Report on the Euro for the week ending Friday, December 2, 2011
Martin Strydom of the Telegraph writes Ten Days To Rscue Euro As Leaders Call For IMF Funds “We are now entering the critical period of 10 days to complete and conclude the crisis response of the European Union," Economic and Monetary Affairs Commissioner Olli Rehn said on Wednesday as EU finance ministers met in Brussels.
His comments came as Gerard Lyons, chief economist at Standard Chartered, said: "The euro cannot survive in its present format." ... "Throughout the year I have stressed that the world economy could suffer a double-ip if it was hit by one of three factors: an external shock, a policy mistake or a loss of confidence. Unfortunately, in recent months, the euro area has been hit by all three. And that is why the euro area will slip back into recession in 2012," he said in his Economic Outlook for November. He warned that the scale of the downturn will be determined by eurozone leaders' policy actions and the extent to which confidence is hit.
1) … Financial shares moved higher on Friday, December 2, 2011 on hopes of European leaders being able to provide a credible solution to the Eurozone crisis.
Financials shares rose higher again today as Bloomberg reports EU Bank Writedown to Exclude Pre-13 Debt The European Union may exempt bank debt issued before 2013 from proposals forcing investors to take losses at failing lenders, said a person familiar with the plan.
European Financials, EUFN, led Global Financials, IXG, Investment Banks, KCE, Stockbrokers, IAI, India Earnings, EPI, Financials, XLF, Emerging Market Financials, EMFN, FGEM, Banks, KBE, KRE, IAT, higher today, UK area banks, IRE, BCS, RBS, and India Banks, HDB, IBN, and the National Bank of Greece, NBG, led the banks seen in this Finviz Screener higher. Asset Management Companies, FIG, EV, LAZ, EVR, BEN, EVR, GROW, rose strongly this week as is seen in this ongoing Yahoo Finance chart. And Junk Bonds, JNK, and Leveraged Buyouts, PSP, traded higher.
Shipping Stocks, seen in this Finviz Screener, and Education Stocks, seen in this Finviz Screener rose.
Automobile Dealerships, a small cap value component, KMX, SAH, ABG, CRMT, LAD, GPI, rose.
Automobile stocks, VROM, CARZ, and those seen in this Finviz Screener rose strongly; these included TRW, AXL, JCI, DAN, TEN, MGA,TWI, LAD, TSLA, CLC, F, SMP, VC, MTOR, WBC, WPRT, PCAR, GM, CVGI, ALV, CMCO. Nick Bunkley of the NYT reports Americans Flock to Car Showrooms With Wallets Open. Strong sales are seen in Chevrolet Silverado Chevrolet Cruze, Ford F Series, Ford Escape, Toyota Prius, Jeep Cherokee, Nissan Altima, Toyota Camry, and Honda Sonata.
DTE Energy, D, led Utilities, XLU, to trade lower as seen in this Finviz Screener of leading utilities. Petsmart, PETM, and Apparrel Retailers seen in this Finviz Screener led Retailers higher.
US Medical Devices, IHI, and Health Care Providers, IHF, led Health Care, XLV, to trade lower.
And China Materials, CHIM, led basic material stocks seen in this Finviz Screener lower.
Tata Motors, TTM, and India Earnings, EPI, led India, INDY, and India Small Caps, SCIF, higher. Yet these, because of the Indian Rupe, ICN, look to be fast fallers. Other likely fast fallers will be credit dependent Argentina, ARGT, and Brazil, EWZ, BRF, carry trade lender Austria, EWO, Eastern Europe, Poland, EPOL, Euro region initiate, Czech Republic, CEE, carry trade recipient Hungary, Turkey, TUR, and South Africa, EZA, supremacist Israel, EIS, growth giant South Korea, EWY, growth and credit addicted China, YAO, HAO, and banking and natural resource dependent Chile, ECH, as well as Australia, EWA, and KROO.
Markus Salzmann of WSWS reports the total investment devolution of Eastern Europe. His report communicates that Hungary and Austria are now insolvent nation states. Hungarian Debt Downgraded To Junk Status. Western European banks are also affected by the crisis in Hungary. Austrian banks in particular, which have been heavily involved in eastern Europe and the Balkans since the 1990s, are in danger. The three biggest Viennese banks, and Austria, Raiffeisen and Erste Bank, are the biggest lenders in the region. According to the Austrian National Bank (ÖNB), at the end of 2009, the latter had outstanding loans and debts of about €35 billion in Bulgaria, Romania and Serbia alone. According to Citigroup, Austria’s Erste Bank is threatened by the Hungarian crisis with a loss of up to €1 billion, which would be the case if Budapest ordered all foreign currency loans to be denominated in forints at the expense of the banks. Also, MKB, a subsidiary of Bayerische Landesbank, and several large Italian banks would be seriously impacted. Many finance houses now plan to dispose of subsidiaries in eastern Europe and cut their lending dramatically. According to a survey by the Polish central bank in November, finance houses have already tightened up their money-lending criteria. Especially in Hungary and the Baltic countries, lending has long been declining. Since the eastern Europe market is dominated by banks from the eurozone, a continuation of this trend would trigger a serious credit crunch and recession. Many eastern European countries are already in major difficulty. For example, the Czech koruna is at its lowest level in 18 months, and the Polish zloty at its lowest point in two and a half years. On Tuesday, Latvia called off a 10-year government bond auction due to lack of demand. The Latvian government cited the nervousness of investors and the bad mood on the European markets.
The carry trade marvels of Neoliberalism, such as Latvia, and Hungary, are now relics in the dust bin of a bygone era; they are the victims of what Doug Noland terms wildcat finance. They will soon experience Neoauthoritarianism’s wildcat governance, where leaders bite, rip and tear one another to see who rules to get the remains. The banking, credit, investment and economic system of Eastern Europe is dead as is seen in CEE having collapsed.
This week, the seigniorage of fiat fiscal finance and credit, that is the moneyness of securitization of debt, banks, industrial companies, risk traded currencies and commodities, caused small cap pure value, RZV, shares to rise more than the small cap pure growth shares, RZG. The currency demand curve, RZV:RZG, and the credit demand curve, RWJ:RWW, and the industrial demand curve, PSCI:XLI, and the carry trade demand curve, EWJ:JSC, and the optimized carry ETN, ICI, all rose this week after having fallen last week. The chart of AGG, LAG, and BND suggests that peak credit was attained in October 2011.
This week saw a revival of Neoliberalism’s fiat money system from the grave. It rose in zombie like fashion, being called up from the dead by hopes of a way out of Eurozone default.
The strong rise in world treasury debt, BWX, and emerging market bonds, EMB, this week came through rising world currencies, DBV, and emerging market currencies, CEW. Despite the rise of Neoliberalism’s fiat currencies this week, the global government finance bubble has burst. Doug Noland relates, the arbitrage of European bond yields was likely one of history’s most lucrative speculative endeavors.The Milton Friedman fiat currency system is dead; this week’s rise in currencies is simply noise of Neoliberalism’s death rattle.
The ETF tradeable currencies seen in this Finviz Screener are seen sinking in this ongoing Yahoo Finance Chart of SZR, FXA, FXE, FXM, FXC, ICN, FXB, FXS, FXF, BZF, FXRU, FXY,
Business Insider relates Why Dec. 9 Is Expected to be One of the Biggest Days in the History of Europe.
A crisis of money is at hand. The WSJ reports The Fiat Money System Is In Crisis. By now it should be obvious to even the most casual observer that this is not just another business cycle. What started in 2007 in the U.S. subprime market and morphed into a global banking crisis the following year has now found its latest incarnation in the European sovereign-debt crisis. What we are dealing with is of a fundamental and structural nature.
Libertarian Ron Paul is a tireless advocate of Freedom. Congressman Dr Paul has an agenda of free enterprise, and promotes the concepts of monetary freedom and a free market system. He wrote critically against Fiat Paper Money on the Lew Rockwell Mises Institute website. And Ralph Benko writes in Forbes that Fiat Money Is The Root Cause Of Our Financial Disaster.
Both the neoliberal concept of choice, and the libertarian concept of freedom are dead on arrival in the age of diktat, which is replacing the age of democracy. Freedom and choice are mirages on the Neoauthoritarian Desert of the Real. And as for free enterprise, one may want to consider moving to Uruguay, Denmark, Norway, Finland, Sweden, Switzerland, Singapore, or the Netherlands. Otherwise I relate, there is not any Free Land. A whole new political, economic and investment regime and experience is at hand. Like in movie The Matrix, where just before the red pill takes effect upon Neo, Cypher warns him “Buckle your seatbelt, Dorothy, ’cause Kansas is going bye-bye!”.
Fate is operating like a terminator that cannot be reasoned with to destroy all existing forms of economic life beginning with European Socialism. There are no buyers of PIIGS sovereign debt, no insurance companies, no Chinese buyers, no middle east buyers. Perceiving that a EU debt union has formed, and that the PIIGS are insolvent, buyers have turned off the spigot of fiscal resource. The PIIGS have lost their debt sovereignty, and are thus insolvent sovereigns, and lack fiscal capability.
Neoliberalism is being replaced by Neoauthoritarianism, where moneyness comes via diktat. The word, will and way of sovereign leaders, sovereign bodies, such as the EU ECB and IMF Troika, and sovereign stakeholder groups, provide money, finance and credit. The EU is transitioning from a currency union into a stability union where leaders meet in summits and announce intergovernmental compacts. Many will live by fiscal dole. Under Neoauthoritarianism, the world’s banks, seen in this Finviz Screener, will be nationalized, and be known as the government banks, or gov banks for short.
Neoliberalism produced a tremendous rise in the standard of living in the European socialist countries with living conditions in Greece, Italy, Iceland, and Ireland soaring. The pony and cart economy became the tractor economy. Anticipation of introduction of the Euro drove sovereign interest rates down, and currencies such as the Swedish Krone, FXS, soared. Doug Noland relates Italian 10-year yields collapsed from almost 14% in March 1995 to 4.0% by the end of 1998: this swelled the value of sovereign debt and underwrote freedom for investors. Brainy Quote relates Silvio Berlusconi, saying, The link between my experience as an entrepreneur and that of a politician is all in one word: freedom.
But Neoauthoritarianism is going to claw back the economic gains made in all of the socialist European nations, which came largely through national wage contracts. For example, the Economist writes in That’s All Folks, that between 2001 and 2010, Italy’s unit wage costs soared as its economy grew less than any other country in the world except Haiti and Zimbabwe. And it is well known, that in Greece, most every family has one member employed by the state. State government workers in Greece received their jobs from political patronage, and up until this month, were guaranteed by the Greek constitution, that they could not be dismissed from employment.
Public employee unionization under European socialism has resulted in government becoming a large part of GDP. The pain of dissolution and annulment of contracts is going to be most terrible. Marc Wells of WSWS reports Italy’s Fiat Terminates Collective Bargaining Agreements. The decision by Fiat’s CEO Sergio Marchionne to terminate collective bargaining agreements starting by January 2012 is an historic attack on basic rights won by workers over decades of bitter struggle. And Christoph Drier of WSWS reports Mass layoffs In Greece’s Public Sector. On Monday, the new Greek government began implementing mass forced retirements in the public sector.
Money will no longer be produced by capitalist firms such as Mortgage REIT, Annaly Capital Management, NLY, or Investment Bank Dexia Bank, DEXB, or Asset Management Companies such as FIG, EV, LAZ, EVR, BEN, EVR, and GROW, seen in this chart. Money will be coined by the word, will and way of politicians, such as Herman van Rompuy, and Goldman Sachs bankers, such as Mario Draghi, as they work in authority of regional framework agreements and regional compacts.
Moneyness will no longer be facilitated by investment brokers, IAI, such as MF Global, Knight Capital Group, KCG, Stifel Financial, SF, Charles Schwab, SCHW, or Piper Jeffrey, PJC. Money will flow through stakeholder groups from government and industry, which provide for a regions’ security and stability. Money has been a creature of the Milton Friedman Free To Choose floating currency regime; very much a Jekyll Island creature, writes Justin Fox, in Time article Explaining The Fed. Money has taken its value from the sovereign authority authority of nation states. The seigniorage of fiat money, which has come under territorial monopolies of central banks and private banks, and that has produced elastic state money, is history. Detlev S Schlichter, author of Paper Money Collapse: The Folly of Elastic Money And The Coming Monetary Breakdown, writes in the WSJ of the Fiat Money Crisis. Artificially lowering market interest rates by printing money misallocates resources and misdirects economic activity. It leads to a mismatch between investment and true saving. But in our system, whenever a recession occurs, more money is created and new imbalances emerge. This system has looked deceptively stable for the past 40 years but the accumulated imbalances have now reached system-threatening proportions. Excessive levels of debt would not have been conceivable, at least in their magnitude, in a system of capitalist hard money. Those economists who advocate quantitative easing and deficit spending to stimulate the economy believe that we can simply keep on doing what we have done in the past. They do not see that the market is now questioning the sustainability of the over stretched credit edifice.
The market has a way of dealing with the unsustainable: liquidate it. This is deemed politically unacceptable, and liquidation is therefore fought with ever faster and more desperate money printing. Around the world, the printing press has become the political establishment's last tool to project the mirage of sustainability and solvency. This will end as it always does. All paper money systems in history have failed. Either a voluntary return to commodity money was accomplished, or the system ended in hyper inflation and complete currency collapse. At present, the latter looks the more likely endgame for the latest fiat money experiment.
Mark Boucher relates Fiat currencies do not balance trade, and so trade imbalances grow unchecked and lead to debt to fill in the gaps for chronic trade deficit countries like Greece and the US. In a free-market system with a 100% convertible gold standard, as assumed by Adam Smith and David Ricardo, trade balances. If the US has a trade deficit it must export gold and its money supply drops and so must its relative prices. If China has a trade surplus it gets an excess import of gold to pay for it, and its money supply (gold) rises and so must its prices. US prices drop and Chinese prices rise until trade balances, and becomes mutually beneficial. This process doesn't work in a fiat currency system. Instead the US prints more dollars and its money supply doesn't drop, nor do its relative prices. China uses excess dollars in a reserve and its own money supply and prices remain unchanged. Trade imbalances become chronic. The US borrows to fill the gap, while China builds excess capacity to provide exports that are excessive when compared to levels a truly free-market (with a 100% convertible gold standard) would allow. But once the US (or Greece) reaches debt levels that border on unsustainable, the game of musical chairs begins to stop. The US can't import as much because it can't borrow any more, and now China can't export as much to the US with consumers deleveraging. The entire world has imbalances that take years to recover from - in addition to the huge debts that have built up. Letting markets sort this out without the distortion of a central committee that produces worthless paper as a medium of exchange, and arbitrarily sets interest rates, is a key driver of our international crisis.
European sovereigns are insolvent and their banks are insolvent. Sovereign insolvency and bank insolvency is the inexorable outcome of the seigniorage of the fiat money system. Bloomberg reports on the rising wave of sovereign debt that is going to sweep out democracy. Banks Vie With Nations to Sate $2 Trillion 2012 Funding Need. Europe’s banks will compete with their governments to borrow $2 trillion next year as the two groups refinance maturing bonds and bills. Euro area governments have to repay more than 1.1 trillion euros ($1.5 trillion) of long and short term debt in 2012, with about 519 billion euros of Italian, French and German debt maturing in the first half alone, data compiled by Bloomberg show. European banks have about $665 billion of debt coming due in the first six months, with a further $370 billion by the end of the year, according to Citigroup Inc., based on Dealogic data.
“Serious investors are fleeing from both European sovereign and European bank debt in droves,” said Mark Grant, a managing director at Southwest Securities Inc. in Fort Lauderdale, Florida. “The financials of both classes are in question, and nothing of substance has been achieved to correct the problems and quell the European crisis.” The 440 basis-point yield premium investors demand to hold bank bonds rather than benchmark government soared to 448 Nov. 30, the most since January 2009, according to Bank of America Merrill Lynch’s EUR Corporates, Banking Index. The average spread between January 2005 and January 2007, before the crisis struck, was 38 basis points, the data show.
The seigniorage of diktat is at hand, and it will produce a totalitarian collective in Europe. Totalitarian collectivism is the EU’s future. Out of sovereign armageddon, that is a credit bust and economic collapse, a credible sovereign leader and a sovereign banker will provide diktat, and the people will be amazed by it and place their trust and confidence in it, they will give it their their allegiance.
In the age of diktat, the only forms of sovereign wealth will be diktat and gold bullion; as for silver, it is simply another risk asset. The monthly chart of silver mining stocks, SIL, communicates that the seigniorage of silver is failing as stocks such as HL, PAAS, CDE, SSRI, MVG. Fiat money is the politician's ultimate tool of enslavement. The pace of enslavement is now increasing on the road to serfdom. Globalism and regional economic government will eventually result in a one world government and a one world bank, which will provide a one world currency and global seigniorage.
2) … The Euro is an irreversible project, Herman Van Rompuy says
Don Melvin of the AP quotes EU President saying “We have to show that the euro is an irreversible project, an irreversible project," using the repetition almost as if to convince himself.
Most experts say Europeans must choose now or the choice will be made for them. Either they will choose to go forward as a community, where rich and poor throw in their lot together, or they will experience greater fragmentation and, potentially, a return of the bitter divisions that have riven Europe in the past.
It is as much a question about identity as it is about finance. And the answer cannot be delayed.
Coming as it did from a man not given to hyperbole, the European Union's monetary chief, the soft-spoken, gray-haired and bespectacled Finn, Olli Rehn, Wednesday's warning was dire: "We are now entering the critical period of 10 days to complete and conclude the crisis response of the European Union,"
Ten days to save the euro. Ten days that will shake the financial world. Ten days to decide how Europeans will go forward. That critical period will culminate at the end of next week in the EU's year-end summit meeting, a diplomatic dance of the 27 EU leaders that is increasingly orchestrated by two of the global powers that were at the core of the continent's last big war, Germany and France.
The summit could set the course for Europe for decades to come, if and how the euro currency is rescued from two years of increasing instability. After living in denial throughout much of the crisis, convinced their currency was untouchable, even top EU officials realize they are in uncharted territory.
"We also consider the situation as grave, even as dangerous," Van Rompuy said.
The crisis hit like a bolt from the blue on Oct. 20, 2009, when Greek Finance Minister Giorgos Papaconstantinou entered a makeshift room on the outskirts of Luxembourg during a meeting of EU finance ministers and hold a huddle of reporters: "To put it simply, we have experienced a collapse of tax collection mechanisms and an uncontrolled rise in spending." The euro has never been the same since.
The announcement also shocked the markets into action. They went after one profligate nation after another, and the euro's stronger nations found themselves having to bail out Greece, Ireland and Portugal. That was painful enough. Still, with debt totaling between euro150 billion to euro330 billion, rescuing countries that size was manageable. But when Italy, the continent's third-largest economy, with a debt approaching euro1.9 trillion, seemed to sink into a financial morass over the past weeks, the downward spiral turned into a crisis that could break the eurozone.
And it tested how "European" every nation really was. Germany was most reluctant to help out those nations that were struggling, arguing they should pay for their mistakes, literally. That inaction has been seen by some as part of the problem the euro now faces.
It was a sea change for Germany and the way it's perceived in Europe. "I will probably be the first Polish foreign minister in history to say so, but here it is," Radek Sikorski said in Berlin this week, 72 years after German troops invaded his country. "I fear German power less than I am beginning to fear German inactivity. The biggest threat to the security and prosperity of Poland would be the collapse of the eurozone."
One option would be to pool resources, a move that would require the eurozone nations to hand over much more economic, budgetary and fiscal authority to a centralized authority that would oversee policy and punish those who failed to abide by it.
To supporters that's the community approach. To critics it reads "Superstate." Last week, German Chancellor Angela Merkel and French President Nicolas Sarkozy met in the border town of Strasbourg and decided to push for changes to the EU's governing treaties. When they came to the fork in the road, they chose not a breakup but more unity. "We must take steps toward a fiscal union to express the conviction that we know policies must be more closely coordinated if you have a common, stable currency," Merkel said.
"It is political confidence in Europe that has been lost, we can only win it back politically," Merkel said. It could mean drastic national changes, even at the heart of Europe in France. Known for its strict, protective labor laws, France might have to change, too, if stricter free-market rules come from Brussels. It would be music to the ears of French business and an answer to many of its problems. "The solution exists. It is audacious," said Laurence Parisot, head of the business lobby Medef. "It is called the United States of Europe."
An inquiring mind asks will a political solution for a European Super State come on or before December 9, 2011? Will Angela Merkel start a process of fiscal union? Given the sovereign insolvency of the PIIGS, and the loss of their debt sovereignty, who and what will provide for their fiscal spending resources?
3) … A New Europe is emerging, it will be based upon intergovernmental compacts.
The concept of a fiscal compact providing a fiscal union and an intergovernmental Europe with iron discipline emerges, as leaders labor in ten day marathon to resolve the European sovereign debt crisis.
Brussels Insider relate Euro Observer reports Nicolas Sarkozy Says The Integration Of Europe Will Go The Inter Governmental Way, In his highly-anticipated speech, he confirmed that he will work together with Angela Merkel to change EU treaties to ensure more budgetary discipline in eurozone countries. But at the same time he underlined, that this will not generally move power from Paris to Brussels. Another point the French president Nicolas Sarkozy, who is facing presidential elections in five months, also announced in his speech yesterday that the passport-free Schengen-area should be reconsidered. The agreement have been under a lot of pressure, latest with the Netherlands proposing reinstated borders. And Nicolas Sarkozy, acknowledges that the top-credit rating AAA for France is fragile. “Fear has returned,” he said, and announced that France must step up to the plate.
Reuters reports Merkel Fights For Euro She Says Is Stronger Than D-mark. German Chancellor Angela Merkel vowed to defend the euro, which she said was stronger than Germany's former deutschemark, but she warned that Europeans faced a long, hard "marathon" to restore lost credibility.
"Resolving the sovereign debt crisis is a process and this process will take years," Merkel said in an address to parliament. She called for a long-term approach to tighter fiscal integration in the euro zone, with tougher budget discipline, and dismissed the possibility of massive Fed-style money printing by the European Central Bank. "The European Central Bank has a different task from that of the U.S. Fed or the Bank of England," the German leader said.
However the Sueddeutsche Zeitung daily said Merkel was willing to see the ECB step up its buying of troubled euro zone countries' bonds as a bridging solution until budget controls took hold. Speaking a week before a European Union summit seen as make-or-break for the 17-nation single currency area, Merkel ruled out issuing common euro zone bonds as a crisis solution, saying that would breach the German constitution.
Instead, she called for a mixture of greater European powers to control national budgets, to be enshrined in treaty changes, and smart use of the euro zone rescue fund to stabilize markets.
World stocks and European bonds continued to recover on hopes that euro zone leaders may be moving closer to a comprehensive solution to the debt crisis.
In a crucial signal to markets, ECB President Mario Draghi opened the door on Thursday to more aggressive action to help fight the euro zone's sovereign debt and banking crisis if governments adopted a new "fiscal compact".
On Monday, Merkel will travel to Paris to outline joint proposals with French President Nicolas Sarkozy for treaty changes to entrench stricter budget controls, with automatic sanctions on deficit sinners.
Sarkozy embraced German calls for a new treaty tightening fiscal discipline in a policy speech in Toulon on Thursday, but in contrast to Merkel, he made no mention of greater powers for the European Commission and European Court of Justice. Instead, the French leader, struggling to win re-election next May, called for an intergovernmental Europe in which the presidents and prime ministers of euro zone countries would be the ultimate arbiters over national budgets.
His socialist opponents denounced him for advocating an "austerity treaty" dictated by Germany.
Merkel went out of her way to rebutt such accusations, telling the Bundestag it was "misleading" to suggest Germans were trying to dominate Europe. Sarkozy will try to persuade British Prime Minister David Cameron on Friday to accept EU treaty changes to allow closer euro zone integration without insisting on returning powers over social and judicial affairs from Brussels to London.
Cameron is under pressure from Eurosceptics in his own Conservative party to loosen Britain's ties with the EU while securing guarantees that any move towards fiscal union on the continent does not harm the interests of the City of London financial centre.
On the markets, German 10-year Bunds outperformed safe haven U.S. Treasuries and British Gilts as investors saw prospects of an EU summit deal and ECB action to ease funding for cash-starved banks and to counter a looming recession in Europe. Yields on Italian and Spanish debt fell further on hopes of a euro zone solution. Italy's 10-year bond was down to 6.65 percent, well below the danger levels close to 8 percent they hit last week, which analysts said could make it impossible for Rome to refinance its debt next year. Spain's 10-year borrowing cost tumbled to 5.68 percent.
German officials praised the conservative Sarkozy's courage in telling voters, in what the business daily Handelsblatt called a "blood, sweat and tears speech", that France would have to overhaul its social model and cut public spending.
Peter Altmaier, chief whip of Merkel's conservatives in the Bundestag, told German radio: "In Germany we have been tightening our budget for some years. Nicolas Sarkozy said yesterday that Europe must achieve a reduction of its debt, and that will only happen with iron discipline in national budgets. "We have so far managed to fix a German-French position on all the important decisions on Europe in recent months. I am very confident that we will be able to reach a common position with our French friends by the summit next week. There is much more uniting us than dividing us."
Wall Street Journal reports France and Germany Remain Poles Apart. Two landmark speeches in two days were supposed to highlight France and Germany's determination to bring about a resolution to the euro crisis. Instead, they have highlighted how divided France and Germany remain. Both Angela Merkel and Nicolas Sarkozy agree on the severity of the crisis, the inadequacy of the European Union's current governance arrangements and the need for Treaty changes and new fiscal discipline. But they remain as far apart as ever on how this should be achieved.
Bloomberg reports Euro Region's Central Banks Seen Providing Up to $270 Billion Through IMF. European proposal to channel central bank loans through the International Monetary Fund may deliver as much as 200 billion euros ($270 billion) to fight the debt crisis, two people familiar with the negotiations said.
At a Nov. 29 meeting attended by European Central Bank President Mario Draghi, Euro zone finance ministers gave the go-ahead for work on the plan, said the people, who declined to be named because the talks are at an early stage. The need for a new crisis-containment tool emerged as the effort to boost the 440 billion-euro rescue fund to 1 trillion euros fell short.Under the proposal, national central banks would recycle funds through the IMF, potentially to underwrite precautionary lending programs for Italy or Spain, the two countries judged to be the most vulnerable now, the people said.
“We’re looking for a maximum reinforcement with the IMF and the central bank,” Belgian Finance Ministers Didier Reynders told reporters.
No fewer than four “comprehensive” rescue packages over 19 months have failed to arrest the crisis, fueling speculation that a currency designed to last forever might break up unless European leaders forge a more united economy. Central bank loans may be linked to an adoption of tougher budget policing by governments and tighter economic ties.
Draghi provided a hint of possible Eurozone Debt financing. The euro area’s 17 national central banks operate under the ECB’s umbrella. Draghi yesterday hinted at a stepped-up crisis-fighting role as long as governments move toward a “fiscal compact” that ensures healthy public finances.
German Chancellor Angela Merkel laid out elements of that strategy today, calling for European treaty amendments to create automatic, court-enforced sanctions on countries that overstep limits of 3 percent of gross domestic product on deficits and 60 percent of GDP on debt.
For governments in rich countries such as Germany that are unwilling to lend more to high-debt states, the IMF idea would unlock a fresh source of funds without violating European rules that bar central banks from offering direct budget financing, the people said. Spokesman for the ECB and Bundesbank declined to comment.
“It is an easy solution because bilateral loans coming from the central banks, they haven’t to ask for money from the taxpayer,” European Union President Herman Van Rompuy said in Brussels yesterday.
Bonds of Italy and Spain rose today amid optimism that European leaders will piece together a tighter fiscal framework agreement at a summit that would prompt the greater central bank commitment.
One option is the lending via the IMF, which specializes in aid programs. The sums being discussed by finance officials range from 100 billion to 200 billion euros, the people said. Bilateral loans through the Washington-based lender would also spare the euro-area central banks from conflicts of interest that could arise from enforcing conditions on countries where they also set interest rates, the people said. “If we could see the proposed combination of IMF and ECB action, obviously that would be very, very credible to the market,” Swedish Finance Minister Anders Borg said Nov. 30.
Two broad channels are under consideration, the people said. Under the first option, the European money would go into an IMF trust fund earmarked for troubled euro states. Under the second, the loans would be plowed into the IMF’s general resources. Such a program wouldn’t be a substitute for the increase in ECB bond purchasing that countries such as Spain have clamored for. The central bank has bought 203.5 billion euros of bonds of three countries receiving financial aid, Greece, Ireland and Portugal, plus Italy and Spain since May 2010.
3) … The New Europe is emerging as the first authoritarian kingdom of the ten toed kingdom of regional economic government
Mike Mish Shedlock relates Peter Tenebrarum who writes in article Apocalypse Postponed – For Now, “The euro will disintegrate within weeks.” And Mr. Shedlock relates, “The euro-boat is filling up with water and will eventually sink, only the timing of when and how is unknown.” I take this to mean that the EU will not be in existence as a political and economic entity shortly.
Fate is operating to produce The New Europe; it is emerging as the first authoritarian kingdom of the ten toed kingdom of regional economic government; its sovereignty comes from the 1974 Clarion Call of the Club of Rome for regional economic government.
Great kingdoms and leaders have been appointed to rise to power as history unfolds. These have included Nebuchadnezzar ruling Babylon; Cyrus and Cyrus and Darius ruling Merdo Persia; Charlemagne ruling Rome; Tony Blair ruling Great Britain, Angela Merkel ruling the EU, and George Bush, The Decider, ruling America with Unilateral Authority. President Obama, now rules with Critical Authorities, which equal or exceed those of the former President, as he has said he will veto S 1867, the National Defense Authorization Act, according to White House statement, relating: “Any bill that challenges or constrains the president’s critical authorities to collect intelligence, incapacitate dangerous terrorists and protect the nation would prompt the president’s senior advisers to recommend a veto. Eventually ten kings will come to rule establishing his own regional power base.”
An inquiring mind asks, which is more reliable for belief, Austrian economic theory which holds that nation states will emerge out of this crisis, or destiny which presents that a ten toed kingdom of regional economic government will emerge? As for me, I believe more in the mysterious plan of the Club of Rome than in the logic of Austrian Economists Mises, Rothbard, and Hayek.
Unfortunately the Economist has failed to realize debt sovereignty has failed in the Eurozone, and that its banks and nations are relegated to the dustbin of history as they wrote on November 10, 2011, “Few countries are ready for a large transfer of sovereignty. The prospect of a United States of Europe is about as real as the bronze of Justus Lipsius's bust. Ready or not, destiny is operating to transfer sovereignty from nations to the Euracracy of The Trilateral Commission and the Bilderberg Group.
Paul Craig Roberts questions Who Will Rule The New Europe? Obviously, the private European banks and Goldman Sachs. The new president of the European Central Bank is Mario Draghi. This person was Vice Chairman and Managing Director of Goldman Sachs International and a member of Goldman Sachs’ Management Committee. Draghi was also Italian Executive Director of the World Bank, Governor of the Bank of Italy, a member of the governing council of the European Central Bank, a member of the board of directors of the Bank for International Settlements, and a member of the boards of governors of the International Bank for Reconstruction and Development and the Asian Development Bank, and Chairman of the Financial Stability Board. Obviously, Draghi is going to protect the power of bankers. Italy’s new prime minister, who was appointed not elected, was a member of Goldman Sachs Board of International Advisers. Mario Monti was appointed to the European Commission, one of the governing organizations of the EU. Monti is European Chairman of the Trilateral Commission, a US organization that advances American hegemony over the world. Monti is a member of the Bilderberg group and a founding member of the Spinelli group, an organization created in September 2010 to facilitate integration within the EU. Just as an unelected banker was installed as prime minister of Italy, an unelected banker was installed as prime minister of Greece. Obviously, they are intended to produce the bankers’ solution to the sovereign debt crisis. Greece’s new appointed prime minister, Lucas Papademos, was Governor of the Bank of Greece. From 2002-2010. He was Vice President of the European Central Bank. He, also, is a member of America’s Trilateral Commission. Jacques Delors, a founder of the European Union, promised the British Trade Union Congress in 1988 that the European Commission would require governments to introduce pro-labor legislation. Instead, we find the banker-controlled European Commission demanding that European labor bail out the private banks by accepting lower pay, fewer social services, and a later retirement. The European Union, just like everything else, is merely another scheme to concentrate wealth in a few hands at the expense of European citizens, who are destined, like Americans, to be the serfs of the 21st century.
4) … Currency trade summary for the week.
The U.S. dollar, $USD, declined 1.3% to 78.62, and the Japanese Yen, FXY, declined 0.4%, as world currencies, DBV, rose 4.2%, commodity currencies, CCX, 3.8%, and emerging market currencies, CEW, rose 3.2%. The South African rand, SZR, increased 6.2%, the Brazilian real, BZF, 5.6%,
the Australian dollar, FXA, 5.2%, the New Zealand dollar, BNZ, 5.0%, the Mexican peso, FXM, 4.4%, the Swedish krona, FXS, 3.7%, the South Korean won 2.9%, the Canadian dollar, FXC, 2.7%,
the Russian ruble, FXRU, 2.0%, the Indian rupe, ICN, 1.8%, the euro, FXE, 1.2%, the British pound, FXB, 1.0%, the Swiss franc, FXF, 0.9%, and the Taiwanese dollar 0.9%.
The blast higher in currencies this week was reflected in small cap pure value, RZV, being the best performing style, and steel, SLX, being the best performing sector. Lagging sectors included, Agriculture PAAS, MOO, Medical Equipment, IHI, and Utilities, XLU.
The sell off of world currencies, DBV, and emerging market currencies, CEW, and reflects debasement caused by fear of sovereign insolvency. This is known as debt deflation and has caused delveraging ou of carry trade investment in country stocks, natural resource stocks and commodities, DBC, particularly, the base metals, DBB, JJC, JJN, JJT, JJU, LD, and Timber, CUT. The global growth that has come via ponzi financing, mortgage equity withdrawal, carry trade lending, ZIRP, and quantitative easing of Neoliberalism is exhausting with the result that recession is setting in.
Dislocation out of the Free To Choose floating currency regime has caused disinvestment out of these country stocks seen in this Finviz Screener EZA, EPU, RSX, EWI, INP, EWZ, ARGT, ECH, EPOL, EIS, TUR, EWO, … as well as out of these basic material stocks in this Finviz Screener of FCX, VALE, BHP, CLF, AA, SCCO, POT, CF, RIO, BVN, S QM, ACH, MXI, MCP … as well as out of these basic material ETFs in this Finviz Screener EMMT, MXI, CHIM, COPX, ALUM, IYM, XLB, URA, KOL, SIL, XME, REMX, WOOD, SLX.
Dislocation out of the Free to Choose floating currency regime has pivoted the world from Inflationism into Destructionism and is causing the shift from democracy to diktat. The abuse of freedom, it investment liberty be called that, means that mankind will be subjected to debt servitude. The debt of Neoliberalism will be applied to every man woman and child on planet earth.
The Google Finance Chart of JYN communicates that the USD/JPY is now rising; which is seen in the Google Finance Chart of USDJPY. Action Forex relates in chart article that the USD/JPY is still trading inside the falling channel that started back in 2007 at 124.13, and below the falling 55 weeks EMA. Abigail F. Doolittle of Peak Theories writes USDJPY’s monthly chart is showing a behemoth and bullish Falling Wedge and one that appears to be pretty close to the potential apex that could send it higher and significantly higher and, in fact, so much higher it nearly sounds absurd to say, but the target on this pattern is 124 and a level last seen in June 2007. Such a topic is a discussion for another time, probably many more times, while this time is about the strong possibility that USDJPY may start to stage the much-awaited reversal of its long-term downtrend. Fang Yang relates A break back above the pivot just above 78.00, and a hold above 77.80 or so suggests bullish continuation. The RSI can confirm with a break back above 60 reading in the 4H chart. The bullish outlook first sees 78.27 high as the near-term resistance. Above 78.30, we can open up the next resistance near 79.20. This is where the 200 day SMA and the October high. A break opens up possibility of bottoming in the longer-term in USD/JPY, but 80.00 is likely to be a strong challenge of the bullish outlook as well, so that would be the next resistance above 79.20.
5) … Summary
The current ten day period is one of labor, that is birth pains, which will bring forth the age of regional global governance, where fate is passing the baton of sovereignty is passed from sovereign nation states to sovereign leaders who meet in work groups and summits, and announce regional framework agreements and regional compacts for regional security and stability. Eventually ten regional kingdoms ruled by a king and a banker will emerge as implied in the 1974 Call of the Club of Rome for regional economic government. Milton Friedman provided the Free To Choose script for Neoliberalism, which was an age of prosperity where bankers securitized all kinds of debt and underwrote carry trade investing based upon rising currencies of sovereign nations, which provided the seigniorage of fiat money, fiat fiscal finance and credit.
The Clarion Call of the Club of Rome is providing the plan of regional economic government for Neoauthoritarianism, which is an age of austerity where leaders carry out coup d etats and establish sovereign bodies such as the EU ECB IMF Troika as sovereign authority, and these provide the seigniorage of diktat, which provides technocratic government, controls fiscal spending, and provides credit for stakeholder groups responsible for regional stability and security.
With the installation of technocratic government in Italy and Greece, the seigniorage of fiat money has ended and the seigniorage of diktat has commenced. Not by any human action, but rather, at the appointed time, destiny will open the curtain, and the Sovereign and the Seignior will come onto the world’s stage to rule the Beast System of Neoliberalism as it rises from the profligate Mediterranean Sea countries. This behemoth of regional global governance and statism has seven heads, symbolic of mankind’s seven institutions, and ten horns, symbolic of its governance in the world’s ten regions.
A collapse of sovereign debt and the banking system collapse is imminent. Out of the current sovereign crisis, will come a New Europe, as the world’s first regional economic government.
Leaders will meet in summits and waive national sovereignty, facilitating a intergovernmental Europe.
The New Europe’s sovereign authority will be based upon fiscal compacts and it will implement a fiscal union overseen by the Sovereign, and his banking partner, the Seignior, and together they will provide the seigniorage of diktat, and the people will be amazed, and place their faith and trust in it, yes they will give it their allegiance. The Sovereign will come as a New Charlemagne to establish the New Europe as a Revived Roman Empire, which will be known for its fierce rule, it will enforce debt servitude on all Europeans.
As Gerard Lyons, chief economist at Standard Chartered, said. "The euro cannot survive in its present format.” The moment of truth is approaching, the end game for the euro has begun.
6) … In today’s news
Open Europe reports French Socialist party’s candidate to next year’s presidential elections, François Hollande, criticised German plans to allow the ECJ to impose sanctions on eurozone countries breaching EU deficit and debt rules, arguing, “I will never accept the fact that, in the name of control over national budgets…the ECJ can be judge of the expenses and revenues of a sovereign state.” Prominent Socialist MP Arnaud Montebourg yesterday warned, “The question of German nationalism is re-emerging through Merkel’s à la Bismarck policy.”
EUobserver relates a history of periphery nation bribery and taxation. Transparency International reports “Eurozone countries suffering debt crises, partly because of public authorities' failure to tackle the bribery and tax evasion that are key drivers of debt crisis, are among the lowest-scoring EU countries.”
CNBC reports Credit Crunch Returns. “The credit market is not functioning right now,” says Guillermo Amann at Ormazabal, a Spanish maker of electrical components. “There is no money. The situation is becoming worse and worse.”It is a complaint that is being made across Europe and, increasingly, in the rest of the world. Sir Mervyn King, governor of the Bank of England, warned this week of “early signs of a credit crunch, with concerns that it will get worse”.
Reuters reports MF Global Proves Enron Era Accounting Lives On
The Hill reports The Hill Conservatives Craft Bill to Prevent IMF Bailout of Eurozone. Conservatives say they will try to block the International Monetary Fund from bailing out Italy and Spain, which they say could leave U.S. taxpayers with a huge bill. Republicans on both sides of the Capitol complain that the Obama administration has refused to share details of what Treasury Secretary Timothy Geithner is discussing with European leaders amid reports the IMF could intervene. “We’re throwing good money after bad down a hole that I think is not a solvable problem,” he said. “Europe is going to default eventually, so why would you socialize their profligate spending,” he added. Coburn estimates the U.S. could be liable for as much as $176 billion if the IMF shores up Italy and Spain and the European Union collapses. President Obama this week said the U.S. “stands ready to do our part” to help resolve the crisis, and Geithner in October said using U.S. tax dollars through the IMF to shore up Europe’s efforts was appropriate. “We need some transparency about what’s really going on,” said McMorris Rodgers. “It’s hard to get information. We’re talking about U.S. taxpayer dollars being involved in the European bailout. The administration needs to be honest with the Congress. I believe Congress needs to be involved in making this decision.”
USA Today reports Guns Are A Big Seller On Black Friday. Gun dealers flooded the FBI with background check requests for prospective buyers last Friday, smashing the single-day, all-time high by 32%, according to bureau records.
Doug Noland relates M2 money supply dropped $35.7bn to $9.619 TN. "Narrow money" has expanded at a 9.9% pace y-t-d and 9.5% over the past year
Ben Moshinsky of Bloomberg reports of systemic risk. “Bank of England Governor Mervyn King urged banks to enhance efforts to bolster their defenses against the euro area’s debt turmoil, which now looks like a ‘systemic crisis.’ ‘An erosion of confidence, lower asset prices and tighter credit conditions are further damaging the prospects for economic activity and will affect the ability of companies, households and governments to repay their debts,’ threatening banks’ balance sheets, King told reporters… ‘This spiral is characteristic of a systemic crisis.’
A Global Eurasia War is coming Madison Rupert relates Reports Say Russian Ships in Syrian Waters Delivered Advanced Anti-Aircraft Missile System and Technicians. Arutz Sheva reports that the S-300 system is regarded as one of the most powerful anti-aircraft missiles systems available. They also point out that the radar system is capable of tracking 100 targets simultaneously while engaging up to 12 separate targets. Deployment of the S-300 takes a mere five minutes and have a long life span with no maintenance required. The system will provide coverage of areas both north and south of Syria which would be able to detect troop or aircraft movements towards Syrian borders. The long-rage surface-to-air missiles were developed by Russia in 1960s-1970s in order to protect industrial and military bases from aircraft attacks and cruise missiles. This S-300 system will reportedly be used to “deflect a possible attack by NATO or the U.S. and EU,” although the possibility of an Arab League-sponsored attack is considerable if recent reports are to be believed. This system can reportedly target much of Israel and the Turkish Incirlik military base which is utilized by NATO, which would likely be leveraged if a no-fly zone operation was conducted
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