Remember Tunisia, Egypt, Bahrain, Greece? It is now getting even closer to the “real” western world. Spain is according to thetrader in large problems. We have written extensively on Spain and the many problems the country is facing. Properties valued at levels totally out of sync with the real world, demand, buyers etc. Unemployment is close to 22% on average. Some provinces like Andalucia, has unemployment rates of +30%. We have written of the “lost generation”. That is a new phenomena in Spain. A whole generation, totally depressed due to extremely high unemployment, with zero prospects of getting a job. This generation won’t be quite for ever. After the ridiculous austerity kicks in, people will feel even more depressed levels of unemployment. Zapatero flying to Malaga in army Jet last year for a meeting is not what people want to hear, especially when the lines to Employment Services go round the block. As thetrader wrote yesterday, Spain is holding local elections on Sunday. ECB, time to open the wallet, again. Welcome to Austerity, estilo Latino.
A stricter approach toward eurozone bailouts would require a political shift in how non-Europeans see the sovereign debt crisis, not new management. The United States, because of its overwhelming share of the votes, would have to turn against European bailouts for such a shift to occur, which is unlikely any time soon. The United States wants the sovereign debt crisis to remain contained in European peripheral countries because it does not want to see the crisis affect the European financial system, which could very well lead to another global financial crisis. More important, however, the issue has not become political in the United States even though Washington is paying for European bailouts via its membership in the IMF. China is also unlikely to want Europe to become destabilized, since its economy depends on Europe’s continuing to purchase its exports.
As to El-Erian’s point that Strauss-Kahn’s arrest will lead to a Greek default, STRATFOR agrees that Greek restructuring may be near. However, this is an analysis independent of Strauss-Kahn’s arrest and one vested in the political logic becoming dominant in Europe: that investors have to share the burden of Greek restructuring with EU taxpayers.
That said, Strauss-Kahn’s downfall is also seen as the end of Europe’s control of the fund. Every IMF managing director has thus far been from Western Europe due to a Cold War-era arrangement by which the IMF leadership post went to Europe and the World Bank presidency went to the United States.
The most significant result of the Strauss-Kahn incident could be its effect on wider European politics. Populism and economic angst are rising across the Continent. In Greece and Portugal, people are on the streets protesting, if not rioting. In Finland and Germany, regular taxpayers are tired of Greek and Portuguese bailouts and euroskepticism is taking root. Old elites find themselves targets of the anger, mainly for bailing out their supposed banking friends with taxpayer money. The problems are deeper than that. The European Union without the Cold War or a recent memory of the devastation of World War II has become nothing more than an economic project, which loses its rationale with the prolonged economic crisis. (Stratfor)
Read more: The Relevance – and Irrelevance – of the Strauss-Kahn Arrest | STRATFOR
“A majority of participants preferred that sales of agency securities come after the first increase in the (Fed’s) target for short-term interest rates,” the Fed said.
“And many of those participants also expressed a preference that the sales proceed relatively gradually, returning (Fed holdings) to all Treasury securities over perhaps five years,” the minutes said.
Discussion of the removal of monetary stimulus should not be seen as an indication the Fed is ready to start down that road any time soon, policy makers said.
Are we seeing another Lehman situation setting up? Plan A, a bridge loan to Greeece, is a failure. What are the options going forward for Greece, and could they become the new Lehmanites that put th world back to “don’t trust” anybody mood again? From The Guardian;
It was less than three years ago that the failure of Lehman Brothers sent tremors through the global financial system, threatening the existence of every major bank and triggering the most severe economic crisis since the Great Depression. As Europe’s policy elite met for fresh crisis talks today, the dark fear that haunted everyone around the table was this: if the bankruptcy of a middling-sized Wall Street investment bank with no retail customers could have such dire consequences, what would happen if the Greeks decide they have had enough and renege on their debts?
Could Greece, in other words, be the new Lehmans? Given the structure of modern financial markets, with their chains of derivative trades and their pyramids of debt, there is only one answer. Greece could certainly be the next Lehmans. The likelihood that a Greek default would pose a threat to the future of the eurozone as well as to the health of the world economy means it has the potential to be worse than Lehmans. Much worse.
Dominique Strauss-Kahn may have more to worry about than a possible prison sentence. The IMF chief’s alleged sex-assault victim lives in a Bronx apartment rented exclusively for adults with HIV or AIDS, The Post has learned. The hotel maid, a West African immigrant, has occupied the fourth-floor High Bridge pad with her 15-year-old daughter since January — and before that, lived in another Bronx apartment set aside by Harlem Community AIDS United strictly for adults with the virus and their families.
Quick Update on Gas prices from Gallup. Don’t forget, driving season coming up.
Average gas prices in the United States have increased by nearly $1 a gallon since January, with half of that increase occurring since March. This increase has clearly caught Americans’ attention, with 67% saying it has caused them financial hardship. Additionally, the slight majority of Americans report that they have made real changes in their lives to deal with high fuel costs. Driving less is the obvious, and most common, response, whether that be driving less in general, cutting back on vacation travel, or consolidating errands. Additionally, some Americans, particularly those under 55, have switched to a more fuel-efficient car, while others, particularly lower-income Americans, have cut back on other household and living expenses to be able to put gas in their tanks. (Gallup)
SPX has not created any returns during the last decade. We have seen cycles of around 4 years. Time to head lower again, especially with this last leg up exhausting….
SPX refuses to make healthy new highs. The tops are loosing “steam”, especially with every uptick made by decreasing volume. SPX might be forming the last part of a big wedge, which eventually should take the market much lower.
SPX and OIL (red). Oil seems to have topped out, especially with the Usd getting stronger and people talk about deflation….As we have argued, we believe the commodities space is showing us where the equities are heading, lower. Both OIL and SPX have failed to take out new highs, let’s see if SPX follows OIL lower.
Upper chart VIX (fear) index compared to OIL on the lower chart. We see the effects on VIX with regards to OIL moving. With OIL volatility increased, we are poised for some higher volatility in the stock market. Judging by the lack of volume, and Algo driven trading, things can get interesting.
Although somewhat extreme in his views, worth reading Cobb’s insights into the food problem.
In his latest book entitled Bottleneck sociologist and ecologist William Catton Jr. explains in detail why he believes human society is destined for a major dieoff, a “bottleneck” from which few survivors will emerge.
One cause, he says, is an array of vested interests who manipulate the media and the power structure, oblivious to the consequences of their actions. Many would say that this is business-as-usual. After all, what do we expect when governments are thoroughly dominated by the industries they are supposed to regulate? As a result, we may say, a few more people will be maimed or killed or maybe just ripped off than would otherwise be the case. But, would such interests be so crazy as to persist in their manipulations when faced with compelling evidence that suggests their actions could result in widespread starvation?
A more recent revelation is that glyphosate, the world’s most widely used herbicide, may be setting us up for a major crop failure worldwide. Sold primarily under the trade name Roundup, the herbicide has been central to chemical and seed giant Monsanto’s strategy to lock-in alfalfa, corn, cotton, canola, soybean, and sugar beet growers who must buy the company’s genetically engineered and patent-protected seeds every year from Monsanto if they want to reseed their fields with herbicide-proof crops.
America’s richest used to pay taxes to America, now they lend their Usd to the government. With the parabolic increase in debt, these super rich dictate the rules. This unseen development, causes great risk to America. Below from professor Reich;
The great irony is if America’s super rich financed the U.S. government the way they used to – by paying taxes rather than lending the government money – that long-term budget deficit would be far lower. This is why a tax increase on the super rich must be part of any budget agreement. Otherwise the great switch by the super rich will make the income and wealth gap far wider.
A topic not getting (almost) attention is the Energy situation in China. Could China’s coming Energy Crisis, spill over to Us, and push gas prices further up?
China is currently facing its worst energy crisis in years. It’s so bad that their central planners must be having sleepless nights in Beijing worrying if the lights are about to go out and the factories will stop pumping out goods. Huge swaths of central China, including the financial center, Shanghai, are likely to face power cuts this summer as energy demand peaks. This is how the state-controlled China Daily newspaper summed up the situation: “Power shortages that gripped many parts of the country in recent months could herald the worst energy crunch in years amid growing concerns that economic growth may suffer.”