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Gold Continues Higher With The Failure Of Credit … Creative Destruction Will Produce A Ten Toed Kingdom Of Regional Global Governance

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Seeking Alpha Analyst Since 2010

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.

Financial Market Report for Monday January 23, 2011

1) … Introduction
Gold continued higher with the failure of credit.

The destruction of fiat wealth and European socialism commenced, as the strongest rallying stocks traded lower on the failure of credit, and as the Troika returned to Greece with a list of demands including the closure of state entities, state worker layoffs, reduced salaries in the private sector, reduction of pensions, and opening of closed professions.

Out of the collapse of credit, creative destruction will produce a Federal Europe and the ten toed kingdom of regional global governance.

2) … Small cap pure value, homebuilders, US infrastructure stocks trade lower on the failure of credit; the destruction of fiat wealth has commenced.
The investment demand for Gold, GLD, continued strong, as bond vigilantes called US sovereign debt interest rates higher. The interest rate on the US Ten Year Note, $TNX, rose to 2.067%, in advance of the FOMC meeting scheduled for Tuesday and Wednesday. The chart of the steepner ETF, STPP, shows a steepening sovereign debt yield curve, which portends a global recession is at hand.

Commodities, DBC, rose today on continuing higher world currencies, DBV, and parabolically rising emerging market currencies, CEW. Reuters reports Oil up on EU deal to ban Iran crude.

The Euro, FXE, rose 0.80% to close up at 128.8, which took European Financials, EUFN, higher. Higher emerging market currencies took Emerging Market Financials, EMFN, higher. Rising world currencies took China Financials, CHIX, India Earnings, EPI, and World Financials, IXG, higher. Banks rising strongly included, IRE, NBG, BPOP. Here is the ongoing chart of the EURUSD.

The higher major currencies, DBV, stimulated the major countries, ACWX, ACWI, VT, higher. The higher emerging market currencies, CEW, stimulated the world small caps, VSS, emerging markets, EEM, EMMT, EWX, EEB, higher. The most currency driven and carry trade driven nations rose the strongest; the large countries included EWY, RSX, EWI; and the small countries included ENZL, SCIF, BRF, KROO, ERUS, SKOR, LATM, CEE, GMF, EPOL, TUR, ARGT, EWO. But former Dollar rally leaders Russell 2000, IWM, and Philippines, EPHE, traded lower.

Gaming, BJK, Uranium, URA, Steel, SLX, Coal, KOL, Metal Manufacturing, XME, Copper Mining, COPX, Mining, MXI, Rare Earth, REMX, Global Agriculture, PAGG, rose on today's higher currencies. Southern Peru Copper Corporation, SCCO, and Aluminum Corporation of China, ACH, rose strongly.

Industrial Office REITS, FNIO, and US Reits, RWR, both rose in a three white soldiers pattern. US Small Cap Real Estate, ROOF, Residential REIT, REZ, Real Estate, IYR, Blackrock, BLK, Cedar Fair, FUN, RJL Trust, RJL, rose.

Energy AMJ, WCAT, XLE, ENY, PSCE, rose on higher oil prices, and Shipping, SEA, and Small Cap Pure value, RZV, rose of higher today's higher currencies

But a broad number of other sectors IYT, IYJ, ITB, XLI, PXN, IYZ, IHE, SKYY, IEZ, XTL, RZG, IWO, IWM, IYC, XLB, OIH, WOOD, IHF, IGV, IGN, PSCI, PSCT, PSCD, CVCO, traded lower, reflecting that Neoliberalism's Death Rattle Rally is coming to an end.

Dividend paying Exxon Mobil, XOM, manifested a spinning doji, at the top of an ascending wedge, after having risen in a three white flag advance; this is a terrifically bearish pattern. And VMWare, VMW, fell in spite of ales and profit that exceeded estimate. The combination of these two facts suggests that the rally in dividend paying stocks, DVY, and rally in tech stocks, IPK, is ending. An inflection point has been reached in the Dow, DIA, and the Nasdaq 100, QTEC. And a pivot point has been reached in the the S&P, SPY, RSP; it will now enter an Elliott Wave 3 of 3 of 3 down.

The ratio of the small cap pure value shares, RZV, relative to the small cap pure growth shares, RZG, RZV:RZG, manifested a questioning doji, suggesting that the small cap value rally and the US infrastructure rally are over. The RZV:RZG ratio reflects funding status for the debt contagion rally.

The US infrastructure stocks, that is the North American design build and construction stocks, PKB, the solar energy stocks, TAN, the homebuilders, XHB, ITB, regional banks, KRE, dividend payers, DVY, semiconductors, XSD, railroads, KSU, UNP, CSX, NSC, GWR, that had led the Eurozone debt contagion rally, traded lower, suggesting a failure of credit is commencing the death of fiat wealth.

Although higher currencies took Caterpillar, CAT, higher, the US infrastructure stocks, seen in this Finviz Screener, traded lower; these included, CX, URS, NX, USG, NCS, TRN, RBN, SXI, AEGN, DY, PRIM, BECN, GVA, EXP, GBX, MHK, FLR.

Eurozone debt contagion rally leaders, seen in this Finviz Screener, trading lower included value shares SBUX, TBI, ORLY, CTAS, SNX, BEBE, LII, IMAX, SHFL, PSEC, SIX, CHRS, GPN, HLF, PETM, NGPC, WTW, NUS, IMAX, CCO,

The ongoing Yahoo Finance chart of ACWI, EWJ, YAO, RZV, PKB, XBI, ITB, DVY, shows the small cap pure value rally, infrastructure rally, biotechnology rally, home builder rally, and dividend rally, which came to an end today. Fiat wealth has finally been destroyed by the credit liquidity policies and quantitative easing policies of the US Federal Reserve and the ECB LTRO credit liquidity policy. Neo liberal finance has finally caused the death of currencies, capitalism and fiat wealth. Too much central bank credit has made both money and credit bad, an as a result creative destruction is bringing forth a Federal Europe and the ten toed kingdom of regional global government to replace democracy and capitalism.

Biotechnology, XBI, IBB, leaders, AMGN, MON, traded lower, suggesting an end to the profitable investing in biotechnology research.

The trade lower in Boeing, BA, Airlines, FAA, and airplane rehabilitator, BEAV, suggests that the failure of neo liberal finance and credit, has terminated the age of growth.

Small cap industrials, PSCI, trading lower included DXPE, SWK, LECO, WTS, ROLL, BRC, CLC, DCI, PLL.

The former rally leader, IP, a North American, non oil, natural resource company, traded lower. It being debt laden, will now be a fast faller. Other similar companies trading lower included DEL, WY, PCL, UFPI.

Electrical equipment manufacturers trading lower included ETN, TNB, AIMC, AMRC, heralding a pivoting turn lower in the Morgan Stanley Cyclical Index, $CYC.

Bonds, BND, LAG, AGG, traded lower again, establishing the death of credit. The trade lower in bonds is part of the death of capitalism. The strong fall lower in US Treasuries, ZROZ, EDV, TLT, IHF, BAB, in front of the US Federal Reserve Meeting, establishes that bond vigilantes have command of interest rates, and established an end to over forty years of neo liberal finance.The Debt Super Cycle has come to an end. The global government finance bubble, BWX, has finally burst. Longer duration corporate bonds, BLV, fell more than medium duration corporate bonds, LQD, documenting a flight of capital out of the bond market. Emering Market Bonds, EMB, Junk Bonds, JNK, High Yield Corporate Bonds, HYG, rose on today's higher currencies, but Leveraged Buyouts, PSP, traded lower.

Credit providers, MA, and V, traded lower suggesting that the age of neo liberal finance is over.

3) … Creative Destruction commenced today as the debt contagion rally in US infrastructure stocks, small cap value, and homebuilders failed, and as credit providers Master Card and Visa traded lower, and as bonds and US Treasuries traded lower. The failure of credit means that creative destruction will bring forth a Federal Europe and the ten toed kingdom of regional global governance.
Investopedia relates that Joseph Schumpeter fathered the term creative destruction. "A process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one". Econolib relates Schumpeter believed that capitalism would be destroyed by its successes, that it would spawn a large intellectual class that made its living by attacking the very bourgeois system of private property and freedom so necessary for the intellectual class's existence. And unlike Marx, Schumpeter did not relish the destruction of capitalism. "If a doctor predicts that his patient will die presently," he wrote, "this does not mean that he desires it."

Through the failure of credit and the ending of the US infrastructure, small cap pure value, home builder, and dividend rally, creative destruction commenced today. The world is embarking on something new, the emergence of regional global governance out of the death of capitalism, credit and fiat money. Loss of confidence in debt, and the loss of debt sovereignty by the US central bank, means an end to the Milton Friedman Free To Choose floating currency banker regime known as Neoliberalism, and confirms the death of capitalism. These will be replaced by the Beast regime known as Neoauthoritarian, and the ten toed kingdom of regional global governance, where the emphasis will be on regionalization, specifically regional trade, barter and use of regional currencies. The dynamos of corporate growth and investor prosperity, are being replaced by the dynamos of regional security and stability.

The development of regional blocks will mean private public partnerships, such as MIC, will rise in importance as regioanal stakeholders are appointed from business, banking and government to manage the factors of production and natural resources. The emphasis will be on un-dollar transactions, as the world's reserve currency falls into disrepute. Banks will be nationalized, perhaps better said regionalized, and come to be known as the government bank or the govbank for short. Regional blocks, that is regional unions already in existence include SCO in Asia, and CELAC, in South, Central, and Caribbean America; these will be increasingly dollar exclusion zones. A North America Union will form out of Canada, Mexico and the US, and might be called CanMexAmerica.

In as much as fiat money has failed, credit will be replaced by diktat. Bankers providing growth and prosperity, will be replaced by monetary cardinals providing regional security and stability. Under Neoliberalism, people trusted in bankers, who securitized ponzi credit. Under Neoauthoritarianism, people will place their their trust in sovereign leaders whose word, will, and way, will provide order out of chaos. The monetary cardinals will provide diktat as currency and also diktat as credit; and they will be responsible for managing regional infrastructure assets.

The seigniorage, that is the moneyness, of neo liberal finance, will be replaced by the seigniorage of diktat.

Out of sovereign armageddon, that is a credit bust and global financial collapse, fate will open the curtains, and onto the world's stage, will step the most credible of leaders. This seemingly Little Authority, will come to be known as the Sovereign, and together with his banking partner, The Seignior, will change our times and laws. By working in regional framework agreements, they will make sweeping economic and political changes. Fate is even now operating to pass the baton of sovereignty from nation states to sovereign bodies such as the EU ECB and IMF Troika. Soon these two leaders will build a Federal Europe, with the ECB or the Bundesbank, Buba, empowered as Europe's Bank which, will in effect be a type of revived Roman Empire.

Perhaps the reality will settle in this week that Greece is bankrupt, and that when default occurs no one will trade with them, and they will have no seigniorage, that is moneyness, for fiscal spending. And that in order to prevent regional chaos, leaders must waive national sovereignty, and create a Federal Europe with the ECB or the Bundesbank chartered as Europe's Bank.

AFP Breitbart reports on the 2012 World Economic Forum And Global Leaders Summit in Davos relating Capitalism Is The Problem. Economic and political elites meeting this week at the Swiss resort of Davos will be asked to urgently find ways to reform a capitalist system that has been described as "outdated and crumbling." A major topic at Davos is The Future of Capitalism.

"We have a general morality gap, we are over-leveraged, we have neglected to invest in the future, we have undermined social coherence, and we are in danger of completely losing the confidence of future generations," said Klaus Schwab, host and founder of the annual World Economic Forum.

"Solving problems in the context of outdated and crumbling models will only dig us deeper into the hole.

"We are in an era of profound change that urgently requires new ways of thinking instead of more business-as-usual," the 73-year-old said, adding that "capitalism in its current form, has no place in the world around us."

Bloomberg reports European bank downgrades now complement the recent Eurozone sovereign downgrade. Societe Generale, Credit Agricole Cut by S&P in Wake of France's Downgrade. Societe Generale SA (GLE) and Credit Agricole SA (ACA) were among French banks to have their credit grades cut by Standard & Poor's after France was stripped of its top rating earlier this month. The downgrade of some of these banks follows the downgrade of France, S&P wrote in a statement.

Perhaps the elites will conclude that capitalism is outdated, and that the Milton Friedman paradigm of floating currencies needs to be replaced with the paradigm regional global governance, as the world is being undone by debt deflation and failing credit. Perhaps they will come to relate that economies need to be regionally directed to deal with bad credit and trade imbalances.

Simone Foxman of Business Insider reports Peter Westaway, Chief European Economist at Vanguard Asset Management, communicates we are likely to see a New Eurozone Economic Infrasturcture Policy. The immediate risk relates to Greece and the restructuring of its debt which if handled badly could lead to damaging contagion and in the worst case, fragmentation of the monetary union itself. More years of continuing fiscal consolidation and painful structural reform in the periphery will still be needed with all the attendant economic and political risks. By the time that period of adjustment is complete we are likely to see a new policy infrastructure up and running. Only then will the euro area be truly sustainable. At that point, we might be able to declare the euro area sovereign crisis over. (Hat Tip to Between The Hedges for this news item).

Moyers & Company relates David Stockman says, "We need not only a reinstitution of Glass-Steagal, but even a more serious limitation on banks -- [a provision that says] if you're a bank and you want to have deposit insurance (which ultimately, you know, is backed up by the tax payer). if you're a bank and you want to have access to the so-called discount window of the Fed (the emergency lending), then you can't be in trading at all. ... If they're too big to fail, they're too big to exist."

Creative destruction will combine the too big to fail with government to form a public private partnerships managing the factors of production and natural resources to establish true socialism.

Wikipedia relates true socialism is an economic system based on direct production of utility rather than on the capitalist laws of accumulation and value. Wikipedia also relates Immanuel Wallerstein, writing in 1979, maintained that "There are today no socialist systems in the world-economy any more than there are feudal systems because there is only one world-system. It is a world-economy and it is by definition capitalist in form. Socialism involves the creation of a new kind of world-system, neither a redistributive world-empire nor a capitalist world-economy but a socialist world-government. I don't see this projection as being in the least utopian but I also don't feel its institution is imminent. It will be the outcome of a long social struggle in forms that may be familiar and perhaps in very few forms, that will take place in all the areas of the world-economy."

John Mauldin in PDF report shows the chart of 2003 to 2011 OCED nominal labor costs for European nations rising quite dramatically with the exception of Germany. Lower cost labor in this industrialized state has been a major factor in regional trade imbalances. Structural reforms, such as dissolution of national wage contracts, will be mandated by the EU ECB and IMF Ttroika. Capitol controls will be forth coming rather quickly to prevent bank runs.

The credit based fiat system is entering a debt deleveraging cycle. Out of a credit bust, creative destruction will bring forth a Federal Europe and the ten toed kingdom of regional global governance. Fate, not any human action, will bring forth many political events where leaders waive national sovereignty, and establish public private partnerships to provide regional security and stability. Default by Greece will be the catalyst for the formation of a One Euro Government and a Fiscal Union as well as a Eurozone Bank. Monetary cardinals will rule as regional economic stakeholders managing the factors of production as well as natural resources, such as refineries. Tyler Durden reports PetroPlus, Largest European Refiner By Capacity, Files Bankruptcy. Soon, a monetary cardinal will be assigned to oversee this refinery and other regional infrastructure assets.

4) … Current news reports suggest the beginning of the destruction of European socialism
Euro Intelligence is the premier new service; this comes at a cost. I recommend that one subscribe to their daily news letter which reports The EU ECB IMF Troika returned to Athens. According to Kathimerini troika demands the closure of 100 state entities, resulting in some 10,000 layoffs; the trimming of the 13th and 14th salaries paid to workers in the private sector; cuts to auxiliary pensions; and the full liberalization of all closed professions. Euro Intelligence also reports two pro Europeans end up finalists in the race for Finland's Presidency. Two Pro-Europeans will face each other in a second round of the Finland's presidential election in two weeks, as Sauli Niinistö, the leading candidate failed to secure a majority of votes in the first round last Sunday. The FT reports that Niinistö, a pro-European former finance minister from the ruling National Coalition party, won 37%, Pekka Haavisto, a pro-European candidate from the Green League, grabbed second place winning 19%. The eurosceptic Paavo Väyrynen from the Centre party, received 17.5%. The euro-crisis figured high in the campaign, even if the president has no executive rights in economic policies. Niinistö said on Sunday night that 'a pro-Europe policy and support for the euro has received strong backing from the people, according to YLE news. People now have a longing for stability.'

Open Europe reports EU Tax Commissioner: UK "would lose a lot" if other countries go ahead with FTT; Barnier: The City "must play the European game".
EU Taxation Commissioner Algirdas Semeta told the FT, "The UK would lose a lot if other [EU] members decide to move ahead with a financial transactions tax. Because of its design, [Britain] will be subject to the tax, but at the same time, it will not receive any money from it." The paper notes that the FTT could use the 'residence principle', and therefore cover any trade made by a firm which is based in the tax area, even if the trade takes place in London or other financial centres outside of the EU.
Meanwhile, after German Economy Minister Phillip Rösler floated the idea of introducing a European 'bourse tax' instead of an EU-wide FTT, Open Europe's Head of Economic Research Raoul Ruparel was quoted in Saturday's Telegraph saying, "If it is imposed only on shares this bourse tax may not have such a big impact but if it covers, say, derivatives, then it would have a disproportionate effect on the UK because of the size of the City." Open Europe's latest report on EU financial regulation is cited by Simon Nixon in the WSJ.
Separately, EU Internal Market Commissioner Michel Barnier is today expected to argue in a speech in the City, "The EU must not hinder the City's dynamism. But the City must also play the European game. The same applies for the UK government...Opening the door to unanimity for the UK on financial services would mean similar legitimate demands in other sectors from other member states. And that would spell the end of the single market." Open Europe research FT FT 2 Saturday's Telegraph WSJ: Nixon

Croatia has voted to become the 28th EU member state following yesterday's referendum in which 66% voted for membership and 33% against, albeit on a low turnout of around 44%. Providing all other member states ratify Croatia's accession treaty, the country will officially join in July 2013.
FT CityAM BBC Guardian IHT Le Figaro EUobserver Il Sole 24 Ore Süddeutsche FAZ European Voice EurActiv Irish Times

At a rally on Sunday, the Socialist candidate for the French presidential elections, François Hollande, promised to demand that Germany drop its devotion to austerity as the cure to the eurozone crisis, and insisted that - if elected - he will try to renegotiate the new European 'fiscal treaty' on budgetary discipline. Times Le Monde La Tribune Les Echos Welt

Greek bondholders make final offer in voluntary restructuring negotiations; Monti and Draghi call for euro bailout fund to be doubled in size
Eurozone finance ministers will meet in Brussels today, with the failing negotiations on the voluntary Greek restructuring likely to be top of the agenda. It was hoped that a deal could be struck ahead of the meeting. However, disagreements remain despite bondholders saying that they have made their final offer over the "maximum" level of losses they will accept - thought to be a net present value loss of between 65% and 70%. Der Spiegel reports that even this level of write-downs may not be enough to make Greek debt sustainable. Sources close to the negotiations said they were still hopeful a deal could be struck ahead of the meeting of EU leaders on 30 January.
Der Spiegel reported over the weekend that Italian Prime Minister Mario Monti and ECB President Mario Draghi have called for the ESM, the eurozone's permanent bailout fund, to be doubled in size to €1 trillion. German Finance Minister Wolfgang Schäuble dismissed these calls yesterday. The WSJ reports that Monti also said that he has a "very high" expectation that the eurozone will eventually have some form of debt pooling through Eurobonds.
The EU/IMF/ECB Troika overseeing Ireland's bailout warned the Government that a financial "bomb" would go off in Dublin if it defaulted on payments to bondholders of the former Anglo Irish Bank. Handelsblatt reports that Germany may back Luxembourg's Yves Mersch to fill the vacant slot on the ECB's executive board in order to stop the board being dominated by members from southern Europe.
FT CityAM WSJ EUobserver El País Sunday Telegraph Independent on Sunday Sunday Times Mail on Sunday Telegraph Guardian BBC Le Figaro Il Sole 24 Ore Expansión Spiegel Spiegel 2 Bild WSJ 2 Welt WSJ 3 Spiegel Irish Independent EurActiv European Voice FT 2 WSJ 4 Irish Times Mail on Sunday: Watkins Sunday Telegraph: Halligan Conservative Home: Davis Mail: Wiscarson Times: Lyons FT: Atkins FT: Munchau FT: Dizard Irish Times: Leader Standaard Handelsblatt Kathimerini FAZ Le Figaro: Mills El País: García-Margallo

Following Sunday's first round of Finnish presidential elections, two pro-euro candidates, Sauli Niinistö and Pekka Haavisto, will run-off in the second round. Niinistö is the favourite- receiving 37% of votes in the first round - while Haavisto polled 19%, beating anti-euro candidate Paavo Väyrynen into third place with 18%. FT EUobserver

EU finance ministers will tomorrow try to reach a final agreement on new EU rules on over-the-counter derivatives trading. Divergences remain over the role of the EU's financial watchdog ESMA, especially when it comes to authorising or rejecting the establishment of clearing houses in a member state, notes EUobserver. Open Europe research EUobserver

FT: France and Germany to seek dilution of bank capital rules
The FT reports that France and Germany are to call for a relaxation of the Basel III global bank capital rules - which form part of the fourth review of the EU's Capital Requirements Directive (CRD IV) - setting them at odds with the UK's desire to see stronger capital requirements for the banking sector.
A separate article in the paper notes that the draft directive would treat all loans as if they are in default when they are 90 days in arrears, common practice in much of the EU, rather than the 180 days the UK allows. The change will increase UK banks' capital charges on its mortgages by 15-20%, forcing many institutions either to cut lending or charge more to customers. The British Banking Association is reported as saying the 90-day definition was one of their "top concerns" with the draft.
Open Europe Research: Continental Shift Open Europe research: Ten Lessons to be learnt FT FT 2

The Sunday Telegraph reported that David Cameron will this week issue a challenge to the European Court of Human Rights by saying it must no longer be able to act as a court of appeal on cases already dealt with in Britain. Britain is also pushing for changes to the way ECHR judges are appointed.
Mail Sun Sunday Telegraph Sunday Telegraph: Leader Mail on Sunday Conservative Home:Goodman Conservative Home: Rudd

The FT reports that EU plans to apply Solvency II-type capital requirements to funded defined benefit pensions have attracted strong criticism from the pension industry, particularly in the UK and Netherlands - which between them account for more than 75% of the EU's funded pension schemes by value of assets. Open Europe research FT

FT Deutschland reports that the independent European credit ratings agency conceived by the consulting firm Roland Berger is due to be launched this summer, after 30 institutional investors such as banks, insurance companies and stock exchanges across Europe agreed to provide a €300m endowment. FTD

The BBC reports that EU foreign ministers are today expected to confirm the embargo on Iranian oil agreed by EU member states' permanent representatives last week. BBC

The European Commission is this week due to unveil plans to introduce a single set of privacy standards in the EU-27. Businesses are concerned that the proposed overhaul could result in costly burdens and big fines for companies that fail to comply with the rules, reports the FT. FT

In the Sunday Telegraph, Christopher Booker noted that several studies commissioned by EU regulators warned about the potential dangers of how large cruise ships, such as the Costa Concordia, are now designed. Sunday Telegraph: Booker

Ambrose Evans Pritchard reports Crucial talks between Greece and private creditors on debt restructuring stalled over the weekend … Reuters reports Euro zone ministers reject private bondholders' Greece offer … Reuters reports IF says creditors at limits of voluntary Greek deal
… The NYT reports Greek taks hit a snag over rates … The Automatic Earth relates The latest solution for Europe solves absolutely nothing … GreekCrisis relates the WSJ report Euro zone spars over solution for Greece … GreekCrisis relates the Richard Barley WSJ article ECB may hold dey to exiting from Greece's debt labyrinth … GreekCrisis relates the Bloomberg repor EU calls for more bondholder concessions as Greece seen going off track

BBC reports IMF's Christine Lagarde warns of 1930s moment ... unless more financing is secured.
I comment that more credit is not the answer. Excessive credit was the cause of the 1929 through 1932 depression. Currencies failed in July 2011, when investors feared that a debt union had formed in the EU, and now a credit bust is underway with bonds, BND, and US Treasuries, ZROZ, EDV, TLT, turning lower. US Federal Reserve monetary policies of credit liquidity, quantative easing, and the ECB LTRO facility, has made both money and credit bad. There is no money good. The only safe investment is personal possession of gold bullion.

Stephen Kinsella writes in Irish Economy article Eurozone Debt And Deleveraging, Paul Krugman links to the latest McKinsey report on debt and deleveraging. There's a lot of useful data in there, but this chart struck me as worth posting on this blog, with little comment required.

5) … The ECB's LTRO facility, was the mother of all central bank ponzi credit schemes.
Mario Draghi's stealth money printing operation increased the ECB's balance sheet by 38%. The LTRO rally was the investor's golden moment. Today, Finviz provides the monthly chart of IRE which shows a rise of 46% so far this year; and the monthly chart of NBG shows a 37% gain. The LTRO rally, that is the stealth ECB money printing rally, is seen in the ongoing chart of EUFN, IRE and NBG. The National Bank of Greece, NBG, and Governor and Company of the Bank, IRE, are insolvent banks; yet they have been brought back to life by the ECB's so called temporary lending facility. The ECB LTRO facility was a zombification of dead banks, this clearly being seen in the EUFN, IRE and NBG chart which shows hot money flows to the most insolvent of all banks. There has been a stunning European money printing rally. Today we have the Irish Independent report Bailout chiefs order banks to slash 2,500 workers. Officials say Government cuts must be made immediately to speed revamp.

Giancarlo Corsetti, Professor of Macroeconomics, University of Cambridge; and Programme Director, CEPR, talks to Viv Davies in VOX.Mr. Corsetti is of the opinion that liquidity support is essential for, and compatible, with reforms in the failing Eurozone economies. Alas, creative destruction has commenced, and it will bring forth political, monetary, and fiscal infrasturcture reforms, along the lines of the Club of Rome which in 1974 call for regional integration.

Bloomberg reports Draghi Makes Euro Favorite For The Most Profitable Carry Trades With Rate Cuts
Betting against the euro may be the most profitable trade in the foreign-exchange market as policy efforts to stave off a European recession debases the currency.

The Euro became a carry trade funder where a number of investors borrowed in Euros, FXE, and invested long in Australia, EWA, Brazilian, EWZ, South Africa, EZA, and South Korea, EWY, as is seen in this chart.

6) … News of the day
Business Insider provides the James Pethokoukis, American Enterprise Institute, report into Team Obama's thinking as the financial crisis exploded. Article Larry Summers' Secret Economic Memo features The New Yorker report Policymaking In The Obama White House, where Ryan Lizza provides the 57-page, "Sensitive & Confidential" memo, written by the National Economics Council economist in December 2008.

Think Money reports UK has second-highest debt-to-GDP ratio in the world, second only to Japan.

The Daily Ticker reports Obama To Fight For Fairness, Soical Justice, And Income Equality And Bloomberg reports Obama Speech to Embrace U.S. Manufacturing Rebirth, Energy for Job Growth

Ciovacco Capital reports Last time bullishness hit these levels ...

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