When in Trouble, double. At least this seems to be Obama’s plan. By increasing debt and unrealistic assumptions about the future growth, interest rates, unemployment etc, he seems to believe that is the way forward for the mighty US. This is what he is selling to the American people. Instead of using common sense, ie, stopping the spending, Obama is doing the opposite, but on the other hand, Election time coming up, and he needs his friends….

Graphic; William Warren.

Below, Finley on the failed truth test;

Credit counselors offer standard advice to clients overwhelmed by debt: Tear up the credit cards and start paying down the balance before spending another dime on nonessentials.

That’s just common sense. Yet President Barack Obama is trying to sell us on the opposite approach for an overextended federal government. He wants us to issue him another credit card while he keeps spending as if the bills will never come due.

Obama has no credibility in the current showdown over raising the debt ceiling because he’s pitching a bundle of fibs to cover the reality that he doesn’t believe government spending is a problem.

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This time is different? SPX pushing aggressively last two weeks on low volumes. Short getting squeezed, and hedge funds returning poor performance. After the almost 100 points rally in SPX from the lows seen 2 weeks ago, everybody is “sucked” back into the market, all trying to achieve returns in a panic fashion. Volumes are low, and CFTC reports of dramatically lower volumes. Vol was bought in panic 2 weeks ago, while now some 10 days later, people are puking vol again. As thetrader has argued, the market won’t go down until all the momos are long, preferably geared to max levels.

The bounce off the 200 day moving average, we argued would happen, 3 weeks ago, has reached it’s full potential, and we will start looking for some cheap vol at these levels. Earnings season and debt ceiling are around the corner. Below 10 points dealing with the issue of “nothing has changed”, and the next crisis will be even bigger than the last, as we have not learnt anything. This time is not different. Courtesey of Smart Money;

1. We are learning the wrong lessons from the last one. Was the housing bubble really caused by Fannie Mae, Freddie Mac, the Community Reinvestment Act, Barney Frank, Bill Clinton, “liberals” and so on? That’s what a growing army of people now claim. There’s just one problem. If so, then how come there was a gigantic housing bubble in Spain as well? Did Barney Frank cause that, too (and while in the minority in Congress, no less!)? If so, how? And what about the giant housing bubbles in Ireland, the U.K. and Australia? All Barney Frank? And the ones across Eastern Europe, and elsewhere? I’d laugh, but tens of millions are being suckered into this piece of spin, which is being pushed in order to provide cover so the real culprits can get away. And it’s working.

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As the SPX is reaching critical resistance levels on “panic” buying, the Debt Ceiling Situation, is around the corner. Geithner has assured, there are o alternative plans, but sources are saying something else. Maybe the Troika can be of some assistance in trying to flatten out the parabolic chart below?

Reuters reports on the Debt Ceiling “secret” talks;

A small team of Treasury officials is discussing options to stave off default if Congress fails to raise the country’s borrowing limit by an August 2 deadline, sources familiar with the matter said on Wednesday.

Senior officials, including Treasury Secretary Timothy Geithner, have repeatedly said there are no contingency plans if lawmakers do not give the U.S. government the authority to borrow more money.

But behind the scenes, top Treasury officials have been exploring ways to prevent a financial meltdown that would be triggered if the government were unable to pay its bills on time, sources told Reuters.

Treasury has studied the following issues:

- Whether the administration can delay payments to try to manage cash flows after August 2

- If the U.S. Constitution allows President Barack Obama to ignore Congress and the government to continue to issue debt

- Whether a 1985 finding by a government watchdog gives the government legal authority to prioritize payments.

The Treasury team has also spoken to the Federal Reserve about how the central bank — specifically the New York Federal Reserve Bank — would operate as Treasury’s broker in the markets if a deal to raise the United States’ $14.3 trillion borrowing cap is not reached on time.

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Welcome to free markets. You rig the markets, get to know other bids and therefore manage to win the deals. Then all goes wrong, taxpayers bail you out. After doing the roundtrip, you can then reclaim all bonuses, and even look for a possibly even more prestigious job at the Treasury. The fine is paid by the firm, and is pocket change money, compared to the revenues due to rigging the market. The stealing continues. SEC charges JPM with regards to rigging the Muni bond markets. (Full release)

Washington, D.C., July 7, 2011 – The Securities and Exchange Commission today charged J.P. Morgan Securities LLC (JPMS) with fraudulently rigging at least 93 municipal bond reinvestment transactions in 31 states, generating millions of dollars in ill-gotten gains.

To settle the SEC’s fraud charges, JPMS agreed to pay approximately $51.2 million that will be returned to the affected municipalities or conduit borrowers. JPMS and its affiliates also agreed to pay $177 million to settle parallel charges brought by other federal and state authorities.

“JPMS improperly won bids by entering into secret arrangements with bidding agents to get an illegal ‘last look’ at competitors’ bids,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “Municipal issuers and investors didn’t stand a chance against the fraudulent strategies JPMS and others used to guarantee profits.”

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Although exact numbers are difficult to confirm, China’s financial involvement in Venezuela since 2005 has included hard asset investments and loans, along with commitments for more loans and investments, worth approximately $49.5 billion. This is part of China’s global outward investment strategy. Beijing chose Venezuela as a target for investment because of its natural resources — Venezuela has repaid some of its loans from China with oil — and opportunities for Chinese businesses. China has been sure to maintain a strong role in how the investments and loans are spent, and the agreements often include joint decision-making and commitments to hiring Chinese firms. If Venezuela were to renege on its commitments, China could be exposed to losses amounting to approximately $14 billion (a conservative estimate). (Stratfor)

FX comment from our currency trader, as we trade in dull summer trading.

Peripherals under pressure  Italy/ Ger spread at widest level since emu  10 yr 223 bp —Fear of rating downgrade for Italy ..

Spain 5y CDS at 320bp

Sen Fin at 175 – close to high of year and the key one for us – germany – is trading at 46 which should continue to support the 2-10 curve

Eurusd been trading around the  1,4325 mark the whole Asian session. Moody’s made the following statement early in the European session “RPT-MOODY’S CUTS PORTUGUESE BANKS’ GOVERNMENT-GUARANTEED DEBT FURTHER TO SOVEREIGN RATING ACTION..”, and euros dropped like a stone to 1,4280. AUD been trading stronger on better than expected unemployment figures. Market is in a waiting mode to see what fun Trichet can bring to the table.

All you need to know. Continue below….

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While the Troika is trying to figure out how to save the ever more  desperate Greek people, Der Spiegel gives some color on who brought the country to ruin. Welcome to the Papps and the Elite that brought Greece down.

The queue of hungry people snaked across the courtyard and into the street at the homeless shelter behind Omonoia Square in Athens last Thursday, just as it does every day at lunchtime. The retired, the unemployed, mothers with children, immigrants; they were all waiting patiently for church members to press something to eat into their hands.

Georgios Levedogiannis, 38, managed to get his hands on some peas with root vegetables and potatoes, along with three hunks of bread and a few cups of yoghurt. Levedogiannis has been coming here regularly for nine months. “I have to, in order to survive,” he says.

Levedogiannis worked in security at Athens Airport for seven years. He wasn’t rich, but he got by — until his bosses fired him in 2009. At the moment, his poverty is not yet visible. Levedogiannis wears a clean shirt, smart blue slacks and a new-looking bag slung around his waist. He clearly makes an effort. But there are tears in the man’s eyes as he says: “If I had work, I wouldn’t do this to myself.” He says he has “zero” money and that he sleeps at the Red Cross, eats at the church and dreams of a different time, a time where there was still work. “If you don’t have connections, no one will take you,” he explains. “And it’s only getting worse.”

Picture; Spiegel. Three generations of Papps, all leaders of Greece…..

Full Article,

How Greece’s Political Elite Ruined the Country