Category: Countries & Regions

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The Sceptical Inflationist | Steve Saville | Safehaven.com

The reason we are in the inflation camp is that the case for more inflation in the US doesn’t depend on private-sector credit expansion; it depends on the ability and willingness of the Fed to monetise sufficient debt to keep the total supply of money growing. A consistent theme in our commentaries over the past 10 years has been that the Fed could and would keep the inflation going after the private sector became saturated with debt.

Up until 2008 there was very little in the way of empirical evidence to support the view that the Fed COULD inflate in the face of a private sector credit contraction, but that’s no longer the situation. Thanks to what happened during 2008-2009, we can now be certain that the Fed has the ability to counteract the effects on the money supply of widespread private sector de-leveraging. The only question left open to debate is: will the Fed CHOOSE to do whatever it takes to keep the inflation going in the future?

via The Sceptical Inflationist | Steve Saville | Safehaven.com.

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Is the SP 500 on the Verge of a Rally? | JW Jones | Safehaven.com

After the nasty downside probe today, there are layers of buy stops above current price levels. If price worked high enough, the stops would be triggered and an all out rally could play out. Anything coming out of the Eurozone that appears to be either stimulative or that appears to push an ultimatum out on the time spectrum will be viewed as positive.

Often news and price action play out together at key support/resistance levels and it would make sense that some form of announcement will be made when the S&P 500 price is sitting right at a long term support level.

via Is the SP 500 on the Verge of a Rally? | JW Jones | Safehaven.com.

That would be a bear market rally rather than a reversal.

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Bernanke criticises China over currency – FT.com

The chairman of the US Federal Reserve has accused China of damaging prospects for a global economic recovery through its deliberate intervention in the currency market to hold down the value of the renminbi.

…..“Right now, our concern is that the Chinese currency policy is blocking what might be a more normal recovery process in the global economy,” he said. “It is to some extent hurting the recovery”.

via Bernanke criticises China over currency – FT.com.

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Europe Races to Stem Debt Crisis Amid Rescue Plan for Dexia – WSJ.com

Euro-zone governments suffered a blow Tuesday in their efforts to contain a deepening sovereign debt crisis as one of the Continent’s biggest banks, dogged by fears about its exposure to Greek and Italian debt, was on the verge of a government-backed breakup. Bank executives and government officials zeroed in on a drastic plan to break up Dexia SA, a Belgian-French bank that is one of Europe’s 20 largest in assets.

via Europe Races to Stem Debt Crisis Amid Rescue Plan for Dexia – WSJ.com.

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Bull versus bear is dead – macrobusiness.com.au

As the S&P500 rocketed into the close this morning on yet another European bailout rumour, it occurred to me just how broken the equity market is right now. We are trapped in bear market dynamics of grinding sell-offs punctuated by explosive short-covering rallies with no end in sight.

….. Days like today are not some romantic struggle between bulls and bears, they are a reminder that in periods of structural risk that volatility reigns. Anyone that tells you otherwise is a fool or trying to sell you something.

via Bull versus bear is dead – macrobusiness.com.au | macrobusiness.com.au.

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Australia: August retail sales up 0.6%

Westpac reported Australian retail sales posted another strong month with nominal sales up 0.6%mth in Aug following a similar gain in July. Through the year sales growth rose from a low of 1.4%yr in Jun to 2.1%yr in August, suggesting a modest 0.6%yr gain in per capital spending.

Talking to a mobile phone salesman yesterday, however, he said that state-wide they had a very quiet September. One has to be careful of seeking out evidence that supports your market view, but it occurred to me that mobile phone sales may be a good barometer of consumer sentiment.

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The Ugly World Of Auto Sales | ZeroHedge

While the media giddily reported the September new vehicle sales numbers, beneath the surface, there was little to be giddy about. At 1,053,722 units, sales were down 2% from an already lousy August, but up 10% from an even lousier September 2010.

….But September benefited from a traumatic August: Consumer confidence was hit by the absurd debt-ceiling negotiations in Congress; stock markets worldwide plummeted; and upheavals in the Eurozone made it into the daily news. Then during the last week of August, hurricane Irene wreaked havoc on the East Coast. Sales in the affected areas came to a halt.

via The Ugly World Of Auto Sales | ZeroHedge.

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To Cure the Economy – Joseph E. Stiglitz – Project Syndicate

The economy was very sick before the crisis; the housing bubble merely papered over its weaknesses. Without bubble-supported consumption, there would have been a massive shortfall in aggregate demand. Instead, the personal saving rate plunged to 1%, and the bottom 80% of Americans were spending, every year, roughly 110% of their income. Even if the financial sector were fully repaired, and even if these profligate Americans hadn’t learned a lesson about the importance of saving, their consumption would be limited to 100% of their income. So anyone who talks about the consumer “coming back” – even after deleveraging – is living in a fantasy world.

via To Cure the Economy – Joseph E. Stiglitz – Project Syndicate.

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Follow the Money: Behind Europe’s Debt Crisis Lurks Another Giant Bailout of Wall Street

A Greek (or Irish or Spanish or Italian or Portuguese) default would have roughly the same effect on our financial system as the implosion of Lehman Brothers in 2008. Financial chaos.

….The Street has lent only about $7 billion to Greece, as of the end of last year, according to the Bank for International Settlements. That’s no big deal.

But a default by Greece or any other of Europe’s debt-burdened nations could easily pummel German and French banks, which have lent Greece (and the other wobbly European countries) far more.

That’s where Wall Street comes in. Big Wall Street banks have lent German and French banks a bundle.

via Follow the Money: Behind Europe’s Debt Crisis Lurks Another Giant Bailout of Wall Street – Robert Reich.

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Beginning of the end is near for Greek drama | The Big Picture

After yesterday’s meeting with European Finance Ministers, they are finally facing the reality that the July 21st agreement where Greek bondholders would face just a 21% cut to the value of their bond holdings was just not enough. Said early this morning, Juncker, the European FM head, said “As far as PSI private sector involvement is concerned, we have to take into account that we have experienced changes since the decision we have taken on July 21. These are technical revisions we are discussing.” What he calls ‘technical revisions’ is a nice way of saying a bigger haircut is going to be demanded, something hopefully on the order of 50%+. While bondholders European banks included won’t like it because of a harsher mark, the bonds are already trading at distressed levels.

via Beginning of the end is near for Greek drama | The Big Picture.

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