Mystery Economic Theater 2012

[ewmayer]

In the US today we have the silly political theater of JPM head Jamie Dimon testifying before the Senate Banking Committee about JPM's recent large "when hedge-hogs go bad" derivatives prop-trading loss ... and of course the esteemed committee has 0, we repeat, 0, conflicts of interest in the matter:

...as the following table compiled using OpenSecrets data, it cost JP Morgan just under $1 million, or $877,798.00 to be precise in lifetime campaign contributions, to buy itself precisely one Senate Banking Committee. And where it gets really fun is that between the Chairman, Tim Johnson (D - SD), and the ranking member Richard Shelby (R - AL), JP Morgan has been the top and second biggest campaign contributor, respectively.

With increasing talk in the EU about capital controls and even of suspending the Schengen accord (guaranteeing visa-free cross-border travel), Mish's friend Pater Tenebrarum points out the incredible irony:

Velvet Glove, Iron Fist

The idea of imposing capital controls and limiting the free movement of people across borders are likewise threats that must make every thinking person wonder what the hell the whole 'rescue operation' is supposed to be 'rescuing'. After all, these are basic tenets of the EU treaties the possible suspension of which the eurocrats are discussing here. This is what the EU was established for in the first place: to enable the free movement of people, goods and capital. If these are suspended, then what is it that is being rescued?

[xilman]

Originally Posted by ewmayer

With increasing talk in the EU about capital controls and even of suspending the Schengen accord (guaranteeing visa-free cross-border travel)

Strictly speaking, and one should always speak strictly especially to animals and small children, members of the EU have never needed visas to travel between member states. (Though having VISA card is often a good idea.)

What Schengen provides is that a visa issued by any participating member state to a disreputable furriner will be accepted by any other participating member state. Such furriners still need (or perhaps not, depending on their degree of disreputability) a visa to travel to any Schengen state.


Paul

[Fusion_power]

Are you calling Ewmayer a "furriner"?

On the topic of can kicking, our estimable elected officials are deliberately packing dynamite in the cannon again. The debt ceiling will have to be raised again within 6 months, unemployment benefits are expiring for many more unemployed, state tax revenues are declining like water dropping off Angel Falls, and to top it off, it looks like EU woes will spill over into the world market which means we all get treated to another dep-recession.

Whats a guy to do with his hard earned investment dollars? We could go long on everything Ewmayer is shorting. That looks to be a safe bet lately. We could short Facebook though that is a long term play. Just looking for a few ideas on the likely impact on the great casino ... erm, I mean Market.

DarJones

[xilman]

Originally Posted by Fusion_power

Are you calling Ewmayer a "furriner"?

Yup, though I will withdraw that characterization if he can show that he holds a passport issued by an EU member state. Austria perhaps?


Paul

[ewmayer]

Originally Posted by xilman

Yup, though I will withdraw that characterization if he can show that he holds a passport issued by an EU member state. Austria perhaps?

I do still have my old "Aussie" passport, but it was invalidated when I took US citizenship in '84. I always pictured a furriner as a mad animal-hatter, that is, a fur-specialized milliner. "Vulpine chapeau for you today, sir? Just the right thing to impress a foxy lady..."

The real question is, am I furriner of the gol-durn variety, or just a run-of-the-mill(inery) one.

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Most say Bush to blame for weak U.S. economy, poll finds: WASHINGTON (Reuters) - About two-thirds of Americans believe Republican former U.S. President George W. Bush - not Democratic President Barack Obama - is responsible for the nation's struggling economy, according to a Gallup poll released on Thursday.

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Watched the 1979 BBC 6-part miniseries Tinker, Tailor, Soldier, Spy adaptation of the eponymous John le Carré novel over the past week. In the final minutes, chief mole-digger-upper George Smiley (Alec Guinness) asks the revealed turncoat (whose name I shan't reveal for those who may want to watch it) the obvious question, "why did you do it?".

[efudd]At the wisk or sounding wike a tweachewous tuwncoat[/efudd] myself, I found Mr. Mole's reply to be rather cogent and no less relevant now that the cold war has ended and financial tyranny, erm, I mean, "the thirst for western-style democracy", rules all:

because it was necessary, that`s why! someone had to.

...Do you know what`s killing western democracy, George? Greed. And constipation. Moral, political, aesthetic. I hate America very deeply ... The economic repression of the masses, institutionalized. Even Lenin couldn`t foresee the extent of that. Britain - oh, dear - no viability whatever in world affaits. I suppose that`s when it began ... turning my eyes to the east, I mean. When I saw how trivial we`d become as a nation; say in the mid-40s. By 1950 I was slipping [Soviet spy chief] Karla occasional gifts of intelligence, carefully selected morsels to help the Russian cause against America. At that time I was scrupulous not to give Moscow anything harmful to ourselves, our own agents in the field. I still believe that secret services are the only real expression of a nation`s character. Until the mid-50s I still had hopes ... lingering loyalty to what *we* represented. [Shakes head wistfully] Self-delusion, of course. We were already America`s streetwalkers. [Pauses] I was granted Soviet citizenship 12 years ago. They`ve given me a couple of medals.

Mr. Mole main mistake was thinking the Soviets were any better when in fact they represented a different kind of monstrosity, one which was no less inequitable in terms of benefiting its ruling elite at the asme it destroyed the human initiative at the heart of genuine economic wealth creation, while allowing the great unwashed rabble not even the illusion of prosperity.

[chalsall]

@ewmayer...

I would be interested in your opinion on The Economist's editorial Europe's choice.

It would certainly cause problems for those shorting the Euro....

[ewmayer]

Originally Posted by chalsall

@ewmayer...

I would be interested in your opinion on The Economist's editorial Europe's choice.

It would certainly cause problems for those shorting the Euro....

Well, the article immediately begins with the false binary choice "total catastrophic breakup or true federal transfer union" (the latter run by unelected Brussels euro-crats, natch) and then puts all the onus on Germany. There will come a day - and I believe it is very nigh - when such underhanded code-talking playing of the "German guilt for WW2 and the holocaust" card will at last fail. But let`s just parse the first few paragraphs:

WHAT will become of the European Union? One road leads to the full break-up of the euro, with all its economic and political repercussions. The other involves an unprecedented transfer of wealth across Europe’s borders and, in return, a corresponding surrender of sovereignty. Separate or superstate: those seem to be the alternatives now.

How about a partial break-up, separating the countries willing and able to do what it takes to live within their means, from those who want to live large on borrowed money? Is that not a choice?

For two crisis-plagued years Europe’s leaders have run away from this choice. They say that they want to keep the euro intact—except, perhaps, for Greece. But northern European creditors, led by Germany, will not pay out enough to assure the euro’s survival, and southern European debtors increasingly resent foreigners telling them how to run their lives.

Notice the subtle arrangement here, which puts the onus on Germany "to assure the euro's survival" and turns being a deadbeat borrower into some kind of sovereign right.

This has become a test of over 60 years of European integration. Only if Europeans share a sense of common purpose will a grand deal to save the single currency be seen as legitimate. Only if it is legitimate can it last.

How about, "only if it based on demonstrable mathematical truths and sustainable economics can it last"? Wherein lieth the legitimacy of having the common purpose of spending other people's money and telling them to sick it when the repayment comes due?

Most of all, it is a test of Germany.

Why? Because you say so?

Chancellor Angela Merkel maintains that the threat of the euro’s failure is needed to keep wayward governments on the path of reform. But German brinkmanship is corroding the belief that the euro has a future, which raises the cost of a rescue and hastens the very collapse she says she wants to avoid. Ultimately, Europe’s choice will be made in Berlin.

The euro has no future if the manifold "wayward governments" do not embark on a crash course to live within their means and embrace productive rather than bloated-government ponzi economics. They have made very clear they will not do this without dire threats. Hence the brinksmanship.

Last summer this newspaper argued that to break the euro zone’s downward spiral required banks to be recapitalised, the European Central Bank (ECB) to stand behind solvent countries with unlimited support, and the curbing of the Teutonic obsession with austerity.

Banks need to be recapitalized for what? So they can make more bad loans? What is needed most of all is someone needs to admit to and eat the losses. If there were any justice that would mean the bank share- and bondholders. Why are they not being asked to pony up for their greed and reckless lack of oversight? And agin the tendentious language ... "Teutonic obsession with austerity." What rubbish. How about the "Ponzi-economic obsession with magical unicorns who shit gold bricks" exhibited by the authors of this and similar swill?

As for shorting the Euro, that would THE no-brainer play if the world followed the bank-owned whoresEconomist's advice.

[chalsall]

Originally Posted by ewmayer

As for shorting the Euro, that would THE no-brainer play if the world followed the bank-owned whoresEconomist's advice.

So, then, just for clarity...

Are you saying that not following the Economist's advice doesn't involve shorting the euro?

Strange then that so many are....

[ewmayer]

Originally Posted by chalsall

So, then, just for clarity...

Are you saying that not following the Economist's advice doesn't involve shorting the euro?

That may still be the right play long-term, but less obviously so. The only way the E's transfer union and massive bank bailouts can possibly be funded is through money printing on an epic scale.

Strange then that so many are....

Not really - that's basically saying "strange that markets seem to be following a herd mentality". In this case, though, the herd ma be right. If the EMU agrees to epic printing, the Euro falls ... if they don't the EMU breaks up, and the Euro falls. In the near term, though, lots of shorts makes for these epic short squeezes on well-placed rumors. I was only half-joking the other day when I said the EMU could probably fund the Spanish bank bailout via a series of coordinated rumor-driven squeezes of the Euro shorters. Once the big hedgies playing that game are driven out of business, though, the well has run dry.

[chalsall]

Originally Posted by ewmayer

Once the big hedgies playing that game are driven out of business, though, the well has run dry.

Just wild speculation here...

Would it be illegal for the EU to play shorters to pay for the required bailout?

[Fusion_power]

Would it be illegal for the EU to play shorters to pay for the required bailout?

You've got to be joking. The market is a casino where the player with the biggest bankroll can call suevi (double or nothing) until he wins and in doing so bankrupts the other players. It should be obvious that a major government could play that game and win at the expense of all other players.

DarJones