enable the major parties of capital to dictate events.
The same situation holds true throughout Europe
The Telegraph reports Eurozone Trapped in Straitjacket, Says Rio Tinto Chairman Jan du Plessis. The nations of the eurozone are trapped in a "straitjacket" of a shared currency with no way out, the chairman of mining giant Rio Tinto has warned. And The Irish Times reports National sovereignty takes drastic hit as depth of euro zone debt crisis bite. And Bloomberg reports Berlusconi Pressured to Accept IMF Scrutiny as G-20 Focus Shifts to Italy. And Reuters reports Italy Accepts IMF Monitoring, EU Looks for Support
Tyler Durden reports ECB Issues Ultimatum To Italy, Threatens To Halt Bond Purchases. Three months ago, in exchange for the ECB's expansion of its sterilized monetizations of bonds to include Italian BTPs, allegedly the only backstop that has prevented Italian bonds from experiencing an all out collapse to date, Italy was presented with a list of strict "austerity" demands, among which were spending cuts, higher revenues and labor reform. Since then none of these has occurred... or will occur, simply because Berlusconi has no control over the government, yet neither does anyone else, although everyone in the local government enjoys having a scapegoat for the total chaos. It appears that the ECB has just made it clear that the status quo is about to end, unless Italy does in fact push with something. And unlike other cases, where politicians on both sides of the table are happy to spout rhetoric while knowing well that nothing will change, in this case, courtesy of Italy largely untenable debt profile in which €166 billion in debt and interest are due in 2012, the ECB will have no choice but to play hard ball.
Reuters has just confirmed that, reporting that The European Central Bank often discusses the possibility ending the purchase of Italian government bonds if it concludes Italy is not adopting promised reforms, ECB Governing Council Member Yves Mersch said. "If we observe that our interventions are undermined by a lack of efforts by national governments then we have to pose ourselves the problem of the incentive effect," Mersch said according to extracts of an interview with Italian daily La Stampa to be published on Sunday. In other words on Monday the market will have to not only digest the implications of what the implications of the Greek vote of confidence are (last we checked G-Pap is still PM, and likely will be for quite a while), but also what happens now that the ECB has issued an ultimatum to Berlusconi to get his house in order. The problem is that he can't. Not without stepping down, that is. At that point the Italian pseudo stability that everyone has been taking for granted knowing full well it is nothing but an illusion, will fall and expose all the rot underneath. At that point we will truly see just how "hedged" all those Primary Dealers are, who have perfectly offsetting short positions to all their longs.
Tyler Durden reports CME Issues Clarification On Margins: Less Liquidity In MF Aftermath
Between The Hedges reports on Wenzhou lending. China Securities Journal The bad-loan ratio for banks in China's Wenzhou city, a hub of smaller exporters, rose in September for the first time in ten years. Total outstanding bad loans for Wenzhou's banks may be 3.4 billion yuan at the end of September, based on total credit of 619.2 billion yuan. Non-performing loans may continue to increase after "some government agencies" asked lenders to be more tolerant of bad loans for smaller businesses, citing a person from the banking industry. Wenzhou banks reported declines in property lending, bank acceptance and consumer credit, reflecting cooling property purchases and weaker business activity and consumer demand, according to the report. Deposits by stock and futures investors plunged as some investors withdrew funds to repay borrowings from informal lending channels.
A Global Eurasia War is coming. Elaine Meinel Supkis reports Haaretz reports Netanyahu trying to persuade cabinet to support attack on Iran but this news was supposed to be secret so Antiwar reports Netanyahu Orders Investigation into Leaked Plans to Attack Iran which is, incidentally, a war crime if Israel does secretly attack Iran! Meanwhile, the dupes in NATO who do what the Knesset demands are jumping to attention and joining Netanyahu in his rampages The Telegraph reports.UK Military Steps Up Plans For Iran Attack Amid Fresh Nuclear Fears.
Doug Noland writes in Destructive, Destructionism And Inflationism. I am of the view that inflationary policy doctrine, “inflationism”, is in the process of impairing the Creditworthiness of the financial claims that constitute the foundation of the global financial system. Massive issuance of non-productive debt and central bank monetization have irreparably distorted the global pricing of finance and the resulting allocation of financial and real resources. This backdrop has nurtured destructive speculative dynamics. From my perspective, it is the “destructionist” forces of “inflationism” that today pose grave risk to global Capitalism. And, to be sure, the “socialism” of Credit risk is at the heart of the monetary and economic quagmires imperiling Europe, the U.S and nations around the world.
From Wikipedia: “Destructionism is a term used by Ludwig Von Mises, a classical liberal economist, to refer to policies that consume capital but do not accumulate it. It is the title of Part V of his seminal work Socialism. Since accumulation of capital is the basis for economic progress (as the capital stock of society increases, the productivity of labor rises, as well as wages and standards of living), Von Mises warned that pursuing socialist and statist policies will eventually lead to the consumption and reliance on old capital, borrowed capital, or printed ‘capital’ as these policies cannot create any new capital, instead only consuming the old.”
From the “Austrian” perspective, runaway Credit booms destroy wealth instead of creating it. There is as well an important facet of inequitable wealth redistribution that returns to haunt the system come the unavoidable bursting of the Bubble and the associated devaluation of “printed capital.”
I believe the current course of reflationary policymaking is doomed specifically because the ongoing massive expansion (inflation) of financial claims is not associated with a corresponding increase in capital investment and real wealth-creating capacity. Governments around the world are, and will be in the future, required to issue massive amounts of new debt to sustain maladjusted financial and economic structures, in the processes prolonging wealth-destructive over-consumption and destabilizing global imbalances. The “Austrians” use the apt analogy of consuming one’s furniture for firewood.
As she has a habit of doing, Gillian Tett of the FT, wrote an exceptional piece today, Subprime Moment Looms For Risk Free Sovereign Debt. When future financial historians look back at the early 21st century, they may wonder why anybody ever thought it was a good idea to repackage subprime securities into triple A bonds.
So, too, in relation to assumptions about the ‘risk-free’ status of western sovereign debt. After all, during most of the past few decades, it has been taken as a key axiom of investing that most western sovereign debt was in effect risk-free, and thus expected to trade at relatively undifferentiated tight spreads. Now, of course, that assumption is being exposed as a fallacy... As the turmoil in the eurozone spreads, forcing a paradigm shift for investors, the intriguing question now is whether we are on the verge of a paradigm shift in the regulatory and central bank world, too.”
Italian yields jumped 16 bps today to 6.35%, tacking on another 34 bps for the week. The spread to bunds surged 69 bps this week to 453 bps. One is left pondering how the Italian bond market would have fared had the ECB not surprised the market with a rate cut and not continued to aggressively buy Italy’s debt. Tuesday from the FT: “A trader of Italian government bonds said: ‘It was meltdown at one point before the ECB came in. There were no prices in Italian government bonds. That is almost unheard of in a big market like Italy. There were just no buyers and therefore no prices.’”
Just to think that there were “just no buyers and therefore no prices” in the world’s third-largest sovereign debt market. To have Greek yields this week approach 100%. To have speculative positions in sovereign debt early in the week lead to the eighth largest bankruptcy filing in U.S. history. And there were heightened market concerns as to the safety of “segregated” brokerage assets (in response to MF Global issues) and the integrity of the Credit default swap (CDS) marketplace (Greece and beyond).
To have G20 policymakers, again, fail to reach a consensus as to how to approach the European debt crisis. To have Greece spiraling out of control. Well, the wrecking ball has been just chipping away at the bedrock of market faith in contemporary finance.
No doubt about it, it was another troubling week in global finance. But not to worry; the ECB surprised markets with a rate cut and chairman Bernanke stated that the Fed was readying its mortgage-backed security (MBS) bazooka. The more destabilized world finance becomes, the more our captivated markets fixate on synchronized global reflationary policymaking. For now, faith in policymaking seems to be holding up better than confidence in finance.
There are important reasons why financial crises traditionally often originate in the so-called “money market.” Money market assets are generally the most intensively intermediated financial claims. Risk intermediation is critical to the process of transforming loans with various risk profiles into financial claims essentially perceived as risk-free in the marketplace. As I attempted to address last week, this perception of “moneyness” is an extremely powerful force in finance, the markets and economics more generally. The Credit mechanism and resulting flow of finance can work miraculously when markets perceive “moneyness,” although things can unravel dramatically when the marketplace begins to fear what it thought was safe and liquid “money” are instead risky and potentially illiquid Credit instruments. Just as there is a thin line between love and hate, there can be an even finer line between Credit boom and bust.
From the concluding sentences of Ms. Tett’s article: “…if regulatory systems had not encouraged banks and investors to be so complacent about sovereign risk in the past, markets might have done a better job of signalling that structural tensions were rising in the eurozone – and today’s crunch would not be creating such a convulsive shock. It is, as I said above, wearily reminiscent of the subprime tale. And, sadly, that is no comfort at all.”
I, as well, see disconcerting parallels to subprime. Especially late in the Mortgage Finance Bubble, a huge and expanding gulf had developed between the market’s perception of “moneyness” for mortgage securities and the true underlying Creditworthiness of the debt. And, importantly, it was the ongoing massive expansion of mortgage Credit that supported home prices and economic growth – all working seductively to further seduce the marketplace into perceiving ongoing “moneyness.” The “Terminal Phase” of Credit Bubble Excess saw systemic risk expanded exponentially, as the quantity of Credit ballooned and the quality of this debt deteriorated markedly. It was both a historic mania and astonishing example of (Minsky) “Ponzi Finance.”
These days, sovereign debt (Treasuries, in particular) is being issued in incredible quantities (and at amazingly low yields). The vast majority of this debt is non-productive and of rapidly deteriorating quality. Yet the markets for the most part are sufficiently content to continue perceiving “moneyness.” Part of this “moneyness” is due to the Credit cycle reality that, similar to subprime, things tend to look ok even in the perilous late stage of a Credit boom.
And, importantly, the markets perceive that the Fed, ECB, People’s Bank of China, Bank of Japan, Bank of England, and other global central bankers will continue to monetize (accumulate) this debt, in the process ensuring stable valuation and abundant liquidity in the marketplace (“moneyness”).
Ironically, the greater the upheaval in global sovereign debt and risk markets, the more willing the markets are to further accommodate Treasury Bubble excess.
Increasingly, the key dynamic underpinning global risk markets is the expectation for the Fed and global bankers to ensure the “moneyness” of Treasury and global sovereign debt. Indeed, “risk on” or “risk off” now rests chiefly on the markets’ immediate, perhaps whimsical, view of the capacity for the world’s central banks to sustain the faltering sovereign Credit boom. Such a backdrop creates extraordinary uncertainty and is inherently unstable. It points, problematically, to binary outcomes (ongoing speculative boom or bust) across global asset classes, certainly including currencies. And it creates a dynamic where an acutely fragile global financial and economic backdrop can actually incite only more destabilizing speculation and excess.
And, “for the record”, here’s Mr. Faber’s perfect response to Simon Hobbs: “Well, I think I’m very constructive and I’m a great optimist in life. Otherwise I would commit suicide in view of the kind of governments we have nowadays. Because, for sure, they will take wealth away from the well-to-do people one way or the other. And from the middle class they will take it away through inflating the economy and lowering the standards of living.”
2) … Regional economic government is rising to rule the world as destructive economic, political and investment factors destroy democracy. The money, that is, the currency of regional economic government will be diktat. This new money is coming as the new Beast Regime of Neoauthoritarianism, replaces the Milton Friedman Free To Choose Regime of Neoliberalism.
Traditional money is beginning to die. Doug Noland reports M2 (narrow) "money" supply dropped $35.9bn to $9.592 TN. "Narrow money" has expanded at a 10.4% pace y-t-d and 9.6% over the past year. The new money of diktat is beginning to increase. The only form of “money good” in Neoauthoritarianism will be diktat and gold. These will be the only forms of sovereign weatlh.
Out of sovereign crisis will come new sovereign authority. Under Neoliberalism, sovereign authority resided in nation states such as the US and the United Kingdom. Under Neoauthoritarianism, sovereign authority resides in the Banking, EU Leader, and IMF Troika, and other forms of regional economic government, as well as regulatory bodies, that is stakeholder groups, formed out of government and industry. One such private public operation, PPO, is the Financial Services Forum, headed by Robert Nichols. Sovereign authority is held by government leaders such as Mary J. Miller, Assistant Secretary for Financial Markets, who is involved in the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act. She related that she has worked through the Financial Stability Oversight Council with a mandate to facilitate coordination across agencies, to produce the Volcker report and coordinate the interagency rule making on the Volcker Rule; coordinate a six-agency proposal on risk retention; issue a rule on the designation of financial market utilities for enhanced supervision and other requirements; and most recently; re-propose a rule and propose additional guidance on the process for designating nonbank financial companies for enhanced supervision.
Emma Ross Thomas of Bloomberg reports that sovereign overhaul is underway. Spanish regions, cited by rating companies as a risk to the nation’s finances, may face the deepest overhaul since their creation three decades ago as the People’s Party pledges to cull bureaucracy and slash spending. The opposition PP, set to win its biggest-ever majority in Nov. 20 elections, will create a ‘new model of administration’ to avoid overlap between local, regional, and central governments. ‘If you don’t solve this, everything else is impossible,’ said Jaime Garcia-Legaz, secretary general of Faes, a research institute. We’ve created regional leviathans’ and ‘you have to do this if you want to get back to balanced budgets.’
Eddy Elfenbein writes October was the eighth best month for the S&P 500 of the last 70 years. The problems in Europe are having an unusual side effect on the stock market here. What we’re seeing is an unusually high correlation among stocks. In other words, nearly every stock is moving in the same direction, whether it’s up or down. It’s important for investors to understand this.
The last time correlation was this high was in October 1987 when the market crashed. Bespoke Investment Group, one of my favorite sites, tracks what it calls “all or nothing days” which is when the advance/decline line for the S&P 500 exceeds plus or minus 400. Since the start of August, more than half of the trading days have been “all or nothing days” which is a rate far greater than seen in previous years. The current market divide has energy, industrial, material and most importantly, financial stocks, soaring on up days, while volatility, gold and bonds rally on down days. The market is behaving like a legislature that has only extremists and no moderates. The equation boils down to this: The euro zone needs fiscal union or the euro dies.
USA Today reports Sarkozy said at a hastily called news conference shortly before midnight, on the eve of the Group of 20 summit, “We will not let the euro be destroyed, nor will we allow Europe to be destroyed or torn apart.” The EU leaders are effecting a political and economic coup, terminating national sovereignty in Europe; they are rising as sovereign leaders. Sovereign leaders are supplanting severing nations as sovereign authority.
The Banking, EU, and IMF Troika is establishes its rule in the Eurozone. The seigniorage of freedom is being supplanted with the seigniorage of diktat.
Those living in the Eurozone are now vassals of the vassal state. A eurocracy is effecting a coup. Sovereign individuals, sovereign nation states, democracy, freedom and choice, are concepts of the bygone regime of Neoliberalism. In as much as nations are loosing their debt sovereignty, and their fiscal capability, sovereign leaders and sovereign bodies, such as troikas, are rising to rule in the Beast Regime of Neoauthoritarianism which features diktat, fiscal surveillance, structural reforms, pension overhauls, bank nationalizations, austerity measures and debt servitude. The Europeans will now have identity and experience in a totalitarian collective. totalitarian collectivism, not free enterprise, is the EU’s future.
Libertarians such as Austrian Economists perceive themselves to be sovereign individuals. They oppose government intervention. They long for free enterprise, where Ludwig von Mises wrote, “the individual is in a position to choose the way in which he wants to integrate himself into the totality of society”. But today, there are no sovereign individuals, there is only sovereign leaders, who rule via diktat.
Sovereignty is meant only for kings and princes. The Economist in article The Euro Crisis: Is Anyone In Charge, communicate that a Troika of Bankers, EU Leaders, and The IMF is born in October 2011; and that a Eurozone wide coup is underway. The euro zone may have only a few weeks to come up with a more credible plan; the informal deadline is the next G20 summit in Cannes in early November. Though pre-eminent, Germany still needs the support of France to get its way. In contrast with Germany’s dispersed power, economic policymaking in France is concentrated in Nicolas Sarkozy’s Elysée Palace. François Baroin, an inexperienced and floppy-haired political hack who took over from Christine Lagarde as finance minister when she went to the IMF in July, attends formal meetings with Mr Schäuble. But France’s “real finance minister”, says one insider, is Xavier Musca, the presidential chief of staff. Mr Musca cut his teeth at the French treasury, working for Mr Trichet during the talks that led to the 1992 Maastricht treaty, the foundation of the euro. He is backed by Ramon Fernandez, head of the treasury, and Emmanuel Moulin, Mr Sarkozy’s economic adviser. None is a trained economist. Although unpopular, the mercurial Mr Sarkozy faces none of Mrs Merkel’s problems of public opposition to bail-outs. And he is never shy of a bold plan, particularly in the run-up to a tight election next spring. Curiously, though, French ideas have been modest of late. Mr Sarkozy tends to propose only what he knows Mrs Merkel will accept, such as the idea of a European tax on financial transactions.
The French president, though, may be about to secure a prize that France has long wanted and Germany has long resisted: European “economic government”. For Mr Sarkozy, this means the 17 leaders of the euro zone meeting separately from the ten non-euro EU members (including Britain) to co-ordinate economic policies. Over time, this might lead to a new bureaucracy separate from the European Commission. In a smaller-core Europe, Mr Sarkozy thinks, France’s voice will be louder. Yet to get this French-inspired institutional structure, Mr Sarkozy has to accept German ideas: peer pressure to promote fiscal discipline and economic competitiveness.
To organise things, they rely on their political fixer, Herman Van Rompuy, the president of the European Council. This former Belgian prime minister blends the austere demeanour of a monk (he famously writes Japanese haiku verses) with the wiliness of a French cardinal. He operates in the background, almost in the confessional, finding a point of balance between Paris and Berlin and then selling their ideas to leaders in other capitals. He will deliver proposals for economic governance to a European summit in mid-October; if adopted, these will undoubtedly shift power and influence within the euro zone. First, they will enhance the role of leaders at the expense of finance ministers, so giving Mr Van Rompuy a greater role as “Mr Euro” than Jean-Claude Juncker, Luxembourg’s prime minister and finance minister, who chairs that group in the euro-zone
A second power shift is likely to be from the European Commission to national leaders. Though the commission is the traditional guardian of the European ideal, it is regarded with some disdain by the Germans and French.
Even so, the commission retains the bureaucratic power. Mr Van Rompuy often finds himself working with its ideas, and national leaders often end up endorsing its plans. Olli Rehn, the Finnish commissioner for economic policy (and a former professional footballer) is more capable than his stiff public persona suggests. And Michel Barnier, the French commissioner for the single market, is moving systematically to regulate the financial sector, often pushing Britain into rearguard actions to defend the interests of the City of London.
These days, the IMF has a big voice in the euro zone. Its quarterly judgments about Greece’s performance will decide whether the country remains on life-support. And it is speaking more bluntly under its new managing director, Ms Lagarde. She infuriated her former European colleagues in August with a hard-hitting call for recapitalising Europe’s banks. More recently her chief economist reinforced the mood of panic by warning that the world economy was entering a “dangerous new phase”.
Ms Lagarde’s tough tone may reflect the views of David Lipton, her new deputy, recently an adviser in the White House on international economics. Mr Lipton was a senior figure in the Clinton administration during the 1990s emerging-market crash. His priorities, notably boosting bank capital, also reflect official assessments of what worked in America in the earlier phases of its own crisis. He is becoming one of the most important non-European voices in the sovereign-debt debacle.
3) ... In summary, a credit bust and global financial collapse is imminent.
“Printed capital” will be replaced by the “political capital of diktat”, of forums, stakeholder groups, regulatory bodies, troikas such as the Bankers, EU Leaders, and the IMF Troika, as well as regional sovereign leaders working for the security and prosperity of regions.
The last decade saw social, economic, and political evolution come from falling interest rates, which gave impetus to the Euro currency; growth and prosperity ensued in the currency union and democracy prevailed.
But now, destruction, has commenced with rising interest rates, causing deleveraging and disinvestment out of the Euro; growth is falling, austerity is growing, and diktat is growing in a diktat union.
The world is moving out of “inflationism” and into “destructionism”. Moneyness will come from the seigniorage of diktat. Credit will come from the word, will and way of sovereign leaders. The people will be amazed by diktat, and will place their faith and trust in it, giving it their allegiance. The accumulated debt of Neoliberalism will be applied to every man woman and child on planet earth. Austerity measures, structural reforms, pension overhauls, and debt servitude will be de rigueur.
Angela Merkel and Nicholas Sarkozy called for a “true European economic government” in the August 2011 Communique. These are simply precursors, antecedents, of the Prince who is to come, this one will rule the Eurozone.
The seigniorage of Neoauthoritarianism features diktat. Out of a soon coming Sovereign Armageddon, a sovereign debt and banking collapse, Eurozone Leaders will waive national sovereignty, and announce regional framework agreements which call for structural reforms which liberalize labor markets and overhaul pension systems, establish a Fiscal Union, which governs fiscal policy and manages spending, provides wider powers for the ECB, integrates banks with government, and establishes a stakeholder group from government and industry to oversee credit for companies critical to the security and prosperity of the region. The Eurozone Leader, the Sovereign, will arise to speak for and to the Eurozone; and together with his banking partner, the Seignior, will provide seigniorage, that is moneyness, based upon their combined word, will and way.
The European Super Government will be a type of revived roman empire, and will feature a Fiscal Union, whose New Charlemagne, will rule with diktat, enforcing structural reforms, austerity measures, pension overhauls, and debt servitude. The people will be amazed by the new seigniorage, that is the new moneyness, and follow after the Beast Regime of Neoauthoritarianism, giving it their allegiance.
The vision of the sovereigns will be the basis for a collective Europe: totalitarian collectivism is the way of the future. The soon coming President of the EU, will be one knowledgeable with the scheme of framework agreements. He must be a fierce leader as he will have a whole spectrum of angry people to deal with. A leading individual for this position is Herman Van Rompuy, as he orchestrated the original Greek bailout, and as who the Daily Mail reports as saying the age of the nation state is over and the idea that countries can stand alone is an ‘illusion’ and a ‘lie’.
In 1974, three hundred of the world’s elite met as the Club of Rome. Their Clarion Call is for regional economic government, as a means to deal with the chaos stemming from the deleveraging and disinvesting out of the Milton Friedman Free To Choose floating currency regime. That call is clear, distinctive and ringing for the world federalists; and it carries an authoritarian imperative that will flow globally that will establish a Ten Toed Kingdom of Regional Economic Government.