Financial market report for November 17, 2011
1) … Stocks, currencies, and world government bonds, fell lower yesterday as Fitch warned of US Banks’ European exposure and the European government bond market froze.
On November 16, 2011, World Stocks, ACWI, and VT, fell lower, led by Health Care Provider, IHF, Financials, XLF, Materials, XLB. The sell off included Transports, IYT, and Industrials, IYJ, and included shares across the globe, EWZ, RSX, INDY, YAO, EWA, EZA, ENZL, EWC, EWU, EWY, EWT, EWC, EWM, EWW, and VGK, as Bloomberg reports Fitch's Warns About US Banks' European Exposure.
Mike Mish Shedlock reports JPMorgan, Goldman Keep Investors In Dark On European Debt Risk ; Net Position Disclosure Hides True Risk.
And Mike Mish Shedlock reports on sovereign insolvency European Government Bond Market "Frozen" Says Bank Of Italy Managing Director; ECB Steps In But Rally Fails To Hold Spreads between bid and ask government bond prices indicate markets are “frozen,” said Franco Passacantando, Bank of Italy’s Managing Director for Central Banking, Markets and Payment System in Milan today. The European Central Bank is “almost exclusively buying Spanish and Italian bonds,” he added.
2) … Today, stocks fell lower as oil, gold, silver and copper turned lower on sovereign insolvency fears.
The volatile commodities, Oil, USO, Gold, GLD, Silver, SLV, and Copper, JJC, being risk trade driven and performing like currencies, turned lower. These commodities, are like currencies, and have market place seigniorage, that is market place moneyness, which comes from a high risk and high reward profile. And today traders took risk trade profits, as an auction of 10-year bonds in Spain left the country paying interest rates of nearly 7 percent. That is the highest rate since 1997 and a level that economists see as unsustainable. It is likely that proxy buyers underwritten by ECB, that is buyers who are indemnified by the ECB, bought Spain’s bonds. A rate of 7% communicates that Spain is insolvent. Now Spain is an insolvent sovereign along with Italy. Thus all of the PIIGS are insolvent sovereigns.
World stocks, ACWI, VT, World Small Caps, VSS, EWX, and Emerging Markets, EEM, all fell lower on failing sovereign authority. Fears of sovereign insolvency drove markets lower today.
Energy stocks falling lower included WCAT, OIH, IEZ, XLE, XOP, PSCE,
Silver Miners, SIL, Gold Miners, GDX, fell lower. And the Junior gold miners GDXJ, turned sharply lower. The age of profiting from investing in searching for new gold mining properties is over.
The Too Big To Fail Banks, RWW, European Financials, EUFN, Investment Bankers, KCE, and Stockbrokers, IAI, continued lower today. Blackstone Group, BX, fell strongly. The Emerging Market Financials, FGEM, and EMFN, traded strongly lower. Brazil Financials, BRAF, and Australia Dividend, AUSE, fell strongly. The world’s leading banks seen in this Finviz Screener, turned lower.
Technology stocks falling lower included, QTEC, MTK, SKYY, SMH, PSCT, PNQI, SWH, HHH, FDN, XSD, PXN, IGV, SOXX,
Real Estate, IYR, REZ, FNIO, and RWR, turned lower.
The BRICS, BIK, fell lower, being led so by China, YAO, FXI, HAO, CHIM, CHIE, CHIX, CHII, CAF, EWH, HKK, with India, INP, and Russia, RSX, RSXJ, and Brazil, EWZ, BRF, tagging along.
Ending of the risk trade in Tata Motors, TTM, and India Earnings, EPI, pushed India, INDY, SCIN, and SCIF, lower. Business Week reports India Stocks May See 'Sharp' Fall, Franklin Templeton Says. Indian stocks, the second worst performers among Asia’s biggest markets this year, may decline further as investors shun riskier assets amid the global economic turmoil, according to Franklin Templeton Investments.
Ireland, EIRL, and Austria, EWO,, were among Europe’s strongest fallers. Other country fallers included Turkey, TUR, South Africa, EZA, Indonesia, IDX, Australia, EWA, and KROO.
Argentina, ARGT, fell strongly as its banks, BMA, GGAL, BRF, BMA, all fell strongly. Given its market deterioration today, it too will join the ranks of failed sovereigns.
Agriculture, PAGG, and MOO, fell heavily, on falling grain, GRU, cotton, BAL, and agricultural commodities, JJA. Stocks AGCO, LNN, DE, fell hard.
Steel, SLX, Metal Manufacturing, XME, Coal Producers, KOL, Copper Miners, COPX, fell strongly on falling commodities, and on the failure of Neoliberalism’s Free To Choose regime, where the baton of sovereignty is now passing from sovereign nations to sovereign leaders, giving rise to the regime known as Neoauthoritarianism.
Basic Materials, XLB, IYM, MXI, fell lower. With AA, and FCX, leading the Morgan Stanley Cyclicals Index, $CYC, lower. Leading mining stocks seen in this Finviz Screener, fell strongly.
S&P Telecom, XTL, plummeted.
Shippers, SEA, seen in this Finviz Screener, fell strongly.
Medical products Intuitive Surgical, ISRG, logistics company, EXPD, fell strongly, as did consumer discretionary, STMP, GAME, SFLY, WTW, MAT,
Applied Materials, AMAT, fell 8%, as Reuters reports Applied Materials Warns of "Challenging Economy". Chip gear maker Applied Materials Inc gave a cautious quarterly revenue outlook and warned it expects to be affected by a tough economy. Economic uncertainty in the United States and Europe has hurt demand for consumer electronics in recent months, leading many chip manufacturers to put expansion plans on hold.
High income dividend shares, ABCS, traded strongly lower.
At market turns, airlines, FAA, is a fast faller; this market down turn is no exception.
The end of credit has commenced as these credit providers, PHH, AXP, NNI, COF, SLM, ECPG, NICK, MA, V, AMT, ADS, CATM, AINV, ARCC, AINV, seen in this Finviz Screener, fell strongly.
The rally of the defensive sector Utilities, XLU, is definitely over, as these have turned parabolically lower. DTE Energy, DTE, was a utility loss leader. The strong fall in foreign utilities, EDN, and EBR, suggests that the rewards of the Free To Choose Age is over. The Age of Diktat is beginning.
Commodities, DBC, plummeted. Oil, USO, fell vertically, giving rise to yesterday as an evening star candlestick. Base metals, DBB, fell, strongly led by copper, JJC, and aluminum, JJU. Grains, GRU, fell strongly, which is not surprising there are a glut of them.
Gasoline, UGA, fell strong; so one does not have to worry about the pump being responsible for headline price inflation or consumer price inflation.
US Treasuries, ZROZ, EDV, TLT, were a safe haven investment today. Fears of Eurzone sovereign default gave seigniorage, that is moneyness, to US Government bonds. Junk Bonds, JNK, and Leveraged Debt, PSP, continued lower on risk avoidance.
Of note the longer out corporate debt, BLV, rose; but the shorter duration corporation bonds, LQD, turned lower.
3) … To save the Euro, Germany must cede sovereignty, Angela Merkel communicates.
Mike Mish Shedlock writes in Business Insider German Chancellor Angela Merkel came flat out and said, "To save the Euro we must Destroy Germany". Well not exactly, but she may as well have because that is the implication. This is what she did say: Germany Is Ready to Cede Some Sovereignty to Save the Euro.
Chancellor Angela Merkel said that Germany is ready to cede some sovereignty to strengthen the euro area and restore confidence in the common currency. European Union treaty changes to strengthen EU institutions and patrol tighter budget rules are needed “to make the euro zone more crisis-proof,” Merkel told reporters in Berlin today at a joint briefing with Irish Prime Minister Enda Kenny.
“Germany sees the need in this context to show the markets and the world public that the euro will remain together, that the euro must be defended, but also that we are prepared to give up a little bit of national sovereignty,” Merkel said. Germany wants a strong EU and a euro “of 17 member states that is just as strong and inspires confidence on international markets.”
It’s Not Merkel's Decision. For starters Merkel is saying what she wants. It is debatable if that is what Germany wants at all. I rather doubt it. Moreover, even if it is what Germany wants, it is not Merkel's decision. Such decisions, as the German supreme court has ruled are up to voters of Germany, not politicians with an axe to grind about what they want. If German voters want to cede power and form a European nanny state, then so be it. But it will be the end of Germany and the end of Europe as well should they do so.
Its A Desperate Attempt to Save Something Not Worth Saving. As the crisis lingers the cries for more intervention get louder and louder, even though the massive intervention to date has only made matters worse. Ambrose Evans Pritchard highlights the cries for intervention in Latin showdown with Germany over ECB. The EU's €440bn EFSF bail-out fund was supposed to take over on the rescue task, relieving the central bank. It has been a disastrous flop, unable to raise money itself at a viable cost after toying with leverage plans that greatly concentrate risk for creditor states. The net effect has been to accelerate contagion to the core. Germany's constitutional court has ruled that "open-ended" and "automatic" liablities violate the country's Basic Law. So only the Germans can save monetary union, yet the Germans cannot legally do so. Europe's crisis has reached an impasse, the result of the original design flaws of EMU. Even so, a growing chorus of economists within Germany itself is calling for a strategic change. Wurzburg professor Peter Bofinger wants the ECB to cap Italian and Spanish yields. "We are in an emergency situation; this isn't plastic surgery. If worse comes to worst, the ECB has to act before the financial system falls. And if it acts, it should act properly and set an upper limit for sovereign yields. It's naive to believe that Italy can solve its problems on its own. Structural reforms can't be implemented overnight. "Dennis Snower, head of the Kiel Institute, said the ECB must act to stem the crisis, even if this means straying into fiscal policy. Thomas Mayer from Deutsche Bank said Italy's new government will fail unless the ECB buys time by holding down yields, perhaps as low as 5pc.
The Euro Experiment Is Over. Pritchard concludes with a couple of paragraphs that I whole heatedly endorse. David Heathcoat Amory, Britain's former Europe minister, said Berlin will do whatever it takes to try to save EMU. "The Germans will pay up, accept eurobonds, and mobilise enormous firepower. But this won't save monetary union in the end because it is not a debt crisis. It is a currency crisis. The weaker states are uncompetitive and you cannot force them to deflate their way back to competitiveness by cutting wages 30pc. The EU elites won't admit it, but the euro experiment is over," he said. Merkel is willing to destroy Germany (and Europe) to save something that is doomed anyway.
Top Orwellian Comments Of All Times. An American major after the destruction of the Vietnamese Village Ben Tre: "It became necessary to destroy the village in order to save it." President George W. Bush: "I've abandoned free-market principles to save the free-market system." We can safely add "To Save the Euro We Must Cede Sovereignty" to that list.
4) … The Euro is not over, sovereign insolvency will be the catalyst for Financial Nuclear Winter and the sacrifice of sovereignty and the pooling of sovereignty, where regional economic government will come to rule in the world’s ten regions.
A Financial Nuclear Winter is imminent. The downturn in world financials that began November 16, 2011, with Fitch's Warning About US Banks' European Exposure, will propel highly volatile stocks quickly lower. These fast fallers will include, CHIX, XME, COPX, EWX, HAO, CHIM, ETN and JCI, as seen in this ongoing Yahoo Finance Chart of World Financials, IXG, Chinese Financials, Metal Manufacturing, Copper Mining, World Small Cap Leaders, China Small Caps, China Materials, and industrial electrical equipment company Eaton, and automobile parts manufacturer, Johnson Controls, both of which are Morgan Stanley Cyclicals Index components
Recent economic is just a one time event. These metal manufacturing stocks, CMC, NUE, STLD, XME, these industrial electrical equipment manufacturers, and these automobile manufacturers, such as F, GM, MTOR, TWI, DAN, WPRT, TRW, SORL, SMP, VC, AXL, WBC, PCAR, CLC, have been among the stocks leading the S&P higher in the most recent rally, as Bespoke Investment Group reports, these have been the Industrial Production Subcomponents showing faster growth than the headline number (3.9%). Also these industrial, construction and environmental rehabilitation companies MTW, TEX, SHS, TRN, RBN, JOYG, AIMC, have been recent rally winners.
The strong Industrial Production Subcomponents report is a look in the” rear view mirror report”, where Industrial production likely came from the delayed results of QE I and QE2, coupled with firms buying replacement equipment and assets such as vehicles, computers and industrial electrical equipment, and is nothing sustainable.
Reuters reports on sales intransigence, that is the inability to make forward growth in sales. Salesforce.com, CRM, Shares Drop On Tepid Outlook. Web based software maker Salesforce.com Inc forecast current-quarter earnings broadly in line with Wall Street estimates and posted a quarterly net loss as its marketing and sales costs increased sharply. The tepid outlook from one of the leaders in Internet-based cloud computing suggests it will not avoid the effects of broad cutbacks in corporate spending which have ravaged other technology firms. Salesforce shares fell 6 percent after hours.
Bloomberg reports that a credit evaporation is underway. Tighter Credit Sending Warning Signals. The US market has been buoyed by a string of better-than-expected economic reports that have helped encourage the belief that the US is a relatively safe haven, insulated from the problems of Europe. But these data are coincident, or lagging, data at best, warns Mike Darda of MKM Partners. Leading indicators are found in the credit markets and are pointing to tighter financial condition, and lower stock prices, in the future.
The WSJ reports European Firms Face Lending Woes. Companies Struggle as Banks Lend Less, at Higher Rates, Forcing Businesses Into Public Markets With Selective Investors. Euro-zone countries aren't the only borrowers whose financing costs are rising: European companies are facing higher capital costs as the debt crisis curtails bank lending and keeps wary investors on the sidelines. The amount of European corporate debt in need of refinancing is set to jump in 2012. But banks are lending less and at higher rates, forcing companies into public markets, where investors are becoming increasingly selective. Less corporate borrowing leads to less corporate investment—another drag on already sickly economies
Bloomberg reports Zoomlion Sees Drastically Slower Demand for Cranes, Excavators in China. Zoomlion Heavy Industry Science & Technology Co. said a slowdown in China’s demand for cranes and excavators will carry on next year because of waning economic growth and cutbacks in railway building. “Demand for construction machinery has shrunk drastically and growth will no doubt continue to slow next year,” Chairman and Chief Executive Officer Zhan Chunxin said in a Nov. 15 interview in Hong Kong. “The overall economy will also cool because of weaker export demand.”
(Hat Tip To Between The Hedges)
John Nyaradi, writing in Market Watch, used the term Financial Nuclear Winter relating, “As a beautiful autumn slowly moves towards the dark days of winter, global investors will likely find themselves facing a nuclear winter of extreme danger and volatility. Nuclear winter is the term used to describe the ice age-like temperature drops, severely cold weather, reduced sunlight and catastrophic agricultural failures that are theorized to be the after effects of nuclear war. In the financial world, nuclear winter will be a long period of years, even decades, of sub par growth, high unemployment, global recession/depression and a long-term secular bear market brought about by the financial equivalent of multiple nuclear blasts. Greece is the immediate trigger point for this series of fiscal nuclear explosions.”
Sovereign insolvency will be the catalyst for Financial Nuclear Winter, and the pooling of sovereignty as called for by Herman van Rompuy. Consillium provides a video of Herman Van Rompuy, President of the European Council, during a debate on European economic government at the European Parliament. And Reuters reports Van Rompuy urges euro zone to pool sovereignty. And G7 Finance reports Mr Van Rompuy saying in a speech to a conference held by a Brussels think tank. “The euro zone has to move towards real economic union commensurate with monetary union.” … “We need to give both our citizens and the markets a clear message about the irreversibility of the euro,” ... “This will imply in some of these areas a pooling of sovereignty in exchange for a stronger, more stable monetary union,” Van Rompuy stated “(Deepening economic union) will require a combination of two things, a significant strengthening of our rules and mechanism for fiscal responsibility and a large step in terms of integration in economic policies.” … “We have to fight for our economic and monetary union and Europe’s place in the world,” … “In Italy, it is an hour of truth.”
You Tube Video provides Nigel Farage stating “By any objective measure the Euro is a failure”, and asking What gives you the right to dictate to the Italian people?
Fate is sovereign. In the age of sovereign insolvency, with nation states unable to issue Treasury Debt, Fate is providing sovereign authority in the 1974 Clarion Call of the Club of Rome for regional economic government. Regional leaders will meet in summits, and announce regional framework agreements and mandates for regional security and stability. Sovereign leaders and sovereign bodies, such as the EU ECB and IMF Troika, will pool national sovereignty, and govern through diktat, establishing the New Europe as envisioned by Angela Merkel. Fate is operating sovereignly to provide a coup d etat. With the appointment of Mario Draghi, Goldman Sachs is taking over Europe.
The economic, political and tectonic plates shifted in July 2011 as the world major currencies and the emerging market currencies, sunk, and as investors fled the stock markets when they realized that a debt union had formed in the EU. And today, November 17, 2011, others have fled the market as they realize that a sovereignty union and that they realize that Italy’s ten-year government bond yields soared well above 7%, the level beyond which Greece, Ireland and Portugal were all pushed into EU/IMF bailout programmes. Having been frozen out of the markets, Italy now faces a buyer’s strike.
Neoliberalism featured sovereign individuals and human action; now Neoauthoritarianism features sovereign leaders and diktat.
In 1971, the world went off the gold standard, as Milton Friedman provided the “Free To Choose” script. Now, in 2011, Angela Merkel is providing the “more Europe” script, and Herman van Rompuy is providing the "We need reforms, not elections" script.
Bloomberg reports European Banks Face $270 Billion Goodwill Hangover for Past Acquisitions. European banks may have to write down some of the $270 billion of goodwill from their purchases in the run up to the financial crisis before they can sell assets, or new stock, to bolster capital. UniCredit SpA (UCG), Italy’s biggest lender, this week opted to take an 8.7 billion-euro ($10 billion) impairment charge following a series of acquisitions at home and in eastern Europe. Other European banks are yet to follow, analysts said. Credit Agricole SA (ACA), Banco Santander SA (NYSE:SAN) and Intesa Sanpaolo SA are among European banks with the most goodwill remaining on their balance sheets, according to data compiled by Bloomberg. “Banks that paid a premium for businesses when the outlook was better will need to reassess the goodwill on their balance sheets,” said Andrew Spooner, an accounting partner at Deloitte LLP in London. “Previous acquisitions which are exposed to peripheral Europe are most vulnerable to impairments.” European bank stocks are trading at an average 58 percent of their book value, according to Bloomberg data. While writing down goodwill won’t deplete banks’ capital for regulatory purposes, it’s a sign that executives overpaid for purchases
Bloomberg reports GM Sees Europe Crisis 'More Serious' Than 2008 Credit Bubble. Europe’s debt crisis is a “more serious” situation than the housing bubble three years ago that preceded a global recession, General Motors Co. Chief Executive Officer Dan Akerson said today. “The ’08 recession, which was a credit bubble that manifested itself through primarily the real estate market, that was a serious stress,” Akerson told the Detroit Economic Club today. “The government took some insightful actions. This is much more serious.” GM, which hasn’t turned an annual profit in Europe in more than a decade, has declined in New York trading since rescinding its target for break-even results in the region. European operations lost $292 million before interest and taxes in the quarter ending Sept. 30, GM said last week as it reported a 2.5 percent drop in third-quarter net income. Analysts have slashed their estimates for GM’s adjusted earnings in the fourth quarter by 49 percent after the company said last week that results for the period would be similar to a year earlier, citing weakness in Europe as a factor. All 14 analysts surveyed by Bloomberg cut their estimates in the last two weeks, reducing the average to 44 cents a share, from 86 cents. “We’re dealt a hand and we have to play it as best we can,” Akerson, 63, said today of Europe. “It may get a little ugly at times, a little bumpy.” Asked if some countries such as Greece may eventually leave the euro zone and lead to a breakdown of the currency, Akerson said “I wouldn’t doubt it.” GM slid 3.8 percent to $21.79 at the close in New York. Detroit-based GM plunged 34 percent since its initial public offering a year ago.
Bank exposure to the European Sovereign Debt Crisis will mean the Money Market Funds will break the buck, that is fail to maintain their constant one dollar value. Money Market Fund, MMFs, and banks world wide will be integrated into governments and be known as the government banks or gov banks for short.
Business Week reports Money-Market Spreads Surge to Two-year High on Europe Crisis. Investor demand for the relative safety of Treasuries during the European debt crisis has sent the difference between U.S. short-term yields and credit-market rates surging to levels not seen in more than two years. The gap between the London interbank offered rate and the overnight index swap, or what traders expect Federal Reserve’s benchmark to be over the term of the contract, widened to 38 basis points as of 9:58 a.m. in Tokyo. It was the highest level since June 2009. U.S. five-year swap spreads climbed to 45 basis points, the most since August 2009. “It’s a flight to safety,” said Akira Takei, head of the international fixed-income department at Mizuho Asset Management Co. in Tokyo, which has the equivalent of $42.7 billion in assets. “I have quite a bullish view on U.S. Treasuries. The market is quite risk-averse.” The TED spread, the difference between what lenders and the U.S. government pay to borrow for three months, widened to 47 basis points, or 0.47 percentage point. It was the most since June 2010. Two-year swap spreads increased to 52 basis points today, the most since May 2010. (Hat Tip To Between The Hedges)
5) … Moneyness will come by fiscal integration and diktat in a European Super State. Life will be experienced in a totalitarian collective.
Moneyness, that is seigniorage, will come by diktat.
Before the sovereign crisis, the seigniorage of freedom, ruled as sovereign nation states ran with the Milton Friedman Free To Choose script of floating currencies, and banks and investment bankers underwrote debt of all types, such as GSE Mortgage Backed Bonds, MBB, US Treasuries, ZROZ, EDV, TLT, Long Duration Corporate Bonds, BLV, Corporate Debt, LQD, Junk Bonds, JNK, World Government Bonds, BWX, Emerging Market Bonds, EMB, and Municipal Bonds, MUB. Inflationism came via US Federal Reserve credit liquidity, ZIRP, Quantitative Easing I, and II, as well as carry trade lending from Austria and the Bank of Japan, driving World Stocks, ACWI, and Bonds, BND, higher. Hedge Funds speculated in commodities, DBC, of all types, driving base metals, DBB, such as copper, JJC, coffee, JO, and cotton, BAL, wildly higher.
Currencies, being based upon failed sovereignty, are no longer floating; they are sinking as sovereign insolvency is becoming apparent. The Yen, FXY, rose, as carry trades unwound, causing debt deflation, that is currency deflation, in the world’s major currencies, DBV, emerging market currencies, CEW, and commodity currencies, CCX. The Australian Dollar, FXA, led these currencies, seen in this Finviz Screener, lower today: FXE, FXM, FXC, ICN, FXS, SZR, FXF, BZF, CEW, and FXRU. The US Dollar, $USD, UUP, closed higher at 78.82. The chart of optimized carry trade ETN, ICI, shows a parabolic turn lower.
The seigniorage of diktat which commenced during the last summit, as the EU leaders mandated a fifty percent reduction in the value of Greek debt, and as they sent a fiscal inspection team to Greece. The EU ECB and IMF Troika, and the technocratic government that they installed in Greece and Italy, are now the EU’s sovereign authority, as the baton of sovereignty has passed from sovereign nations to sovereign bodies and sovereign leaders.
In August 2011, Nicolas Sarkozy and Angela Merkel issued their Joint Comminique, calling for “true European economic government”. Such reflects the 1974 Clarion Call of the Club of Rome for regional economic government. These two are forerunners, heralds, and ambassadors of the soon coming Ten Toed Kingdom of regional economic government, where regional authority rises over former sovereign nation states, to establish rule in the world’s ten regions.
The Beast Regime, that is Neoauthoritarianism, is replacing Neoliberalism. Its called the Beast Regime, because it is a monster of state corporatism, that is statism, ruling in all of mankind’s seven institutions and in all of the world’s ten regions. Wildcat governance replaces wildcat finance, a Doug Noland term. Leaders bite, rip and tear one another. Only the most fierce and adept at working in the scheme of framework agreements will rise to the top.
Out of sovereign armageddon, that is an credit bust and financial system collapse, the New Europe will arise as a type of revived Roman Empire. It will have a New Charlemagne, the Sovereign, and a European Banker, the Seignior, who provide order out of chaos. Perhaps Herman van Rompuy will be Europe’s New King. And perhaps Olli Rehn, or Mario Draghi, will be the Seignior, which literally means top dog banker who takes a cut. Roy Schwarcz writes The Roman Empire fell apart from within, no enemy destroyed it. Rome is living in the great nations of Europe today: Italy, France, Great Britain, Germany, and Spain are all part of the old Roman Empire. The laws of Rome live on, as well as the language. Latin today is the base of French, Spanish, and other languages. Her warlike spirit lives on also as Europe has been at war ever since the empire broke up into these kingdoms. What is happening in Europe today? There is a diminishing of the nations and a unifying of the people with a common currency, common markets and common government. The foundation is being laid for the man who is coming someday to put the Roman Empire back together again.
The new script, replacing Milton’s Friedman’s Free To Choose scrip, is diktat. The moneyness of freedom is being replaced with the moneyness of diktat.
The seigniorage of diktat, the New Europe seigniorage, will mandate that the accumulated debt of the Eurozone be applied to every man woman and child therein. Greeks cannot be Germans, the former are of the olive state, and the latter are of the industrious state. One is club med, and the other industrious; yet both will be one, living in a New Europe, featuring a Federal Government, a Fiscal Union, a Common Treasury, the nationalization of banks, and the ECB empowered as a bank.
Destructionism mandates fiscal integration and diktat; these will enforce austerity measures, structural reforms, pension overhauls, and debt servitude; all these will be de rigueur. A fiscal czar may issue some dole coming forth from a common EU Treasury. The word, will and way of sovereign EU leaders will constitute a new money, and the people will marvel and follow after it, placing their trust and faith in it. The seigniorage of diktat will have the people’s allegiance.
Sovereign administrators, sovereign regulatory bodies, and sovereign stakeholder groups, will manage order and security. These will issue sovereign credit in a world otherwise devoid of credit, so that economic activity of the region will flow smoothly. Andrew Eisinger of ProPublica writing in NYT article Reform Adds More Twists to a Convoluted Derivatives World, highlights Gary Genzler of the CFTC. Mr. Genzler is the type of sovereign who will rule the EU..
The John M Broder, NYT article, Behind The Shift On Smog, A Re-Election Calculus, provides insight into Cass R. Sunstein, Obama’s Regulatory Czar, who oversaw a shift away from EPA enforcement of pollution controls. His bureaucratic action style will exemplify and predominate Neoauthoritarianism and Euracracy.
The Libertarian vision of the Mises Institute, and the Ron Paul agenda, of freedom and free enterprise, are mirages on the authoritarian desert of the real. Libertarianism is an anachronism. Fate is working through the Clarion Call of the Club of Rome, is over whelming any and all freedom and human action. A totalitarian collective is coming to rule the Euro zone; totalitarian collectivism is the EU’s future. Neoliberalism is falling to Neoauthoritarianism. The choice of sovereign individuals is being replaced by the diktat of sovereign leaders.
The Free To Choose economic policies of Neoliberalism produced Inflationism. Now Destructionism, characterized by disinvesting, deleveraging, and derisking is underway, bringing forth an entirely new economic, political and social order. All current economic life, whether it be Greek Socialism, or American Capitalism, or European Socialism, is passing away, as the Global Government Finance Bubble has burst. The political dynasties of both Italy and Greece, that produced patronage and pork are history. Freedom and choice are epitaphs on tombstones of a bygone era. Totalitarian collectivism is the Euro zone’s future.
SFGate reports Finance Job Losses Near 200,000 as BNP, Citigroup Cut Staff. Job losses in the global financial services industry this year are close to surpassing 200,000 as Citigroup Inc., France's BNP Paribas SA and Bank of America Corp. eliminate jobs to reduce costs. Citigroup, the U.S. bank that shook up senior management earlier this month, may cut as many as 3,000 jobs as Chief Executive Officer Vikram Pandit squeezes out costs, said a person familiar with the company's plans. BNP Paribas, France's biggest bank, said today it will trim about 1,400 jobs at its investment-banking unit, with most coming from the lender's capital markets and structured-finance teams. Bank of America also cut part of its equities unit in Europe yesterday. The reductions add to the 195,000 banks, insurers and asset managers announced this year, and surpass the 174,000 losses in 2009, data compiled by Bloomberg show. (Hat Tip To Between The Hedges)
Neoliberalism featured the Spirit of The Cat In The Hat, as is seen in the repeal of the Glass Steagall Act, and the introduction of derivatives of all types.
Neoauthoritarianism features The Spirit Of Wilding. Karen Matthews of AP reports New York City police in riot gear lock down park amid violence as protesters take to streets nationwide in "Day of Action." And Zero Hedge reports The Technocratic Revulsion Begins: Photos and Video as Thousands of Italians Protest Monti's "Banker" Government. Both of the two news reports relates that the leaders of this age are sorely unappreciated.
In Neoliberalism, leaders practicing wildcat finance, waived magic wands, and created wealth. In Neoauthoritarianism, leaders yielding clubs, practice wildcat governance, to deter protest.
6) … Conclusion
I definitely observe pooled sovereignty. Do you want to take a dip into the pool of sovereignty?
Today, the world was immersed, that is baptised into the pooled sovereignty; soon it will experience the baptism of fire, as fiat wealth flows into the Pit of Financial Abandon.
Out of sovereign default, will come an entirely new order, The Ten Toed Kingdom of regional economic government. In July 2011, many investors fled the stock market when they became aware that a debt union had formed in the Eurozone. Today, others have fled as they became aware that a sovereignty union is forming in the EU out of failed sovereign nation states.
Under Neoauthoritarianism, the only “money good” will be diktat and gold bullion. Yes, the only form of sovereign wealth will be regional economic government or physical gold.
Landon Thomas of the NY Times reports The Rise of a Euro Doomsayer, The euro zone was unraveling, just as he had long predicted, yet Bernard Connolly, Europe’s most persistent prophet of doom, still faced a skeptical audience.
“The current policy of lending plus austerity will lead to social unrest,” Mr. Connolly told investors and policy makers at a conference held this spring in Los Angeles by the Milken Institute, arguing the case that Greece, Italy, Portugal and Spain could not simply cut their way to recovery.
“And one should not forget that of the four countries we are talking about, all have had civil wars, fascist dictatorships and revolutions. That is history,” he concluded, his voice rising above the chortles and gasps coming from the audience and the Europeans on his panel. “And that is the future if this malignant lunacy of monetary union is pursued and crushes these countries into the ground.”
Mr. Connolly has been warning for years that Europe was heading for disaster. As an E.U. economist in the early 1990s, he helped design the common currency’s framework, but he was later dismissed after he expressed turncoat views. In 1998, just months before the euro’s introduction, he predicted that at least one of Europe’s weakest countries would face a rising budget deficit, a shrinking economy and a “downward spiral from which there is no escape unaided. When that happens, the country concerned will be faced with a risk of sovereign default.”
In 2008, Mark Carney, the governor of the Canadian central bank, cited the British-born Mr. Connolly, along with the far more prominent Nouriel Roubini of New York University and the Harvard economist Kenneth S. Rogoff, as having been among the few who foresaw the global financial crisis. Mervyn A. King, the governor of the Bank of England, who has become increasingly vocal about the euro zone’s problems, is also a longtime follower.
Nicolas Carn, an independent research analyst and money manager who worked previously as chief investment strategist for the London-based hedge fund Odey Asset Management, is one of his biggest fans. “Bernard has influenced me a great deal,” Mr. Carn said. “He has shaped my views on Europe and contributed significantly to my investment performance.”
To be sure, Mr. Connolly was not the only analyst who raised early warning flags about the euro project. Economists like Martin Feldstein of Harvard and Paul Krugman, a Princeton economist who writes an op-ed column for The New York Times, have been longtime critics, as were many experts in euro-skeptic Britain. But few have gone on to devote more or less their entire professional career to exposing Europe’s monetary fault lines.
Unlike many critics of the euro, Mr. Connolly, 61, plies his trade mostly in private, eschewing cable television programs, opinion pages and policy journals. He represents a new breed of independent analyst who has come increasingly to the fore since the financial crisis broke in 2008.
As investment banks have cut down on staff and remain constrained by their banking and government relationships, independent analysts like Mr. Connolly, who are mostly pessimistic in outlook, have become highly popular for hedge fund investors who wager large sums of money betting against the currencies, bonds and banks of countries heading for trouble.
Mr. Connolly, who used to work for AIG Financial Products, the banking arm of the giant insurance company American International Group, until it went into government receivership, now operates out of a nondescript office in New York, where he is said to pound out as much as 20,000 words of analysis a week.
Like those of other such analysts scattered around the globe, his insights do not come cheap. While the price Mr. Connolly charges is not public, analysts of his stature command, in some cases, as much as $100,000 for a full array of services, including regular meetings and phone calls along with written reports.
And like most of them, Mr. Connolly — the Oxford-educated son of a bus driver from Manchester — guards his privacy zealously. He declined numerous requests to comment for this article. People who know him say that his public reticence is also fed by a lingering anxiety that officials in Brussels will exact some form of revenge.
The origins of that fear as well as the anger and passion that drive him date to 1995, when he took a leave from his job to write “The Rotten Heart of Europe,” an excoriating history of the failure of the euro’s predecessor, the European Exchange Rate Mechanism.
In Britain, where suspicions of common European economic policy ran very high, the book was a hit for its attacks on the architects of the European common currency, including Jacques Delors, the former head of the European Commission, and Jean-Claude Trichet, the French finance official who would go on to run the European Central Bank for eight years.
The book was greeted less enthusiastically in Brussels; Mr. Connolly was told not to return from leave to reclaim his position. Moreover, he was the subject of an investigation by the European Commission into whether he had disclosed any proprietary information in his book. Investigators found that he had not.
In 2005, while working at A.I.G. and at a time when Greek, Portuguese and Irish bonds were trading at rates barely higher than Germany’s, Mr. Connolly persuaded a small group of hedge funds and independent investors to bet on a euro zone crack-up.
They did so by buying the credit-default swaps of what he saw as the most vulnerable European countries. When fears that those countries would default took off in 2008 and 2009, sending the values of those swaps skyward, they were able to sell out — reaping large profits.
“It took a while, but we finally were able to monetize Bernard’s views on Europe,” said James Aitken, who worked with him at A.I.G. and described his job then as translating Mr. Connolly’s arcane musings into actual investment strategies.
While other investors have also profited from following Mr. Connolly’s advice, Mr. Aitken says that Mr. Connolly’s true passion is to try to prevent the social and political train wreck he fears is just around the corner.
“He is anguished,” said Mr. Aitken, who runs his own research service for investors, called Notes from a Small Island, from his home in London. “He sees where this is going and is warning against the human tragedy.”
Yra Harris, a trader on the Chicago Mercantile Exchange, is another of Mr. Connolly’s supporters in the investment world. “Bernard is like no one I have ever met,” he said, citing his work as inspiration for some recent profits he made selling Italian bond futures.
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