Markets Rule

From NC.

Update 3:30 AM: Philip Stevens’ comment is germane:

Political resolve has given way to fear. No one waxed more eloquently than Mr Sarkozy about the iniquities of liberal markets. This was the moment, the French president told us, when capitalism would be remade in the image of the European social market. All this, though, was before the Greek sovereign debt crisis saw the eurozone under siege. Now Mr Sarkozy lies awake each night worrying that France might lose its triple A credit rating.

He is not alone. As they struggle to reduce huge budget deficits, western politicians almost everywhere are in thrall to global capital markets. David Cameron has made no bones about it – Britain’s prime minister says he is slashing spending on the welfare state and paring back the nation’s global role because the Bank of England has told him that the rating agencies would be satisfied with nothing less.

The rating agencies – remember them? Some may recall that these very same organisations were deeply complicit in the chicanery that saw worthless debt instruments repackaged as top-notch financial securities. I am sure I heard the politicians say they would be cut down to size. It never happened. The rating agencies never repented; and now they are masters again….

Financial institutions are still extracting large profits from trading activities described by Lord Turner, the head of Britain’s Financial Services Authority, as inherently useless. Lord Turner, however, has been almost a lone voice in suggesting a fundamental rethink.

The crisis in the eurozone shows how the herd instincts of capital markets can destabilise an entire continent. The consequence has been to push European governments into a premature, and risky, race to slash fiscal deficits before economic recovery is assured.

With a little help from the regulators, the big banks can now declare themselves duly stress-tested, but the systemic instabilities remain. International markets have moved far ahead of the capacity of political leaders to understand, let alone properly oversee them. This failure of political governance to keep pace with global economic integration is as apparent now as it was in 2007.

Even if politicians better recognise the risks of interdependence and the vulnerabilities of particular institutions and financial instruments, they are far from any consensus on how to share responsibility for global oversight. So, three years on, things are much as they were – except that most of us are poorer. The markets rule. OK?

Yves again. It’s worse than that. Not only are the non-banksters poorer, but the perps now have mechanisms in place to assure that the next round of looting will go more smoothly.

What comes after quadrillion?

(Hat tip The Burning Platform)

Mr Market seems to be handing out free money

Headline in Yahoo: " Home sales surge in June with inventory at 42-year low" and the Dow obliges with a hundred point pop.

Meanwhile Calculated Risk gives his usual reliable take: New Home Sales: Worst June on Record and the Consumer Metrics Daily Growth Index drops to minus 3% as the duration of the current contraction in consumer spending hits 6 months This, plus the ECRI leading indicators crash of the last month screams double dip even as the market tries to retake the highs of this bear market rally. The disconnect between the economic tea leaves and the markets is glaring, and despite Mr Keynes' famous dictum ("The markets can stay irrational longer than you can stay solvent") I think the break is coming soon.

My prediction: the markets are going to roll over in not more than 3 weeks as the July data starts coming in. By the time September data arrives in October, there will be panic selling as the double dip gets priced in. At that point we will see the lows of March 09 re-tested.

Whether I am right or wrong, being long equities right now seems hugely risky.

A small island off the coast of a subcontinent.

Those of you who know me well will know what a pleasure are the ironies of history.

So I will simply refer you to this story, seemingly mundane, about the upcoming trip to India by David Cameron.

Fast forward to 2030 or thereabouts, and the full dimensions begin to appear.

Is Neo-Localism Coming?

From the blog "Automatic Earth" a theme that will grow in importance. But of course, skype and the internet are not going to be un-invented..... so most likely there will be some kind of hybrid world emerging. I don't think, despite the best efforts of Benny and the Feds, Trichet & Co, et al. that we can return to the globalization of the kind we have just experienced... What comes next?


Thanks to globalization, we are much more dependent on trade than people were in the 1930s. The combination of credit drying up on the one hand and global trade wars on the other is an extreme threat to our vulnerable supply lines. Add to that the general upheaval created by severe economic disruption, which can easily lead to increased physical risks to transporting goods, and the longer term potential for much higher energy prices, and we could see an outright collapse of global trade in the approaching years.

The benefits of self-sufficiency will be seen in places where it still exists. So long as the whole supply chain is local, localized production means being able to maintain access to essential goods at a time when obtaining them from overseas may be difficult or impossible. It is currently more expensive, but the relative security it can provide can be priceless in a dangerous world. The ability to produce locally does not arise overnight however, especially where there are no stockpiles of components. In places where it has been lost, it will take time to regain. There is no time to lose.

We will be returning to a world of much greater diversity as we lose the homogenizing effect of trade. That means the existing disparities between areas will matter far more in the future than they have in the recent past. We will need to think again about the pros and cons of our local regions - what they can provide and what they cannot, and for how many people. Some areas will be in a great deal of trouble when they lose the ability to compensate for deficiencies through trade. As the global village ceases to exist, the world will once again be a very large and variable place.

What rough beast

From Mort Zuckerman's commentary in US News and World Report via Zero Hedge:

Historically, presidents with approval ratings below 50 percent—Obama is at 45—lose an average of 41 House seats in midterm elections. This year, that would return the House of Representatives to Republican control.

In the normal post-war era, such a shift would be of modest consequence. With the economy about to dive again, and with the misery index about to rise for many who saw themselves as middle class (state and municipal workers), there is no doubt that the slash and burn tactics of the Republican right will intensify.

Just saw the Maddow piece on how the Acorn videos were selectively edited. The guy called the cops as soon as the so-called pimp left the Acorn office! I expect more of these Goebbels tactics in the run up to 2012.

Who will it be? Petraeus on a white horse or Palin under a swastika? Even if Obama squeaks through to a second term, it will be gridlock as the productive economy continues to deteriorate and financial manipulation remains ascendant.

This Aussie walks into a bar.....

In case you missed it -- heard on the Beeb this morning:

A drunk man who climbed into a crocodile enclosure in Australia and attempted to ride a 5m (16ft) long crocodile has survived his encounter.

The crocodile, called Fatso, bit the 36-year-old man's leg, tearing chunks of flesh from him as he straddled the reptile.


He had been chucked out of a pub in the town of Broome for being too drunk.

The man, who was not named by the police, climbed over a fence and tried to sit on the 800kg (1,800lb) saltwater crocodile.


"Fatso has taken offence to this and has spun around and bit this man on the right leg," Sgt Roger Haynes of Broome police told journalists.

"The crocodile has let him go and he's been able to scale the fence again and leave the wildlife park."



"The man who climbed the fence was fortunate because Fatso was a bit more sluggish than normal, due to the cooler nights we have been experiencing in Broome," said Mr Douglas.

"If it had been warmer and Fatso was more alert, we would have been dealing with a fatality."

Sic Transit Gloria

British military power adjusts to post-bubble realities:

We have come a long way from "Rule, Britannia"!

Lt Gen David Leakey, the former director general of the EU’s military staff, said: “We won’t ever be operating in a national sovereign capacity. We will always be doing it in a multi-lateral capacity.”

Why I Call it Neo-Feudalism.

From a blog on the new Plutocracy (I don't recall that all 4 had perfect records in Q1):


Goldman Sachs, JPMorgan Chase, Citigroup AND Morgan Stanley ALL had PERFECT quarters in Q1, not having a single loss in the markets in over 250 combined chances with GS alone making $9.74Bn in trading profits without having a single bad day. Let’s assume GS was the best of the best and that they hedged so well that they are normally up 7 out of 10 days using their system. What are the odds of a single firm having 63 consecutive wins, EVEN if they already have a 70% advantage? ONE IN 5.7 BILLION! And don’t forget, Q1 was a wild quarter with huge ups and huge downs – yet they were NEVER wrong. We are blessed, on this planet Earth, with a population of 6 Billion, to be in the company of 4 firms that have pulled this off AT THE SAME TIME. What will it take to wake people up to this scam?

When you put it this way, it's clearly nothing but massive sociopathic looting.

The Bank I'm Looking For

Taken from: The Secret of OZ.

I'm looking for such a bank.



Letter to the New Mayor of Reykjavik, Iceland
Sunday, 04 July 2010 11:44 administrator


July 4, 2010

to: Jon Gnarr

Mr. Mayor,


I am the writer/director of "The MoneyMasters" and the new film, "The Secret of Oz".
By coincidence, I landed in Iceland on May 31, 2010, two days after your election.

I was asked to come to Iceland to try to help make suggestions for your economy. ........


We (IMRWG) decided that the BEST thing to do was to try to meet with you to convince you to form the BEST BANK to help relieve the people whose homes were being foreclosed on by the banks. BEST BANK would be modeled on the Bank of North Dakota (BND).

Here is how it works. The City of Reykjavik (CR) creates its own bank. Really, since Iceland has had bad experiences with banks being closely tied with certain political parties, it is probably BEST to call it "Bank of Reykjavik" (BR). But just for fun, let's call it Best Bank (BB).

CR deposits all its tax receipts into BB. Let's say that is 200.000.000 KR per year. This is an asset that can be multiplied by a factor of 9 according to international banking rules. Using the fractional reserve principle that is well accepted by the IMF, that would allow BB to IMMEDIATELY make loans of 1.800.000.000 KR. Since CR completely owns BB, BB could make these loans to anyone it chooses, including the city government, at NO interest -- yes, that's right, ZERO interest. This is completely legal! That is why North Dakota is the ONLY state in the U.S. with a balanced budget, no debt, and the lowest unemployment rate in the nation.

But it gets ever better. The City of Reykjavik has other assets as well. According to the same international banking rules, the CR gets to count the value of all roads, bridges, buildings, etc. into its asset base. That amount is huge! Now, of course, you would not want to inflate the amount of money too much, or take any risk with the assets of CR, so you wouldn't loan out anywhere near as much as you could, but think of the number of people you could help by lending out 2 BILLION KR? Of course, the CR could use this money to help repair the economy in other ways as well as keep taxes low in these difficult economic times. That is what North Dakota does with its bank.

When it comes to houses, there is a problem.The cost of houses went far too high. That needs to be brought down. So you need to consider this. You do not want to keep the price of housing high. Prices must come down. But there are good economists in Iceland which can help you there, including the Gang of 8.

You have an historic opportunity today to change the Icelandic monetary system. If you approve of Best Bank, the Parliament will follow. If the nation of Iceland escapes the debt money system which the IMF is trying to enslave Iceland in, investment money from around the world will flow into Iceland. My wife and I would gladly deposit our money into Best Bank because we know how strong it would be. Many other Americans would do the same. Once BB is working, other nations will be watching.

Bill Still
Last Updated ( Sunday, 04 July 2010 11:49 )

Sunshine and tap water to run your car --I can't wait.

I'm sure this unit cost about a million dollars, but eventually, it will cost thousands, and I want one!

Water-to-solar-to-hydrogen-to-auto- and back again to water....


An at-home system for refueling a car that doesn't pollute? It's not just a pipe dream.
June 25, 2010|By Susan Carpenter, Los Angeles Times
Imagine a world where all it took to power a car was sunshine and tap water. That isn't a pipe dream but, rather, the reality of emerging technology that someday could turn your house into a personal, zero-emission gas station.

It's called a residential hydrogen refueler, and only one currently exists. Tucked away on the Torrance campus of Honda R&D behind a security guard and a locked gate, the sleek system is designed to power Honda's limited-production FCX Clarity sedan and other hydrogen fuel-cell vehicles. The system uses solar panels — a 6-kilowatt array of thin-film cells, to be precise — to power a machine the size of a mini-refrigerator that sips in H2O and breaks it apart into hydrogen and oxygen gases. The hydrogen is then pumped directly into the car, which uses the gas to generate electricity for the car's electric motor. No fossil fuels, no pollution, no additional strain on the power grid — and all done at home.