Meltdown-The Men Who Crashed the World (about to save us?)
A look back at how we got here. Sunday evening viewing.
Government Debt-Who’s holding what
From the latest IMF report on who is holding government debt. Although we are trying to figure out Greece and the other PIIGS, we clearly see the US is holding the debt “in house”, close to 50%. Wonder when we will address that problem.
“Suffering” in Greece up sharply
While the Troika argues of how to fix Greece, the Economy is in free fall, and it is as usual the people the suffer. Latest from Gallup.
Gallup classifies respondents’ wellbeing as “thriving,” “struggling,” or “suffering,” according to how they rate their current and future lives on a ladder scale with steps numbered from 0 to 10 based on theCantril Self-Anchoring Striving Scale. Greeks’ current level of wellbeing is low compared with levels in other developed countries, where thriving is typically much higher than suffering. The results from Greece are based on surveys conducted in the country in April and May immediately preceding the start of major riots and protests against the government’s austerity measures.
Greeks’ current life evaluation — with 14% thriving, 62% struggling, and 24% suffering — is also low compared with ratings in other European countries surveyed so far in 2011. More Greeks are now classified as suffering than those living in several other European nations, including those in other countries hard hit by the financial and economic crisis such as Ireland and Italy. Suffering is higher only in Hungary (29%), Romania (30%), and Bulgaria (42%), and thriving is significantly lower only in Bulgaria.
Notes from the Bloomberg Markets 50 Summit
Some short quotes from at least a few intelligent people that attended Bloomberg Markets 50 Summit in NY. Full article by Andrew Horowitz here..
Nassim Taleb; The system has consumer between $2-3 trillion of compensation over the past 5 years. The great bank robbery. There are rules that we had for centuries, the problem is that the modern version of capitalism that we have (of which Adam Smith did not like) does not have consequences.
We are not made for information, we are not made for randomness, we are not cut for this world. 2 options, heuristics and try to play with them or 2) change the world. Either the world will self-correct or destroy itself. All we need is common law (heuristic). If we want to simplify the system, look at what Swede did in 1991, they cleaned house in 90 days. Then reset the system.
Thinking requires effort and a high expenditure of energy. Heuristics – we don’t know that we are using heuristics and have the illusion that we are thinking when we are not thinking.
Dalio; Credit can be created in countries and the same cycle as above will persist. How much of the money that is being spent by ECB to do a restructuring and other measures to fix things. One of the most important things now is to understand what is going on and make some important plans, rather than waking up every day to a new surprise.
On printing money: It is quite a handy thing to have. If you are a creditor with a linked policy then you have problems in that there are extremes that are created. For example Greece is a creditor and they cannot adjust and they are their economy is going to crash, if on the other hand you have those that are linked and needs to print then you have a bubble like China.
What is working for Bridgewater? Dalio says the he writes the daily so that he knows that he knows what he is doing wrong. If you diversify and don’t rely on only one things to make your year, but many ideas go into the Ray Dalio code and his template for the economy is available to download HERE. (pdf).
Market and Economic Indicators
By Macro Story;
Copper VS SPX
Copper VS Copper Commercial Net Position
Skew Vix Divergence VS SPX (short term)
Skew Vix Divergence VS SPX (long term)
IMF Transcript of Press Conference
With not much new from today’s IMF conference the market will continue being confused. Below full transcript of the Press Conference.
MS. NARDIN: Good afternoon and welcome to this press conference on Europe.
Antonio Borges, head of the European Department of the IMF, will offer brief introductory remarks, and then we will take your questions.
MR. BORGES: Thank you. Welcome. I will be very brief in my initial remarks, first because most of what I have to say, you already know from the various message that you have been getting in these Annual Meetings; second, because I want to leave as much time as possible for your own questions.
As you know, in Europe, we are quite concerned with the economic situation. Relative to the last press conference on Europe I had, which was at the time of the Spring Meetings, the situation has become much less favorable. In the spring, we were looking at some solid economic growth, export-driven, and so forth. Now there is quite a significant slowdown which, to a certain extent, is inexplicable because we expected that the European economy would be in good shape, on very solid foundations, and in fact this has proven more shaky than we thought, and in fact even the best economies are slowing down significantly, which is certainly concerning.
Full IMF Release
Communique of the Twenty-Fourth Meeting of the IMFC: Collective Action for Global Recovery Chaired by Mr. Tharman Shanmugaratnam, Deputy Prime Minister of Singapore and Minister for Finance
The global economy has entered a dangerous phase, calling for exceptional vigilance, coordination and readiness to take bold action from members and the IMF alike. We are encouraged by the determination of our euro-area colleagues to do what is needed to resolve the euro-area crisis. We welcome that the IMF stands ready to strongly support this effort as part of its global role.
Today we agreed to act decisively to tackle the dangers confronting the global economy. These include sovereign debt risks, financial system fragility, weakening economic growth and high unemployment. Our circumstances vary, but our economies and financial systems are closely interlinked. We will therefore act collectively to restore confidence and financial stability, and rekindle global growth.
Loud Rumors of Greek Default
As Europe is enjoying Saturday evening we are getting multiple loud rumors of Greece defaulting. A default is necessary, the only question is how much bankers are willing to loose/sacrifice. Below some early Saturday rumors. The night is loooong.
From Telegraph; German and French authorities have begun work on a three-pronged strategy behind the scenes amid escalating fears that the eurozone’s sovereign debt crisis is spiralling out of control.
Their aim is to build a “firebreak” around Greece, Portugal and Ireland to prevent the crisis spreading to Italy and Spain, countries considered “too big to bail”.
Greece needs a decade to regain competitiveness by Reuters.
Greek Default Gets Louder by Ekathimerini.
…and here is BBC’c quick guide to the different scenarios.
Greece’s Debt Odyssey (and more)
Guest Post by the MoreLivers.
Terrible week in the markets, no hope, only delusion, denial, empty promises, one more drink, one more turn, I will never hit you again. None of it is true anymore. Four weeks ago it used to be that the price was the news, in absence of solid, trustworthy politicians and central bankers. Price was followed, as it knew what was what. Now all markets are manipulated, squeezed, closed, restricted or kept in the dark. Market participants have no news, no prices and no statements or rules, so now rumors of rumors are moving the markets.
On Tuesday the Greek parliament will vote on austerity measures. The end result is uncertain, and if the parliament says no, the EU bailouts agreed on 21st July are not happening. They might be stupid enough to vote no and learn to eat stones and fight regional wars, or brave enough to vote no, as in this game of chicken the Germans, French and the ECB have more to lose. I gave my odds for Greek default here one week ago. I see no reason to change my view.
At some day, at some point, someone will uncover how much the banks have paid the European politicians to get recapitalization without participation and then put the full burden of their self-inflicted crisis on tax payers and austerity-ridden PIIGS. At that point these people have no political future, respect or security.
Joke of the day: “While the first ten years of the euro have been a success, the crisis exposed a number of shortcomings in the policy framework.” – Statement of Commissioner Olli Rehn to IMF committee – IMF (pdf)
Dear Olli, where, how much and when the euro was a success, and at what total cost? Go f**k yourself, Olli.
Joke of the day 2: Van Rompuy paints rosy picture of EU at first-ever UN speech – euobserver.com
This speech is so delusional that I cannot say anything about it. Has he passed the Voight-Kampff-test?
Then to the links, plenty of stuff and no fillers.As per your feedback, I’ve added “editorial content” and in link summaries also bring forth my view on the topic. Bookmark now, read later if you have to. Feedback would be much appreciated – what do you find most useful here? Leave a comment, follow me on Twitter or email me.
NEWS, WRAPUPS
** Evening summary: Friday Watch – Between The Hedges
Morning summary: Morning Take-Out – DealBook / NYT
Emerging markets: The weekender – beyondbrics / FT
All EM currencies hit, IMF warns about corporate debt risks. Let’s see what all of this will do the public sector deficits in the near future.
For much more, continue below.
Gold-The 5000 year Bubble
A rather “amusing” report on Gold. Despite the somewhat “crazy” approach, it is well worth reading over the weekend. It definitely makes Roubini look a Gold Bull.
It’s become quite popular to talk about the price of gold . . . in blogs, the press, at dinner parties. The latest topic of debate is not about the price of gold as a commodity, but about gold as the one and only king money. The basic argument is that 5,000 years of tradition will overwhelm the tyranny of modern government and the fiat printing press. The barbaric relic will defeat socialism, fascism, Obama-ism, and restore liberty to the world, after a terrible economic collapse in which gold-owning visionaries become fabulously wealthy.
Perhaps they are correct—or perhaps not. I don’t know what will happen in 10 years. However, unless civilization utterly collapses (which is what gold hoarders seem to want), the gold bubble will collapse. And I don’t mean the 10 year “bubble” . . . I mean the 5,000 year bubble.
Full article, Price of Gold in 2160.
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