According to [Boston Consulting Group], the amount of developed world debt between household, corporate and government that needs to be eliminated is just over $21 trillion. Which unfortunately means that there is an equity shortfall that will have to be funded with incremental cash which will have to come from somewhere.
German Parliament Approves EFSF’s Expansion – WSJ.com
German Chancellor Angela Merkel’s fractious coalition won a brief reprieve on Thursday, as lawmakers from the center-right ruling parties closed ranks and passed legislation to expand the euro-zone’s bailout fund.
……A total of 523 lawmakers voted in favor of the EFSF reform bill; 85 voted against, with three abstentions. The overall result includes the votes of the opposition Social Democrats and the environmentalist Greens, who unanimously backed the bill in stark contrast to Ms. Merkel’s unruly coalition.
……The 17 euro-zone governments agreed in March and July to expand and reform the EFSF, boosting the lending capacity of the fund to €440 billion ($596 billion) from €250 billion. The fund also will receive additional powers, such as the ability to extend credit lines to banks and buy bonds on the secondary market.
…….The temporary EFSF is set to expire in 2013 and to be replaced by a permanent European Stability Mechanism.
China’s African Mischief – Yuriko Koike – Project Syndicate
Since 2000, China has actively courted Africa’s unstable and dictatorial countries with offers of aid and a refusal to back United Nations sanctions against them. Indeed, China has blithely entered into business with African countries that Europe and America refuse to engage with, owing to sanctions.
…..China has chosen a high-risk path – ignoring human rights and violating UN sanctions – to secure the energy and other resources needed to sustain its economy’s rapid growth. It is a choice that neither befits one of the permanent members of the Security Council, nor demonstrates China’s readiness to be a responsible stakeholder in the international community.
China’s willingness to arm and defend African dictators, even in the teeth of UN sanctions, as in Libya, undermines its claim to a “peaceful rise.” Given China’s Libyan duplicity, the world should now determine whether it is a country that obeys international rules only when doing so suits its interests.
via China’s African Mischief – Yuriko Koike – Project Syndicate.
South African Rand: weakness continues
The greenback found support at its secondary rising trendline, with a long tail at R7.70/dollar indicating buying pressure. Respect of the secondary trendline would indicate an advance to $9.00*, while failure would test the primary trendline at R7.35.
* Target calculation: 8.40 + ( 8.40 – 7.80 ) = 9.00
CDS signaling trouble for Chinese banks – macrobusiness.com.au
Credit markets are also now showing distrust in Chinese banks. Credit default swaps spreads for Bank of China and China Development Bank have surged according to Société Générale, and they are rising at much faster rates than the rest of Asia ex. Japan
via CDS signaling trouble for Chinese banks – macrobusiness.com.au | macrobusiness.com.au.
Commodities point to weaker Aussie and Canadian Dollar
CRB Commodities Index is testing support at 300 and the lower border of its trend channel. 63-day Twiggs Momentum holding below zero indicates a strong primary down-trend. Breakout below the trend channel would warn of a sharp decline, with a target of 260*. Respect is less likely, but would indicate a rally to test the upper trend channel.
* Target calculation: 300 – ( 340 – 300 ) = 260
Canada’s Loonie and the Aussie Dollar are both closely linked to commodity prices. A fall in the CRB index would lead to similar falls in the two currencies. CAD breakout below $0.9650 would signal a test of $0.94*.
* Target calculation: 1.00 – ( 1.06 – 1.00 ) = 0.94
Both currencies commenced a primary down-trend when they broke parity. An Aussie Dollar breakout below $0.97 would offer an identical target of $0.94*.
* Target calculation: 1.02 – ( 1.10 – 1.02 ) = 0.94
Frau Merkel, it really is a euro crisis – Ambrose Evans-Pritchard
The reason this crisis keeps grinding ever deeper is because the euro itself is a machine for perpetual destruction. The currency is fundamentally warped and misaligned. It spans a 30pc gap in competitiveness between North and South. Intra-EMU current account deficits have become vast, chronic, and corrosive. Monetary Union is inherently poisonous.
The countries in trouble no longer have the policy tools — interest rates, QE, liquidity, and exchange rates — to lift themselves out of debt-deflation. Just as they had few tools to prevent a catastrophic credit bubble during the boom. Their travails were caused in great part by negative real interest rates set by the ECB (irresponsibly) for German needs.
via Frau Merkel, it really is a euro crisis – Telegraph Blogs.
Euro-Zone Bailout Plan Progresses – WSJ.com
While German officials say they are open in principle to using the EFSF’s limited war chest “as efficiently as possible,” they say these ideas are unlikely to work well unless the ECB cooperates. So far, the ECB has rejected calls to team up with the bailout fund.
Political resistance to such a “leveraging” of the EFSF is high in Germany’s parliament, which would have to approve such a move. Ms. Merkel’s government has tried to reassure its lawmakers this week that it has no plans to make German taxpayers shoulder even bigger risks.
Dollar rise as euro falls
The euro is testing short-term support against the greenback at $1.35/1.34. 63-Day Momentum (declining below zero) reminds we are in a primary down-trend. Failure of support would signal a decline to $1.30*.
* Target calculation: 1.40 – ( 1.50 – 1.40 ) = 1.30
The dollar has benefited from safe haven demand, commencing a primary advance as the euro falls. 63-Day Twiggs Momentum crossed to above zero, confirming the primary up-trend. Further retracement to test the new support level at 76.00 is likely, but respect would demonstrate strong buying support.
* Target calculation: 76 + ( 76 – 73 ) = 79
It’s Man vs. Machine and Man Is Losing – WSJ
Since the recession ended, businesses had increased their real spending on equipment and software by a strong 26%, while they have added almost nothing to their payrolls.
via It’s Man vs. Machine and Man Is Losing – Real Time Economics – WSJ.