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I am not an investment professional. I do not engage in stock or currency trading. I am a blogger and investor who believes the failure of credit has created an investment demand for gold, and that gold bullion is the sole means of wealth preservation.
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  • Stocks Spike As World Central Banks Announce Coordinated Actions To Provide Liquidity Support To The Global Financial System - A Failure Of Sovereign Debt And The World Financial System Is Imminent 0 comments
    Dec 1, 2011 10:43 AM | about stocks: ACWI, VSS, EEM, EWX, CHIM, IEZ, XES, REMX, COPX, URA, ALUM, WOOD, PSCI, PSCE, EWD, EWN, EZA, TUR, EPOL, EWW, EWO, EWG, EWI, EWP, RSX, ARGT, RSXJ, BRF, KROO, XSD, SMH, FIO, PKE, WEX, VSAT, AXE, PXN, MTX, AXLL, NL, HWKN, FXI, YAO, HAO, CHII, EZU, EUFN, EMFN, FGEM, CHIX, IXG, KBE, IAT, KRE, QABA, RWW, IWM, EIRL, IR
    Financial market report for November 30, 2011

    Introduction
    In joint announcement, the world central banks announced coordinated liquidity actions in an attempt to prevent the implosion of sovereign debt and runs on banks world wide, with the result that risk assets like silver miners and copper miners, and currency carry trade driven countries rose strongly as the US Dollar fell parabolically lower. Foreign money center banks, rose eight percent after having risen four percent earlier this week, led by Deutsche Bank, DB, which rose ten percent. Investment Bankers, KCE, rose seven percent, and stock brokers, IAI, rose six percent. Both the world major currencies rose and the emerging market currencies rose taking commodities higher, turning the US Dollar lower.

    The coordinate liquidity actions only postpones a Eurozone default. Out of sovereign armageddon, that is a credit bust and global banking system collapse, a New Europe and regional global governance will commence.

    The Milton Friedman Free To Choose floating currency regime has died, and today’s market noise is simply its death rattle.

    Fate, not human action, is working to provide a ten toed kingdom of regional economic government as called for by the 300 elite of The Club of Rome in 1974. Its Clarion Call comes with an authoritarian imperative to provide order out of chaos from deleveraging, derisking, and dissolution out of the debts and carry trade investments of the former regime.

    An authoritarian tsunami is on the way as the economic, political and investment tectonic plates have shifted. The Beast Regime of regional corporatism is rising out of the fiscal debauchery of the Mediterranean profligates. It has seven heads, symbolic of its occupation in mankind’s seven institutions and ten horns, symbolic of its rule in the world’s ten regions.

    Destiny is driving Neoauthoritarianism to replace Neoliberalism, and the only forms of sovereign wealth will be diktat and gold bullion as Tyler Durden reports Gold Safe Haven in November, Rises 1.8% As Central Banks Further Debase Currencies.

    1) .. The world central banks announced a coordinated policy of swapping currencies for dollars to help banks stay liquid; the world financial system, being based on a fiat monetary system is bankrupt.
    Bloomberg reports Fed, Five Central Banks Lower Interest Rate On Dollar Swaps. And WSJ relates What Are Fed Swap Lines and What Do They Do?

    David McHugh of AP writes Central Banks Move To Stabilize The Global Financial System. “The action appeared to be the most extraordinary coordinated effort by the central banks since they cut interest rates together in October 2008, at the depths of the financial crisis. That fall, fear gripped the financial system after the collapse of Lehman Brothers, a storied American investment house. Banks around the world severely restricted lending to each other. Investors panicked, resulting in a meltdown in stocks. In October 2008, the ECB, the Fed and other central banks cut interest rates together. That action, like Wednesday's, was a signal from the central banks to the financial markets that they would be players, not spectators. But while it should ease borrowing for banks, it does little to solve the underlying problem of mountains of government debt in Europe, leaving markets still waiting for a permanent fix. European leaders gather next week for a summit on the debt crisis.”

    “European banks cut business loans by 16 percent in the third quarter. And no one knows how much European banks will lose on their massive holdings of bonds of heavily indebted countries. Until the damage is clear, banks are reluctant to lend. Banks are also being pressed by European governments to increase their buffers against possible losses. That helps stabilize the banking system but reduces the amount of money available to lend to businesses. "European banks are having trouble borrowing in general, including in dollars," said Joseph Gagnon, a former Fed official and a senior fellow at the Peterson Institute for International Economics. "The Fed did the Europeans a favor." Foreign central banks are reducing by half a percentage point, to about 0.6 percent, the rate they charge commercial banks for dollar loans. Commercial banks need dollars because they are the No. 1 currency for international trade. The lower rate is designed to get credit flowing again.”

    “To get the dollars to lend, central banks go to the Fed and exchange their currency for dollars under a special swap program. Foreign central banks pay the Fed whatever interest they earned from commercial banks. The Fed had offered dollar swaps from December 2007, when world financial markets were weakening because of fear about subprime mortgages, until February 2010. It reopened the program in May 2010, as European debt concerns grew, and planned to end it Aug. 1, 2012. On Wednesday, the Fed extended the program to Feb. 1, 2013. If it all works, the market rates on dollar loans will drop, and stock and bond markets will calm down.”

    “In Europe, countries like Ireland, Portugal, Spain, Greece and Italy overspent for years and racked up annual budget deficits that have left them with backbreaking debt. Italy alone owes euro1.9 trillion, or 120 percent of what its economy produces in a year. The ECB extends unlimited short-term loans to banks. It cannot lend directly to governments, including by buying their national bonds. It can, however, buy national bonds on the secondary market, lowering borrowing costs for governments. The ECB has resisted expanding even this indirect support because it believes that would take the pressure off of politicians to cut spending and reform government finances, a concern known as moral hazard. European leaders are considering other options, including creating a fiscal union, giving a central authority control over the budgets of sovereign nations. That would ease the ECB's concerns. The ECB has also worried that injecting too much money into the European economy would trigger inflation. The coordinated action was a demonstration of how interconnected the world financial system is, and that the debt loads of countries like Italy and Greece are everyone else's problem, too. Germany's economy depends heavily on exports, and if economic output in the rest of Europe collapses, the people of smaller countries couldn't buy as many German goods. Across the Atlantic Ocean, the United States depends on Europe for 20 percent of its own exports. And investors in American banks have worried about their holdings of European debt. Standard & Poor's, the credit rating agency, lowered its rating at least one notch Tuesday for the four largest banks in the US, Bank of America, Citigroup, JPMorgan Chase and Wells Fargo. China, one of the only places in the world where the economy is growing quickly, needs the U.S. and Europe both to stay healthy. Growth in Chinese exports has declined from 36 percent in March compared with the year before to 16 percent in October. China will reduce the amount of money that its commercial lenders must hold in reserve by 0.5 percentage points of their deposits. It was the first easing of Chinese monetary policy in three years.”

    2) … Risk assets and currency carry trade driven countries spiked today in response to the world central banks coordinated policy actions providing for dollar liquidity.
    World stocks, ACWI, VSS, EEM, EWX, were led higher by a strong rise in China Minerals, CHIM, US Oil Energy Service, IEZ, XES, Coal Mines, KOL, Silver Miners, SILV, Rare Earth Miners, REMX, Copper Miners, COPX, Uranium Miners, URA, Aluminum Manufacturers, ALUM, Wood Manufacturers, WOOD, Small Cap Industrials, PSCI, Small Cap Energy, PSCE, and currency carry trade driven countries such as Sweden, EWD, Norway, EWN, South Africa, EZA, Turkey, TUR, Poland, EPOL, Mexico, EWW, Austria, EWO, Germany, EWG, Italy, EWI, Spain, EWP, Russia, RSX, and Argentina, ARGT.

    Russian Small Caps, RSXJ, Brazil Small Caps, BRF, and Australian Small Caps, KROO, were the emerging market small cap leaders,EWX, rising strongly on a much higher Brazilian Real, BRF and Australian Dollar, FXA.

    Semiconductors, XSD, SMH, and small cap technology stocks, FIO, PKE, WXS,VSAT, AXE, CGNX led their ETF, PSCT, strongly higher, as is seen in this ongoing Yahoo Finance Chart. And Nanotechnology, PXN, rose 5%.

    Synthetics, MTX, GGC, NL, HWKN, seen in this Finviz Screener, rose strongly

    China Minerals, CHIM, led China, FXI, YAO, HAO, CHII, higher.

    European Shares, EZU, and VGK rose strongly as did the emerging market shares, EEM.

    European Financials, EUFN, and Emerging Market Financials, EMFN, FGEM, China Financials, CHIX, led world financials, IXG, strongly higher. Banks, KBE, IAT, KRE, QABA, RWW, rose strongly, giving strong rise to the credit dependent Russell 2000, IWM.

    Ireland, EIRL, rose strongly, even though the Irish Times reports ESRI Slashed Growth Forecast For Ireland. Ireland, an export driven, yet debt strangled country, as documented in Seamus Coffey Irish Economy article Ireland Debt And Interest, has been a poster nation for austerity measures as documented in Paul Hannon WSJ article Ireland Enduring A Long Age Of Austerity.

    Ireland banks, such as IRE, and those of Scotland, RBS, and the UK, LYG, BCS, HBC, have been strongly sold of late, but led the world banks seen in this Finviz Screener higher today. These include BSBR, ITUB, BBD, IBN, HDB, UBS, RBS, STD, DB, LYG, BCS, HBC, IRE, BCH, BCA, SAN, WBK, CS, BLX, FGEM, EMFN, RY, BMO, BK, BAC, C, QABA, KRE, RWW, BLK, IAI, KCE, MTU, NMR, MFG, BBVA, BMA, BFR, GGAL, SHG, KB, WF, CHIX, BAP, IXG, NBG.

    Credit providers seen in this Finviz Screener rose strongly; these include PHH, AXP, NNI, COF, SLM, ECPG, NICK, MA, V, AMT, ADS, CATM, ARCC, AINV, GPN , AEA,

    Steel, SXL, the Metal Manufacturers, XME, and the Automobile ETF, VROM, rose strongly reflecting a strong rise in the Automobile stocks seen in this Finviz Screener.

    Construction, Industrial, and Enviornmental Stocks seen in this Finviz Screener, rose strongly today; these include ERII, URS, AMRC, ACO, FLOW, NX, USG, NCS, VMC, TRN, AIMC, MTW, CRH, GLDD, AI, GRC, RBN, SXI, ENOC, CLNE, AEGN, DY, SSYS, TNC, SHS, NDSN, PRIM, BECN, AAON, JOYG, PWR, GVA, TPC, CASC, CAT, TEX, CMCO, NC, CNH,

    Shipping, SEA, and Utilities, XLU, were the lagging sectors of the day rising 3%. Japan, EWJ, JSC, and Vietnam, VNM, were the lagging country sectors of the day.

    World currencies, DBV, and emerging market currencies, CEW, rose strongly and the Yen, FXY, rose weakly as is seen in this Finviz Screener of FXA, FXE, FXM, FXC, ICN, FXB, FXS, SZR, FXF, BZF, FXY, and FXRU. Small Cap Pure Value, RZV, rose strongly on rising currencies.

    Action Forex and Daily FX are in agreement that the USD/JPY has now made a reversal and is headed higher. Action Forex, writes in chart article USDJPY Hold Long Entered At 77.30 Dollar’s rebound after yesterday’s sell off to 77.29 has retained our bullishness and consolidation with upside bias remains for test of the Ichimoku cloud now at 77.95-96. In view of this, we are holding on to our long position entered at 77.30

    It was the strong rise in commodity currencies, CCX, such as the Australian Dollar, FXA, that propelled commodities, DBC, higher. The highest risk commodities such as base metals, DBB, copper, JJC, DBC, timber, CUT, silver, SLV, rode today’s dollar swap rally higher as the US Dollar, $USD, fell parabolically lower. Gold, GLD, rose strongly as a safe haven investment. Gold miners, GDX, GDXJ, ABX, NEM, rose strongly on the higher price of gold. The chart of silver, SLV, shows that it has risen to strong resistance; while the chart of gold, GLD, shows ongoing demand.

    World government bonds, BWX, rose, as US Treasuries, EDV and TLT, fell lower. Longer out, that is greater duration debt fell the most as is seen in ZROZ, BLV, LTPZ, falling more than their shorter duration counterparts, IEF, LQD, STPZ. And thus the 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, steepened, as is seen the Steepner ETF, STPP, rising and the Flattner, FLAT, falling.

    Junk bonds, JNK, and Leveraged Buyouts,PSP, both risk trades, rose strongly.

    3) … The provision of dollar swaps only postpones a Eurozone default. Out of sovereign armageddon, that is a credit bust, and global banking system collapse, a New Europe and regional global governance will commence.
    The dollar swaps provide funds to stave off runs on the banks and prevent competitive currency deflation. The coordinated move supports the Euro and the riskiest of currencies which have come under selling pressure, as European banks especially have scrambled to secure cash dollars, as the US Dollar has been rising in November. Banks globally have been starved for dollars as risk appetite has turned to risk avoidance.

    Investors have been running to safety in the US Dollar, particularly US Treasury Bonds traded by ZROZ, EDV, TLT, and IEF. The dollar swap facilities provided by the world central banks are a stop gap measure to prevent dumping of sovereign debt by insurance companies and banks world wide. Treasury bonds of nation states has come under severe pressure as is seen in International Treasury Bonds, BWX, plummeting in value in November.

    The coordinated provision of dollar swap facilities is the world central banks attempt to prevent a sovereign implosion, that is a collapse in confidence in sovereign debt globally

    Italy has joined Greece as an insolvent nation as Italy pays almost 8% in interest for a three-year bond, and 7.5% for a 10-year bond. At these levels markets have priced in default. These nations have lost their debt sovereignty, and thus have lost their sovereign authority, and will have to look to the sovereign authority of the EU ECB and IMF Troika for seigniorage, that is moneyness for fiscal spending needs, and in return commit to a fiscal union, coupled with a nationalization of EU banks.

    Fear of insolvent sovereigns has been the cause of disinvestment out of financial institutions globally. FT reports A Run On Banks In Greece Is Underway. Greek central bank governor George Provopoulos told a parliamentary committee that deposits of Greek banks had shrunk significantly in the past two months, by €5bn in September and €6.5bn in October Depositors withdrew another €1bn in the first week of November, during the political crisis. So far, funds have not returned.

    The 2Y Euro Swap Spread presents fears of sovereign insolvency which in turn presents systemic risk. This is documented as Scott Grannis, wrote on November 18, 2011, Markets are still priced to a very ugly outcome as this chart recaps the level of systemic risk in the U.S. vs. the Eurozone, using 2-yr swap spreads as the proxy. By this measure, the situation in Europe today is almost as bad as it was during the global financial panic of late 2008. And today, Gary of Between The Hedges continues this theme relating The 2Y Euro Swap Spread is near the highest since Nov. 2008. The Libor-OIS spread is the widest since June 2009, which is also noteworthy considering the equity surge off the recent lows.

    Euro Intelligence writes The Euribor-OIS spread is rising strongly, communicating that financial stress has risen significantly. The Euribor is the rate at which banks lend to each other over various periods. OIS stands for overnight indexed swap. It is a rate at which an investor swaps an overnight interest rate with that of a specific period. Before the financial crisis started in 2007, the Euribor-OIS spread (or Libor-OIS in the UK/US) was typically 0.1%. During the crisis, it shot up. As you can see from the table, the 1-year Euribor-OIS spreads is now close to 1.6%. By comparison, the 1-year Libor-OIS spread in the US was 0.91% this morning. While the US banks are healthier than European banks, the biggest risk to the US would now a contagious banking collapse in the eurozone – which is why even the US level remains elevated. The high Euribor-OIS spread also tells us that monetary policy has no traction at the moment. The low central bank interest rates do not filter through into the real economy.

    CNBC reports Central Bank Action Merely 'Buys Time' for Europe. Stocks in Asia surged on Thursday, after the coordinated action by global central banks to provide cheaper dollar funding to European banks spurred massive gains on Wall Street. But according to a number of analysts CNBC spoke to, the rally is unlikely to last, as the move merely bought time for European leaders and doesn’t solve the euro zone’s fundamental debt problems. "This liquidity is definitely something that's addressing the symptoms of the problems, but we really need the Europeans themselves to be attacking the cause and the solvency issues," said Nick Bennenbroek, Head of Currency Strategy at Wells Fargo in New York.

    Mike Mish Shedlock write Maximum Intervention Moves Into Overdrive and Armageddon Delayed.

    FX Street reports US Debt Rating At Risk; S&P Downgrades Global Banks

    Calculated Risk reports Crisis In Europe Tightens Credit Across The Globe

    Greek Crisis provides The Economist report Trouble Around The Periphery Currencies Sink Fastest In Easter Europe.

    Open Europe writes Olli Rehn said that discussions were underway “to increase the IMF’s resources through bilateral loans.” Other measures agreed include allowing the EFSF to issue short term bills to raise funding and engage in repurchase agreements with banks using any bonds it has bought, allowing it access to liquidity. The finance ministers also approved the release of the next tranche of bailout funds for Greece and Ireland, expected to be released in early December after IMF approval. Separately, Kathimerini notes that the negotiations over the private sector involvement in the revamped second Greek bailout have been put on hold for a week after profound disagreements. The Greek Central Bank admitted yesterday that the outflow of deposits from Greek banks has picked up significantly over the last two months. The Irish Independent notes that finance ministers from the ten non-eurozone countries held a private dinner in Brussels yesterday, in what was the third meeting of the ‘euro-outs’ on the night before a meeting of EU finance ministers

    William Kemble-Diaz, of Dow Jones writes Dollar Funding Costs Surge Ahead Of Year-end Dollar funding rose sharply Tuesday, in some cases hitting their highest levels in three years as Europe's credit concerns intensified further and banks scrambled for cover over the year-end period.

    Mr Kemble-Dias writes of credit evaporation. The implied cross-currency basis swap is a function of spot and forward foreign-exchange prices as well as benchmark interbank interest rates in each currency. A rate of zero implies the balance of demand for each currency is equal and that the market is willing to swap currencies at the prevailing interbank rates. However, the deepening euro-zone sovereign debt crisis and concerns over the creditworthiness of the region's banks means European banks are being forced to lend euros at ever-lower interest rates to get dollars in return.

    On Tuesday, the implied discount on the rate banks charge each other to lend euros for a period of just one month was as big as 1.41%. With the one-month euro interbank Offered Rate, also known as Euribor, fixed at 1.21%, that meant some European banks were willing to pay market counterparties an extra 20 basis points to borrow euros just to get dollars in return.

    "It is a very worrying signal because it is showing that the credit quality of these European institutions is so weak that even though there is so much availability of liquidity in the system they are having to pay up for it," said a foreign exchange and rates strategist at a U.S. bank, who declined to be named. The cost of insuring European banks against default has risen markedly since the summer. Major banks from Germany, France, Italy and Spain saw their five-year credit default swaps hit records last week, according to data provider Markit.

    Doug Noland wrote in his most recent newsletter Global Contagion Not many weeks ago, hopes were high that the EFSF would be equipped with sufficient firepower to help both recapitalize euro region banks and to "ring-fence" Spain and Italy. Today, the marketplace grapples with how a rapidly expanding hole in European bank capital can be contained, while essentially giving up on Italy and Spain. De-leveraging has already created alarming illiquidity throughout sovereign debt markets, boding ill for ongoing enormous refinancing needs for nations and financial institutions alike.

    Economic prospects have deteriorated rapidly throughout Europe and, importantly, in a "developing" world heavily exposed to a tightening of European bank finance.

    I see increasing confirmation that "developing" credit systems and economies are much less resilient than the markets have assumed. I am more confident in the analysis that several years of rampant excess have left the "developing" world much more vulnerable to the unfolding crisis than it was back in 2008.

    The markets are now on daily watch to see if things continue to spiral out of control in Italy and Spain. The high degree of systemic stress that arose last week has market participants conditioned to expect a policy response. With the euro and "developing" currencies under intense selling pressure, the dollar index jumped to its high for the year. Dollar strength further pressures de-leveraging, de-risking and the reversal of “dollar carry trades” (short the dollar and use proceeds to leverage in higher-returning global assets). Some analysts, including myself, view dollar strength as raising the probability for QE3 operations from the Bernanke Fed (additional quantitative easing would be expected to pressure the dollar lower).

    Whether it is CDS or derivative protection more generally, a deteriorating risk versus potential return backdrop would seem to point to the ongoing liquidation of risk asset exposures attained through, or hedged by, derivative products.

    For too long, market participants have tolerated illiquid holdings because of the perception of readily available liquid and inexpensive derivative "insurance". This epic market distortion created egregious speculative leveraging throughout the global system, and attendant acute fragility that is increasingly on display. I would not be surprised by some announcement of concerted international policymaker measures to bolster confidence in global market liquidity. The financial breakdown scenario is no longer outrageous. The global crisis has afflicted the core, with literally tens of trillions of sovereign debt and banking system obligations now in the markets' bad graces.

    4) … A coup d etat is producing a New Europe.
    EU finance ministers pooled sovereignty and took the first steps to establish a stability union. Matthew Dalton of the WSJ reports Finance Ministers Agree to EU Debt Guarantees European Union finance ministers settled on a plan Wednesday aimed at thawing Europe's frozen wholesale lending market, agreeing that national governments would work in concert to offer guarantees backing the bonds issued by each nation's banks. But the officials rejected a more ambitions plan that would have created a single "syndicate" in which the 27-nation bloc would jointly issue guarantees to ease European banks' funding troubles. That rejected proposal had been supported by the European Central Bank and other EU institutions. Guarantees act as insurance policies that banks can buy to protect holders of their debt against default. Governments are eager to get a guarantee program up and running to help banks raise unsecured, long-term funding, a market that has been effectively closed to them for months as global financial institutions have grown increasingly wary of purchasing bonds issued by troubled euro-zone banks. The creation of a syndicate would face large technical and political obstacles that would delay its coming into force, officials said. Moreover, most creditworthy governments have opposed joint guarantees, fearing the plan could undermine their own credit ratings.

    Jacob Funk Kirkegaard, Research Fellow, Peterson Institute for International Economics, writes in VOX to communicate The ECB Will Take The Lead In Building The New Europe. The ECB now faces a new round of "strategic bargaining" with Eurozone governments to complete the partially built Eurozone institutional house.

    The issue now is how the ECB might influence the political process towards a "quantum leap" in European integration, as repeatedly advocated by former ECB president JeanClaude Trichet and other policymakers. See Jean-Claude Trichet’s speech in Aachen June 2nd 2011 and more recently ECB Executive Board Member José Manuel González-Páramo’s speech in Madrid on November 4, 2011 for a detailed description of how the ECB defines a "quantum leap" in economic governance.

    The main weapon (or bazooka, as former Treasury chief Henry Paulson called it) in the arsenal of the ECB is the SMP. Unlike the Fed, which can take away the punchbowl when the economy overheats, the ECB can shut down the party altogether by turning off the gas and electricity.

    As witnessed recently in Italian bond markets, the ECB used the SMP to keep Italian interest high enough to force politicians to move in the desired direction with impressive speed. The central bank’s strategy is aimed at getting recalcitrant Eurozone policymakers to do things they otherwise would not do. It is a "political strategy," not dictated by IS-LM models predicated to return the economy quickly to full employment equilibrium. Despite the best attempts of markets and financial commentators, the ECB is not acting by its estimate of the next couple of quarters’ nominal GDP growth. The ECB is thinking about the design of the political institutions that will govern the Eurozone for decades. It is thinking strategically. Thus, it is best to ignore any advice given to the ECB on short-term economic forecasts, or even how other central banks would have conducted themselves in this crisis.

    The ECB is in a strategic game with Europe’s democratic governments that recalls the writings of B. H. Liddell-Hart’s "Strategy" from 1967. Liddell-Hart explains how all war strategies should be aimed at obtaining a better peace. In this situation, that means the ECB focusing on creating permanent Eurozone institutions. The ideal strategist adjusts ends to serve means, exercises restraint and avoids excesses that might damage longer-term post-war prospects. (Some might say, of course, that this strategy is risking excessive damage to the Eurozone economy.) But the strategy is predicated on conserving resources, as the ECB is doing by not buying more bonds than it has to. It prefers an indirect approach of working through third parties (say, the Eurozone sovereign bond market pressure), and constantly takes actions that offer alternate objectives to put your opponent on the horns of a dilemma. Its philosophy is that you never offer your opponent certainty (by pre-committing to buy all Italian debt at 5% yields, for example). Rather, you constantly seek the dislocation of your opponent’s mind until this dislocation (10-year interest rates above 6-7%) renders the delivery of a decisive blow practicable.

    How should we expect the ECB to engineer its desired "quantum leap" towards European integration? It is clear that the bank’s prerequisite for that leap is fiscal discipline. As stated in ECB Executive Board Member José Manuel González-Páramo’s speech in Madrid on 4 November, the Eurozone needs "to establish institutional arrangements which provide credible incentives for sound fiscal and macroeconomic policies in a monetary union….First, to ensure fiscal discipline, all planned deficits of more than 3% of GDP and those in excess of a country’s medium term objective would need to be approved by all Eurozone governments. Second, past fiscal slippages would be automatically corrected in upcoming budgets without any room for discretion via the introduction of constitutional rules similar to the German "debt brake." Third, all Member States would also agree to implement fines and sanctions in a quasi-automatic mode."

    Nouriel Roubini writes in FT Italy’s Debt Must Be Restructured. But Italy’s debts cannot be and will not be. My conclusion from the news reports is that a Eurozone default is imminent. Out of sovereign armageddon, that is a credit bust, and global banking system collapse, a New Europe and regional global governance will commence where people are no longer free to choose their currency or investments and only technocratic governments rule and enforce debt servitude. Götterdämmerung, a clash of the gods, that is a clash of sovereign leaders and sovereign investors, is imminent. Leaders will waive national sovereignty and rule via regional framework agreements to establish regional corporatism, that is statism, for regional economic security and survival. Goldman Sachs and European banking families will join hands and rule in technocratic government with political leaders.

    Global Research authors communicate that the Trilateral Commission and Bilderberg Euracracy is rising to govern the US, the UK and Europe.
    James Petras writes The New Authoritarianism: From Decaying Democracies to Technocratic Dictatorships and Beyond.
    Richard K. Moore writes Full Spectrum Dominance And The Regime Change Project.
    Bob Chapman writes The Mega Banks: Goldman Sachs, JPMorgan Chase, et. al. Control Europe's Political Landscape And Mr. Chapman writes The Mega Banks: Goldman Sachs, JPMorgan Chase, et. al. Control Europe's Political Landscape And Mr. Chapman writes The Root Causes of the Global Financial Crisis And Mr. Chapman writes Towards a Worldwide Inflationary Depression: The Anglo-American Empire is in an ongoing State of Collapse And Mr. Chapman writes Bursting Bubbles. Waning Currency Systems and Insolvent Financial Institutions And Mr. Chapman writes The Fed's Purchase of US Sovereign Debt: "The US Treasury is under the Control of the Fed’s Owners". And Mr. Chapman writes US Treasury Controlled by Wall Street

    The WSJ reports Wall Street Journal Wall Street Pushed Federal Reserve for Europe Action. Wall Street executives, in a private meeting with a top Federal Reserve official in late September, recommended a coordinated effort by central banks to remedy the European financial crisis, according to Fed documents received in an open-records request. The meeting, led by Louis Bacon, founder of hedge fund Moore Capital Management, preceded a joint action Wednesday by the world's major central banks, which banded together to provide liquidity to the markets through cheap U.S. dollar loans. Wednesday's moves involved central-bank coordination to lend to European banks, and it couldn't be determined what precisely prompted the Fed and the other central bankers to act. Mr. Bacon is one of 12 Wall Street members of a 14-member Fed panel, the Investor Advisory Committee on Financial Markets, set up in the wake of the financial crisis to give New York Federal Reserve Bank President William Dudley a pipeline into investors' thinking. The Sept. 27 meeting with Mr. Dudley exemplifies the private meetings some Wall Street investors have with top Fed officials, in which they can gain access to potential early clues about Fed actions. Hedge funds have been pushing to get more information about the inner workings of the Fed, according to people familiar with the situation, as detailed in a Wall Street Journal page-one article Nov. 23. The Fed's meetings with investors present a delicate situation for U.S. officials. They must balance the need for information from investors about the markets against the Fed's internal policy discouraging employees from arranging meetings with investors that would confer a commercial advantage. In a statement, Mr. Bacon defended the meetings, saying, "The Fed and Treasury canvass market opinions extensively through a variety of private-sector committees, contacts and trading desks in their task to fund the nation's exploding debt load, stabilize markets and optimize economic outcomes." Members of the Investor Advisory Committee on Financial Markets include some of the biggest names on Wall Street, including Keith Anderson of Soros Fund Management; Mohamed El-Erian of Allianz SE's Pacific Investment Management Co.; Peter Fisher of BlackRock Inc.; Joshua Harris of Apollo Management LP; Alan Howard of Brevan Howard Asset Management; Deryck Maughan, a former chief executive of Salomon Brothers who now is at Kohlberg Kravis Roberts & Co.; and David Tepper of Appaloosa Management LP. The group suggested a number of ways to address the European crisis, including "coordinated credit easing and/or quantitative easing by" the European Central Bank. The group also urged "central bank guarantees of sovereign debt," "investments in European sovereigns and banks," "implementation of capital controls" and "government guarantee of bank funding and/or depositors," as well as "recapitalization of the IMF," according to the minutes.

    John Redwood writes There Are many Who Strongly Want A United Europee. They decided the trade, financial and monetary route was the best way of doing it. They did not fancy their chances of holding a series of referenda in members states to gain approval to the establishment of a new country called Europe. They decided on a crab like sideways approach to union. They still want it. They plan to use the crisis of the Euro not to break up the EU but to have more EU. They see it as an opportunity, a chance to persuade the cowed and frightened peoples of Europe that more EU is the only option.
    There is now the immense power of vested interest. The EU commands substantial resources. It makes many grand sounding and well paid appointments. Many in the political elite exchange jobs with those in the administrative EU elite. Why would they want to damage that? That’s why when the EU says all member states must cut their own budgets, they put the EU budget up. That’s why, when the markets say no-one should go on lending to some of these countries, the EU belatedly decides to lend, having secured control of the member state’s economy first. That’s why , when countries vote “No” in a referendum they are told to vote again. That’s why now the EU favours unelected governments, and moves rapidly to deny any referendum.

    Stephen Kinsella writes in Irish Economy There Are Now Three Technocratic Governments In Europe. In Italy, we have Yale-educated economist and formed EU Commissioner Mario Monti’s government. In Greece, we have the government of Lucas Papademos (also an economist and not incidentally a former Vice President of the ECB). In Ireland the Troika of the ECB, EU Commission, and IMF makes all major decisions on fiscal policy, led by IMF economist Ajay Chopra. The swing away from democracy by the European Union was evident in the reception the recently ousted Greek Prime Minister received when he called for a referendum on austerity measures. The deep irony is not that the EU shouted this down, but that Greek politicians, in the cradle of democracy, balked at asking their people a simple question. This should not go unnoticed. The round of austerity measures and crisis meetings will continue, with laggard governments pulled into line to return the Eurozone to a semblance of balance. Recent history has shown that technocrats, if necessary, will manage all of this when directly elected politicians can’t or won’t. I wish them well. The twilight of the technocrats will come if they fail. As all politicians know, there is only one end to the holding of power: failure. The technocrats will impose austerity on their peoples, and hope an expansionary fiscal contraction is the result. This may or may not happen, but when the people see the technocrats, who did not foresee the Eurozone crisis, who have dithered as the crisis gathered steam, hold the reins of power for a while, they may become disenchanted with the professors. And what then?

    CNBC reports Thomas Klau, a German who heads the Paris office of the European Council on Foreign Relations. “The present situation with Italy now is sustainable for days, perhaps weeks, but not months. This new chapter either writes the endgame of the euro zone, or it precedes a much bigger leap into political and economic integration than all those made so far.”

    The fiat monetary system has failed; the moneyness of diktat is commencing. The NYT, reports Obama Meets Leaders of the European Union. A credible sovereign will emerge out of the European sovereign debt crisis, that being Herman van Rompuy. And that he will be accompanied by a seignior, that is the European Banker, possibly Mario Draghi, to provide a European Banking Authority. Dow Jones relates Draghi Calls For Eurozone Compact. Their sovereign authority will be the basis for the seigniorage of diktat, replacing the seigniorage of the Milton Friedman Free To Choose floating currency regime, as the global government finance bubble has burst.

    Ponzi financing characterized Neoliberalism; but debt servitude will characterize Neoauthoritarianism. Ponzi credit such as GSE Lending and Student Lending thrived under the Milton Friedman Free To Choose regime and created fantastic moral hazard. MyBudget360 relates The student loan racket – For-profit enrollment growth surged by 225 percent in last decade. For-profits live off the 85 percent of revenues they receive from the government and filter out to their Wall Street owners. But under Neoauthoritarianism, all will become vassals of the Beast Regime, working in debt servitude to the sovereigns of the age of austerity.

    5) … In today’s news
    The WSJ reports on debt deflation, that is currency deflation in India. As Growth Stutters, India Woos Foreign Investment. Acute stress in India's economy, exacerbated by Europe's financial woes, is prompting the government to restart a long-stalled and politically controversial reform agenda aimed at reviving growth and attracting foreign investment. The question is whether it will be enough. The latest evidence of India's woes came Wednesday when the government reported economic output in the June-September quarter was up just 6.9% from a year earlier, the slowest pace in two years. Weakness struck the country's biggest growth engines, with expansion in manufacturing, construction and agriculture all in the low single digits.

    The WSJ reports Mr. Corzine and His Regulators. MF Global and the new era of crony capitalist regulation.

    Open Europe relates EP Press Release reports of the ratification of the protocol allowing 18 additional embers to join the European Parliament has been completed.

    Open Europe relates EUobserver ….. Open Europe research Reports from a regular European Commission social issues survey, published yesterday, notes that, “Compared with 2009, there has been a substantial fall in the number of people who think that the EU has a positive impact,” on employment and social policy. Across a series of eight questions dealing with such issues as boosting employment, fighting poverty and protecting social services, between 48% and 67% of respondents thought that the EU was having a positive impact. This is down from between 62% and 78% for the same questions in the last such survey in 2009. “In Spain, Greece, Portugal and Cyprus especially, public perceptions of the EU’s ability to make a positive impact have deteriorated dramatically,” the survey reports.

    Open Europe relates The FT ….. City AM …. Telegraph report that EU Internal Market Commissioner Michel Barnier’s proposals on audit reform unveiled today include splitting up the audit and consultancy branches of the ‘big four’ accountancy firms and enforcing audit rotations, but exclude joint audits.

    Open Europe relates The Mail notes that, in his autumn statement, George Osborne unveiled a £250m package of tax breaks for British businesses which have been “burdened” with environmental taxes. “I am worried about the combined impact of Green policies adopted not just in Britain, but also by the European Union, on some of our heavy, energy-intensive industries,” he said.

    Open Europe relates that Germany and France fight about the position of ECB chief economist. Neoliberalism was characterized by wildcat finance, a Doug Noland term. But Neoauthoritarianism is characterized by wildcat governance, where leaders bite rip and tear one another. Only the most fierce rises to the top to be come the top dog. Les Echos reports that France and Germany find themselves on a collision course when Jörg Asmussen and Benoît Coeuré replace Jürgen Stark and Lorenzo Bini-Smaghi on the ECB’s Executive Board on 1 January 2012. The paper notes that France may push for his candidate to be appointed as the ECB’s Chief Economist, a post which has always been occupied by a German since the introduction of the euro.

    Daily Ticker asks Grover Norquist: America’s Most Powerful Man?

    Reuters reports China factory sector shrinks first time in nearly 3 years

    Reuters reports EU faces deadline Thursday in Airbus spat with U.S.

    WSJ reports Euro-Zone Manufacturing Downturn Deepens. The euro zone's manufacturing sector contracted at a faster rate in November, with production and new orders falling at the strongest rate since the height of the credit crunch.

    6) … A Global Eurasian War is coming
    Aleksandr Shustov relates in Global Research Escalation Around the Trans-Caspian Pipeline

    Zero Hedge reports China Will Not Hesitate To Protect Iran Even With A Third World War" (video)
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