The US Dollar broke its 5-year down-trend against the Japanese Yen. Penetration of the descending trendline from 2007 indicates that a bottom is forming. Breakout above resistance at ¥80 would signal the start of a primary up-trend, with an initial target of ¥86, confirming the long-term bullish divergence on 63-day Twiggs Momentum.
The ASX 200 broke through support at 4220 on the hourly chart, signaling a correction to test primary support at 4040. Retracement to test the new resistance level is weak and follow-through below intra-day support at 4180 would confirm the signal.
Why not let an insolvent debtor default and invite capitalism to do its work?
That’s the process an Austro-Hungarian economist by the name of Joseph Schumpeter used to call “creative destruction”…and it has worked pretty well over the years, believe it or not…….
Consider the divergent fates of two countries that came face-to-face with a financial crisis in 1990. One of these countries is still merely muddling along…20 years later! The other country is flourishing.
That’s because one of these countries, Japan, responded to its crisis by coddling its crippled corporations and by throwing monumental sums of taxpayer dollars at failing financial institutions. The other country, Brazil, responded to its crisis with relatively savage measures. It defaulted on its debts, devalued its currency (more than once) and did not stand in the way of corporate failure. Brazil’s responses were far from perfect, but they were much less imperfect than were Japan’s……
Too bad for Japan. Its economy has muddled along for two decades, while its stock market has produced a loss of 2% per year across that entire 20-year timeframe. By contrast, the Brazilian economy and stock market have both boomed during the last two decades, despite some very serious bumps along the way.
via Default Therapy.
Ambrose Evans-Pritchard: This is what a death spiral looks like. It is what can happen if you join a fixed exchange system, then take out very large debts in what amounts to a foreign currency, and then have simultaneous monetary and fiscal contraction imposed upon you.
Germany discovered this on the Gold Standard when it racked up external debt from 1925 to 1929 (owed to American bankers) in much the same way as Greece has done.
When the music stopped – ie. when the Fed raised rates from 1928 onwards – Germany blew apart in much the same way as Greece is blowing apart. This is not a cultural or anthropological issue. It is the mechanical consequence of capital flows into a country that cannot handle it, as Germany could not handle it in the late 1920s.
WSJ.com – Mean Street
[gigya src=”http://s.wsj.net/media/swf/VideoPlayerMain.swf” bgcolor=”#FFFFFF” flashVars=”videoGUID={E5C1EE90-81B3-4ECC-900E-15DFDDD03B57}&playerid=1000&plyMediaEnabled=1&configURL=http://wsj.vo.llnwd.net/o28/players/&autoStart=false” base=”http://s.wsj.net/media/swf/” name=”flashPlayer” width=”512″ height=”363″ seamlesstabbing=”false”]
Steven Russolillo discusses the prospects of another round of quantitative easing by the Federal Reserve based on recent comments by Dallas Fed Chief Richard Fisher.
Francesco Guerrera: A simple solution is staring the likes of Deutsche Bank AG, BNP Paribas SA and Banco Santander in the face: large, decisive, increases in capital through equity sales that would allay investor concerns and boost balance sheets. With the year-end results almost all out of the way, banks should start raising capital soon. The experience of the U.S. financial crisis shows that in stressed times capital infusions can cure or mask many ills and buy valuable time to restructure businesses.
Higher oil prices, the loss of some refining capacity and higher world demand have pushed up U.S. gasoline prices more than they usually track in the winter. So far in February, a gallon of gas nationwide costs $3.56, up from $3.44 in January.
Because they are shelling out more at the pump than usual this winter, consumers have less to spend elsewhere.
The strain is likely to get worse. That’s because gasoline prices typically rise in the first half running up to the summer driving season.
via Odd Retail Data Aren’t as Worrying as Rising Gas Prices – Real Time Economics – WSJ.
Many foreign-policy experts see the present international order as the inevitable result of human progress, a combination of advancing science and technology, an increasingly global economy, strengthening international institutions, evolving “norms” of international behavior and the gradual but inevitable triumph of liberal democracy over other forms of government—forces of change that transcend the actions of men and nations.
……But international order is not an evolution; it is an imposition. It is the domination of one vision over others—in America’s case, the domination of free-market and democratic principles, together with an international system that supports them. The present order will last only as long as those who favor it and benefit from it retain the will and capacity to defend it.
The ASX 200 index has been hesitant since the breach of its descending trendline. A bottom may be forming, but 13-week Twiggs Money Flow reversal below zero warns us not to expect much upside any time soon. Respect of the rising (green) trendline would indicate another test of 4400, while penetration would mean another test of primary support at 4000*.
A 2-hour chart shows the index headed for another test of resistance at 4310 on Monday. But momentum is falling and respect of 4310 would suggest a correction to 4000.
Japan’s Nikkei 225 index is testing resistance at 9000 but declining 13-week Twiggs Money Flow continues to warn of long-term sellers. Breakout would offer a target of 10000, while reversal below 8000 would signal a decline to 7000.
* Target calculation: 9000 + ( 9000 – 8000 ) = 10000
Seoul’s Composite Index broke through resistance but is now retracing to test the new support level at 1950. Respect of the rising trendline on the weekly chart, and respect of the zero line by 13-week Twiggs Money Flow, would both strengthen the bull signal. Target for the advance is 2150*.
* Target calculation: 1950 + ( 1950 – 1750 ) = 2150
