Mystery Economic Theater 2012

[kladner]

Originally Posted by ewmayer

Schizophrenic pair of US employment reports yesterday and today; In global-econ news, nice to know that thanks to the strenuous efforts of the ECB, Europe is saved once again. Quite a relief, that.

Friday Funnies:

Couple of my favorite cartoons (both from last Sunday):

o Dilbert on the next iPhone release

o Pearls Before Swine on memory-foam mattresses

Good ones! I appreciate the diversion.

[ewmayer]

So, just a few days ahead of a crucial ruling by the German Bundesverfassungsgericht (Constitutional Court) in Karlsruhe on the constitutionality of the ESM (which the court is widely expected to sign off on, though with some nice-sounding "cautions" to provide a fig leaf), and the next meeting of the U.S. Fed Central Fiat Printing Council at which the counterfeiter-in-chief is widely expected to announce another round of some form of quantitative easing (likely in the form of another round of MBS purchases, a.k.a. "buying garbage from the banks and GSEs at housing-bubble-peak-based face valuation and relabeling it triple-A plusgood securities"), any guesses as to how those 2 events will play out? [There is also a parliamentary election in the Netherlands, but that will take longer to turn into any substantive course changes there, or lack thereof.]

I'm going with the now-well-established political/central-banker rule of "when in doubt, print, print, and print some more" and thus predict just as I say above: ESM will be green-lighted, and Dr. Bernankenstein will either outright announce QE4 or lead the markets to believe that it is imminent, either immediately post-elections or following the next shocking 1% "market plunge" which indicates Great Recesssion v2.0 is upon us.

[only_human]

Bernankenstein sounds like a country. He can be the Conductor. As long as all that printed green is hypoallergenic, I'm game because perfume can irritate the skin. Perhaps he sleeps to John Lennon's Imagine and dreams of a Nutopia benevolently steered by the Wizards of Davos.

[only_human]

Whistleblower in UBS tax case gets record $104 million

Bradley Birkenfeld, who once confessed to smuggling diamonds in a toothpaste tube, was not present at the news conference on Tuesday where the award was announced by his lawyers. He is under home confinement in New Hampshire, they said, after being released from prison last month.

Birkenfeld spilled many secrets about UBS, his former employer. But he was jailed after the government said he withheld other information about helping wealthy Americans hide money in secret Swiss accounts.

He is set to end his home confinement in late November, said the lawyers. They would not discuss their cut of the award.

In a case that shook Swiss banking to its core, UBS in 2009 entered into a deferred prosecution agreement and paid $780 million in fines, penalties, interest and restitution to settle charges that it helped 17,000 U.S. clients hide $20 billion. U.S. authorities are still investigating other Swiss banks.

[ewmayer]

Originally Posted by only_human

Bernankenstein sounds like a country.

I was aiming for the "mad monetary scientist" connotation. "With a sufficiently powerful jolt of electricity money-printing, we *will* bring this moribund economy and these lifeless capital markets back to life! We must do so at any cost!! Igor, fetch me the lab smock I always wear when working the Ctrl+P button on this electronic fiat emitter here..."

-------------------------------

My (very easy) prediction regarding the German high court's ruling on the ESM was spot on. Now we just need to wait 'til tomorrow to see how much Ctrl+P'ing the above esteemed Herr Doktor announces, intimates, or broadly but noncommittally hints at. With US elections less that 2 months away, Bernanke is surely aware of the political overtones, so I'm predicting the announcement will consist mostly of market-bolstering hints rather than a formal announcement of a fresh round of large-scale "asset" (= toxic bank debt) purchases.

[garo]

Originally Posted by ewmayer

blah blah blah
.... Herr Doktor ....
blah blah blah

Tsk tsk Ernst. I think you have enough Teutonic blood in you to know that it is not Herr Doktor but Herr Professor Doktor Doktor!! Bücken sie sich bitte am schnellsten (if my Deutsch is not too rusty).

[ewmayer]

So Herr Direktor Hofrat Univ. Prof. Dr. Dr. Mag. Dipl-Ing. Arch. OMedR BergR h.c. Baron von Bernankenstein did not disappoint the financial markets today - intraday DJIA chart appended to this message, see if you can guess what time today Bennie von B. started talking. (Tough one, I know.)

Between that and the ECB committing to unlimited distressed-member-states-bond-buying (yeah, I know, the German High Court made some noises about capping the amount, but if you believe that is in the remotest degree enforceable, I got a bridge in Brooklyn I want to sell you to you, even if your name is Ambrose Evans-Pritchard), it would not surprise me to see the markets challenge their late-2007 bubble-highs by year's end.

Mish describes Bernanke's latest bout of massive monetary incontinence (in the sense that it goes beyond Ctrl-P'ing into the realm of "uncontrolled P'ing") as an act of desperation, but I wonder if such language is even applicable to a leverage-addicted central-banker, accountable to no one but his fellow bankers, whose power and influence are tied directly to his ability and willingness to money-print on a massive scale, and who has made clear that he views the economy entirely through the lens of the financial markets. "Desperation" connotes last-gasp efforts to avoid a very unpleasant outcome, but for folks like BB who are almost entirely insulated from the real-economic consequences of their actions and who may even be benefiting from them, any attendant "unpleasantness" is sufficiently remote as to not signify.

[ewmayer]

DW-TV (English edition) last night had an in-depth piece on one face of the debt crisis in Spain - here is a Spiegel piece on the story:

Desperation in Spain: One Mayor's Hunger Strike against Austerity: Austerity measures have dealt a tough blow to Spain's economy. But one mayor of a small Spanish community has decided to fight back. For two months he has been on a hunger strike in front of the Ministry of Industry in Madrid. His protest is the product of desperation.


Friday Funnies:

This is "funny" only in the Kafka-esque sense - the last paragraph is the real kicker:

House Approves Sweeping, Warrantless Electronic Spy Powers: The House on Wednesday reauthorized for five years broad electronic eavesdropping powers that legalized and expanded the George W. Bush administration’s warrantless wiretapping program.

The FISA Amendments Act, which is expiring at year’s end, allows the government to electronically eavesdrop on Americans’ phone calls and e-mails without a probable-cause warrant so long as one of the parties to the communication is believed outside the United States. The communications may be intercepted “to acquire foreign intelligence information.”

The government has also interpreted the law to mean that as long as the real target is al-Qaida, the government can wiretap purely domestic e-mails and phone calls without getting a warrant from a judge. That’s according to David Kris, a former top anti-terrorism attorney at the Justice Department.

The government does not have to identify the target or facility to be monitored. It can begin surveillance a week before making the request, and the surveillance can continue during the appeals process if, in a rare case, the secret FISA court rejects the surveillance application. The court’s rulings are not public.

The vote was 301-118 in favor of passage, with 111 Democrats and seven Republicans voting no.

According to one former Justice Department official, the FISA Amendments Act gives the government nearly carte blanche spying powers.

The National Security Agency told lawmakers that it would be a violation of Americans’ privacy to disclose how the measure is being used in practice. The NSA said the “NSA leadership agreed that an IG (Inspector General) review of the sort suggested would further violate the privacy of U.S. persons.”

In the pantheon of Orwellian doublespeak, that's right up there with the Vietnam-era "We had to destroy the village in order to save it".

[cheesehead]

Originally Posted by ewmayer

Friday Funnies:

This is "funny" only in the Kafka-esque sense - the last paragraph is the real kicker:

House Approves Sweeping, Warrantless Electronic Spy Powers: The House on Wednesday reauthorized for five years broad electronic eavesdropping powers that legalized and expanded the George W. Bush administration’s warrantless wiretapping program.

In the pantheon of Orwellian doublespeak, that's right up there with the Vietnam-era "We had to destroy the village in order to save it".

My nephew and the rest of his generation is growing up in a different climate than I did.

[ewmayer]

Rescued banks engaged in riskier lending - BIS paper

Banks that received public funds during the 2008 financial crises were involved in riskier lending than banks that did not need a government bailout, according to a working paper published by the Bank for International Settlements (BIS).
The paper, by economists Michael Brei and Blaise Gadanecz, examined the loan risk of 87 banks - 40 of which received public funds – and found that before the crisis, the rescued institutions had a significantly higher share of leveraged, and thus riskier, loans in their portfolios of syndicated loan signings than their non-rescued peers.
While the finding is hardly surprising, the authors found evidence that those banks that were rescued took on the risk mainly in their home markets, “possibly reflecting their expectation that rescues are more likely to occur at home, where they may count as more systemic or wield more market power than abroad,” the paper said.

The authors also tried to ascertain whether the public rescue operations, such as the 2008 Troubled Asset Relief Program (TARP) in the US, made the rescued banks shy away from risky lending toward safer loans.
“Although risk started diminishing across the board in 2009, we fail to find significant consistent evidence that with the onset of the crisis in 2008, rescued banks have reduced their risk relatively more than non rescued banks,” the paper said.
The authors said their findings were consistent with current literature that says rescued banks take on higher risks because they expect to be rescued, a concept often referred to as moral hazard.

[ewmayer]

A commentator from Down Under makes a bullish "climbing a wall of worry" case for equities:

Sydney Morning Herald | Business Day | Don't look a gift rally in the mouth

Where have I heard that line about "when the music is playing, you've got to dance" before? Oh yeah - from this fellow, about 3 months before markets hit their housing-bubble highs and a year before his company's leveraged loan portfolio blew sky-high, necessitating several hundred billion dollars of government bailout money to stave off bankruptcy. (Amusing to think that back in those days of yore that actually seemed like a lot of cash).