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Wednesday 03.28.2012

BRICS blazes a new trail
Global rebalancing requires greater role for Brazil, Russia, India, China and South Africa in international governance
By He Wenping (China Daily)
Amid the ongoing global economic and financial uncertainties, BRICS members will be discussing closer cooperation and coordination at their fourth summit, which opens in NewDelhi, India, on Wednesday.
President Hu Jintao is meeting with the leaders of Brazil, Russia, India and South Africa toexchange views on the global economy and other major international issues of commonconcern. The establishing of a joint development bank, which was raised by their finance ministers on the sidelines of the February G20 summit, is also likely to be discussed.

Russia and Iran to punish the West with rubles and rials
Pravda.ru
Against the background of frightening statements that sound from the Western and Israeli politicians about the imminent attack on Iran, an active war in the economic area has been ongoing. In early January of 2012 news agencies spread the message that Tehran and Moscow abandoned transactions in dollars and euros in favor of rubles and Rials.
Note that this decision was made after the sudden drop of the Iranian Rial value in January (by more than one-third) in relation to the US dollar. According to Tehran officials, this was due to the machinations of the West and anti-Iranian hysteria.

Ben-Flation Caused By Fed's Failed Policy
By John Crudele, New York Post
The economy is broken.
Who says? Ben Bernanke does.
You don't have to do much interpreting of the Federal Reserve chairman's speech yesterday to draw that conclusion. The guy, to his credit, was mostly honest (and probably more than a little bit frustrated) when he spoke before the National Association for Business Economics Annual Conference.
Wall Street, of course, hears what it wants to hear.
Until Bernanke comes right out and screams "everything is all better" the financial community will interpret every one of his messages the same way: business conditions aren't very good yet so the Federal Reserve will have to print more money.

Critical Mass: The Mispricing of Derivatives Risk
And How the Financial World Ends
JESSE'S CAFÉ AMÉRICAIN
Jim Sinclair does a good job of explaining the difference between the notional and real value of derivatives, and how that real value comes to bear on the financial system in the event of a default. You can read this here for a review of the basic concept if you do not understand it.
Within my own view of money, uncollateralized financial instruments like derivatives are credits, or potential money. When an event triggers them so that they become real, with a significant presence on the balance sheet and the income statement, then they become money.

Are We Headed for Another Great Depression?

The Great Escape: Delivering In a Delevering World
By Bill Gross, PIMCO
About six months ago, I only half in jest told Mohamed that my tombstone would read, "Bill Gross, RIP, He didn't own 'Treasuries'." Now, of course, the days are getting longer and as they say in golf, it is better to be above – as opposed to below – the grass. And it is better as well, to be delivering alpha as opposed to delevering in the bond market or global economy. The best way to visualize successful delivering is to recognize that investors are locked up in a financially repressive environment that reduces future returns for all financial assets. Breaking out of that "jail" is what I call the Great Escape, and what I hope to explain in the next few pages.

It's Official - The Fed Is Now Buying
European Government Bonds
Submitted by Tyler Durden - ZeroHedge.com
As if the 'risk-less' dollar-swaps the Fed has extended to any and every major central bank were not enough, William Dudley just unashamedly admitted that the Fed now holds 'a very small amount of European Sovereign Debt'. Explaining this position, as Bloomberg notes:
• *DUDLEY: FED HOLDS OVERSEAS SOVEREIGN DEBT TO MANAGE RESERVES
• *DUDLEY: HIGH BAR FOR ADDITIONAL PURCHASES OF EUROPE DEBT
Dudley, testifying to a House panel, noted that he doesn't see more efforts by the Fed to buffer the US from Europe's tempests and believes European banks are deleveraging in an orderly manner. So not only is the US taxpayer bailing out Europe via the IMF (as we noted here a week ago using Greece as an intermediary) and the Fed is providing limitless USD swap lines but now we join the ECB in monetizing European government bonds - something we warned might happen back in December 2010. As for being a small amount - wasn't MF Global's holding relatively small too? And aren't we getting a little full from all this buying?

Prelude to a Credit, Market & Economic Crisis?
Interesting juncture
by Doug Noland - ATimes.com
Macro credit, bubble and speculative market dynamics analysis has reached another "interesting juncture". There are a few premises that will be tested over the coming weeks and months - and quite contrasting possible scenarios to contemplate.
Let's begin with the premise that global central bank market interventions are in the end destabilizing. The European Central Bank's (ECB) $1.3 trillion three-year Long-Term Refinancing Operation (LTRO) liquidity facility was a game changer.

Not Worried About Debt? Really?
By: Allen Wastler, Managing Editor - CNBC.com
Did you check out our Investor Spring Cleaning special report? The one focusing on debt? There's an amazing development in there.
It's our poll asking people about their biggest debt worry. Is it the mortgage? Credit cards? Student loans? You know what got the biggest answer?
"Not worried"...by roughly 40 percent. And we're not talking a small sample here. Over 12,000 people took the poll.

Perception of US monetary policy key to gold rally: HSBC
NEW YORK (Commodity Online): Gold and other markets rallied on Monday following Federal Reserve Chairman Ben Bernanke's comments regarding the U.S. labor market. The length and strength of the gold rally could be subject to investor's view of monetary policy, said HSBC in a research note.
While Bernanke gave no indication of further monetary easing or another round of quantitative easing, monetary stimulus would continue, but not necessarily enhanced, HSBC added.

Stop Blaming the Gold Standard
The real problems behind financial crises and depressions have nothing to do with the gold standard, but rather from mismanagement of spending and debt, and governments that are too big.
By Paul Mladjenovic, Minyanville.com
It drives me crazy when I read stuff by "economists" that is just plain wrong. Some of them are allegedly "MBAs" and "PhDs" but I think that their common sense is actually "DOA." Unfortunately, millions in the public arena see their interviews and blogs and they seem to automatically swallow their commentaries… hook, line, and sinker. Let's address some of the nonsense that these pundits are expressing.
Some conventional and well-known economists have expressed the idea that a gold standard is a bad idea and that the gold standard was a major (and possibly the major) catalyst for the Great Depression. One well-known fellow surmises that an equivalent of the gold standard is the reason why today's European financial crisis is going on. In due course, I am sure that they will blame the gold standard for global warming and probably the heartbreak of psoriasis.

Ben Bernanke's Shocking Gold Standard Ignorance
By Louis Woodhill, RealClearMarkets.com
....America's monetary problems could be solved by implementing the right kind of gold standard. However, doing this would render the Fed Chairman no more important than the head of The National Institute of Standards and Technology. No one would know his name, and the world financial markets would not hang on his every word. This fact is the wellspring of the statements made by Bernanke about "the gold standard" during his lecture at George Washington University on March 20.

Abandoning Gold Helped Dollar Gain Preeminence (Part 2)
By Johnson & Kwak, Bloomberg.com
The birth of the U.S. was paid for by both a debauched paper currency and large debts that it soon defaulted on. When Alexander Hamilton became Treasury secretary in 1789, his job was not just restoring the country's credit by restructuring the debt and imposing new taxes; he also had to clean up the mess that was money in the early U.S.
Hamilton proposed to base the monetary system on both gold and silver. Gold had advantages, including greater stability, he argued, but it would be disruptive to withdraw the large amounts of silver that were already in use. He proposed "ten dollar and one dollar gold pieces, one dollar and ten cent silver pieces, and one cent and one-half cent copper pieces," and the Mint Act of 1792 largely followed his recommendations. As gold and silver were both widely recognized bases for money at the time, this was relatively uncontroversial.

Spain to slash spending
as economy slumps back into recession
Spain's fragile economy has fallen back into recession and the country faces a year of grinding economic decline as premier Mariano Rajoy slashes spending yet further to meet EU demands.
By Ambrose Evans-Pritchard - Telegraph.co.uk
The Bank of Spain said the "contractionary dynamic" in the economy continued into early 2012 for the second quarter in a row, with an "intensifying" pace of job losses. It expects GDP to fall by 1.5pc this year.
Mr Rajoy said at a meeting in Seoul that he would press ahead later this week with a "very austere budget", ordering 15pc cuts in spending across the ministries.
The conservative leader promised a "fair and just" distribution of pain. Public sector salaries will be frozen rather than cut and there will be no rise in VAT.

Lindsey Williams & Radio Liberty - March. 22, 2012

Bernanke Claims That The Fed Has Averted
A Second Great Depression
By Bailing Out The Too Big To Fail Banks
By Michael Snyder - TheEconomicCollapseBlog.com
Federal Reserve Chairman Ben Bernanke claims that the Federal Reserve averted a second Great Depression by bailing out the big Wall Street banks during the last financial crisis, and he says that if a similar financial crisis comes along that the correct "policy response" will be to do the exact same thing again. This was the theme of the lecture that Bernanke delivered to students at George Washington University on Tuesday. In previous lectures Bernanke has defended the existence of the Fed and detailed the history of Fed activities, but on Tuesday he addressed things that have happened since he has been at the helm of the Fed. And according to Bernanke, he has been doing a great job. Bernanke told the students that the "threat of a second Great Depression was very real" and that the Federal Reserve did exactly what needed to be done to fix the financial system. Unfortunately, the truth is that all Bernanke did was kick the can a bit farther down the road. You can't fix a debt problem with more debt, and the debt bubble we are living in today is far larger than it was in 2008. Will Bernanke still be trying to portray himself as a hero when this house of cards finally falls apart?

Bernanke Interview on ABC at 6:30 PM
by CalculatedRisk - from Transcript
CHAIRMAN BERNANKE: Well, we are in a recovery. The economy's been growing-- for almost three years. And we've had some good news lately. We've-- seen the unemployment rate come down. We've seen more jobs be created. And-- consumer and household-- and business sentiment have all improved, so that's all positive, but--
DIANE SAWYER: Strong?
CHAIRMAN BERNANKE: --we do have a long way to go. I-- I would say that we-- you know, it's-- it's far too early to declare victory. We have-- still 8.3% unemployment, that's-- that's too high. We've got a lot of people been un-- out of work for more than six months.
...
DIANE SAWYER: Another quantitative easing on the table, always possible?
CHAIRMAN BERNANKE: Well, we don't take any options off the table. We don't know what's gonna happen in the future and we have to be prepared to respond to however the economy evolves. But again we have 17 people around the table. We look at the economy-- comprehensively and-- and review it-- at every meeting and we try to assess, you know, how much progress we're making and what else we can do that will help us achieve both the growth we want, the reduction in unemployment we want, but also maintain the price stability, the low inflation which is the other part of our mandate.

2012 Home Prices Off to a Rocky Start
According to the S&P/Case-Shiller Home Price Indices
By S&P Indices - sacbee.com
NEW YORK, March 27, 2012 -- /PRNewswire/ -- Data through January 2012, released today by S&P Indices for its S&P/Case-Shiller[1] Home Price Indices, the leading measure of U.S. home prices, showed annual declines of 3.9% and 3.8% for the 10- and 20-City Composites, respectively. Both composites saw price declines of 0.8% in the month of January. Sixteen of 19 MSAs also sawhome prices decrease over the month; only Miami, Phoenix and Washington DC home prices went up versus December 2011. (Due to delays in data reporting, the January 2012 index values for Charlotte are not included in this month's release). Eight MSAs and both Composites posted new index lows in January. The 10- and 20-City Composites recorded marginal improvements in annual returns over December 2011 when they each posted -4.1%. In addition to the Composites, Dallas, Denver, Miami, Minneapolis, New York, Phoenix, San Diego, Seattle, Tampa andWashington DC saw their annual rates improve compared to December; while nine of the MSAs saw their annual returns worsen compared to what was reported for December 2011. Denver, Detroit and Phoenix were the only cities to post positive annual growth rates of +0.2%, +1.7% and +1.3%, respectively. Atlanta again posted the lowest annual (and only double-digit negative) return at -14.8%.

Home Prices Stay Flat as Housing Market Still Struggling
By: Reuters - CNBC.com
U.S. single-family home prices were unchanged in January, suggesting the battered housing market continues to crawl along the bottom, a closely watched survey said on Tuesday.
The S&P/Case Shiller composite index of 20 metropolitan areas was flat in January on a seasonally adjusted basis. A Reuters poll of economists forecast a decline of 0.2 percent after December's 0.5 percent drop.

Housing Data Show an Uncertain Recovery Here in the US
By Chris Gaffney - DailyReckoning.com
03/26/12 St. Louis, Missouri – Good day. What a weekend here in St. Louis. I spent a majority of it outside, and we even ate dinner last night out on our deck, something that is not normal during the month of March. I enjoyed the scent of my wife's lilac bushes as I was sitting outside last night, reading up on the currency markets. The research pointed to poor housing data Friday morning as the reason for the drop in the US dollar on Friday.
Purchases of new homes in the US fell unexpectedly in February, dropping 1.6% after a revised 5.4% drop in January. This data confirmed the housing recovery in the US is not as solid as some had thought. Friday's numbers ended a week in which we saw drops in housing starts, existing home sales and new-home sales for the month of February.

Real House Prices and Price-to-Rent Ratio
decline to late '90s Levels
by CalculatedRisk
Another Update: Case-Shiller, CoreLogic and others report nominal house prices. It is also useful to look at house prices in real terms (adjusted for inflation) and as a price-to-rent ratio.
Below are three graphs showing nominal prices (as reported), real prices and a price-to-rent ratio. Real prices, and the price-to-rent ratio, are back to late 1998 and early 2000 levels depending on the index.

Almost 2 out of 10 men in their prime are not working
By Allison Linn - MSNBC.MSN.com
The recent improvements in the job market have given us reason to hope the economy is finally on the mend.
But after five years of struggles, here's a sobering reminder of how far we still have to go: Nearly two in 10 American men in the prime of their life still are not working.
Nearly 83 percent of men ages 25 to 54 – traditionally the core of the nation's workforce – were working in February, according to the most recent data from the Bureau of Labor Statistics.
That sounds like a lot, and the employment to population ratio for prime-age men has been improving steadily in recent months. But it's still significantly lower than five years ago, when about 88 percent of prime-age men were working.

Did the EPA Just Kill Big Coal?
The Environmental Protection Agency's new greenhouse gas rules could hasten the decline of America's top source of electricity.
By Jordan Weissmann - TheAtlantic.com
Today, the Environmental Protection Agency proposed a set of landmark greenhouse gas regulations that will surely have every coal country politician, from the hills to Appalachia to the Powder River Basin of Wyoming, sputtering mad. The rule will require new power plants to emit about 43 percent less carbon dioxide than today's coal-fired generators. Natural gas plants already meet this requirement. But if a utility wants to burn coal for electricity, it will need to install carbon capture technology -- and that's really expensive.
"This standard effectively bans new coal plants," one petulant lobbyist told The Washington Post.
And indeed, it could. But while that might be devastating for mining companies, it won't mean a whole lot to consumers. Coal use, you see, is already in decline. Blame America's natural gas boom.

Welcome to the United States of Orwell, Part 2:
Law-Abiding Taxpayers Are Treated as Criminals
While the Real Criminals Go Free
By Charles Hugh Smith - OfTwoMinds.com
Law-abiding taxpayers are treated like criminals while the criminal class of financiers and State apparatchiks are free to loot and pillage muppets and taxpayers alike.
I recently received quite an education about how law-abiding taxpayers are treated by the state of California via dozens upon dozens of emails detailing how the Golden State ransacked the bank accounts of law-abiding taxpayers in other stateswithout notification or due process, as if the citizens being looted were crafty bankers who'd stolen church funds to live tax-free in an offshore tax haven.

Secrets of The Hunger Games Revealed: Agenda 21

The 12 Questions That Could Kill the Individual Mandate
A review of the justices' creative, and potentially crucial, questions from today's hearing
By Derek Thompson - TheAtlantic.com
Today was the most important day in the history of the individual mandate. And it might be the day the individual mandate died, based on the conservative justices' creative and painstaking assault on the law. "This was a train wreck for the Obama administration," Jeffrey Toobin told CNN. "This law looks like it's going to be struck down."

Koch Brothers, Worth $50 Billion,
Sue Widow Over $16.00 of Nonprofit's Stock
by PAM MARTENS AND RUSS MARTENS
With the Koch brothers, it's all about control. They reign over the largest private oil company in the U.S. with estimated revenues of $100 billion. They wield power over a sprawling network of nonprofit front groups with unbridled influence over everything from the Tea Party to economics professors at publicly funded universities. Forbes lists their personal wealth as $25 billion each. They own mansions in the toniest towns in America. And last week, in a decidedly Scrooge-esque maneuver, they filed a lawsuit against a widow who lost her husband to a stroke a mere four months ago over stock she inherited in the Cato Institute worth a measly $16.00.

Supreme Court Could Be Lining Up Against Obamacare
247wallst.com
In a second day of argument, the US Supreme Court today seemed to indicate that the majority of justices are coming down against the individual mandate in the health care reform act known as Obamacare. Particular attention was being paid to Justice Anthony Kennedy, long considered to be the swing vote between the four conservative and four liberal justices.
Kennedy's noted at one point that the individual mandate, which requires Americans to purchase health insurance, "changes the relationship of the government to the individual in the very fundamental way."

Obamacare Will Bankrupt US: Rep. Paul Ryan
By: Michelle Fox - CNBC.com
Obama's federal health care law, which is now front of the U.S. Supreme Court, will bankrupt the U.S. and destroy the country's health care system,Rep. Paul Ryan, (R) Wis., told CNBC Tuesday.
"It vastly underestimates how many employers will actually drop their employer health insurance and dump people into the government exchange," Ryan said.
In fact, he said private sector actuaries have told him that within a couple of years, about two-thirds of employers will "wash their hands" of offering health insurance to employees.

Supreme Court turns to key constitutional issue
in health-care law
By Robert Barnes and N.C. Aizenman - WashingtonPost.com
The Supreme Court's conservative justices appeared deeply skeptical that the Constitution gives Congress the power to compel Americans to either purchase health insurance or pay a penalty, as the court completed two hours of debate Tuesday on the key component of the nation's health-care overhaul law.
Justice Anthony M. Kennedy, traditionally the justice most likely to side with the court's liberals, suggested that the 2010 Patient Protection and Affordable Care Act invoked a power "beyond what our cases allow" the Congress to wield in regulating interstate commerce.

Toobin:
Obama healthcare reform law 'in grave, grave trouble'
By Daniel Strauss - TheHill.com
A top legal analyst predicted Tuesday that the Obama administration's healthcare reform legislation seemed likely to be struck down by the Supreme Court.
Jeffrey Toobin, a lawyer and legal analyst, who writes about legal topics for The New Yorker said the law looked to be in "trouble." He called it a "trainwreck for the Obama administration."
"This law looks like it's going to be struck down. I'm telling you, all of the predictions, including mine, that the justices would not have a problem with this law were wrong," Toobin said Tuesday on CNN. "I think this law is in grave, grave trouble."

How Will the Court Decide? Arguments on Obamacare
By Chuck Colson - PatriotPost.us
How will the Supreme Court decide the Obamacare case? And what will factor into their decision?
It has been a long time since I've seen crowds this big protesting outside the Supreme Court. They're all there: Tea Partiers and Obamacare supporters marching, praying, chanting, carrying signs. The marching band was an interesting touch!
The occasion of course is the three days of oral arguments in the case that may decide the fate of the Patient Protection and Affordable Care Act -- or at least critical pieces of it.

Obamacare: Will the Court Vindicate Itself?
By David Limbaugh - PatriotPost.us
If there has ever been a case that could vindicate the Supreme Court as a guardian of liberty or incriminate it as freedom's thief, it is the court's present consideration of the Affordable Care Act.
At the founding of the republic, the Anti-Federalist opponents of the Constitution warned that to grant the power to declare laws unconstitutional to an unelected and life-tenured Supreme Court could subvert the democratic republic and threaten our liberties.

Richard Clarke: China has hacked every major US company
Cybersecurity advisor Richard Clarke is warning the U.S. that its major companies are being regularly infiltrated by Chinese hackers employed by the Chinese government to steal R&D.
By Emil Protalinski - ZDNet.com
Richard Clarke, a former cybersecurity and cyberterrorism advisor for the White House, was a U.S. government employee for 30 years: between 1973 and 2003. He worked during the times of Ronald Reagan, George H.W. Bush, Bill Clinton, and even George W. Bush. He may not be working under current U.S. president Barack Obama, but that doesn't mean he doesn't have something to warning about. He says state-sanctioned Chinese hackers are stealing R&D from U.S. companies, threatening the long-term competitiveness of America. We've heard this before, but the way Clarke puts it makes the situation look even more dire.

Why the Wars Will Not End
How the New American Empire Really Works
by PAUL CRAIG ROBERTS - CounterPunch.org
Great empires, such as the Roman and British, were extractive. The empires succeeded, because the value of the resources and wealth extracted from conquered lands exceeded the value of conquest and governance. The reason Rome did not extend its empire east into Germany was not the military prowess of Germanic tribes but Rome's calculation that the cost of conquest exceeded the value of extractable resources.
The Roman empire failed, because Romans exhausted manpower and resources in civil wars fighting amongst themselves for power. The British empire failed, because the British exhausted themselves fighting Germany in two world wars.

Morocco: Anti-Israel Rally Kicks Off 'Global March to Jerusalem'
BY JEREMIAH JACQUES - TheTrumpet.com
Tens of thousands of Muslims held a massive anti-Israel protest in Rabat, Morocco, on Sunday, burning Israeli flags and demanding the "liberation" of Jerusalem's al-Aqsa Mosque. The rally forced an Israeli diplomat to flee the city, and kicked off the "Global March to Jerusalem," which is scheduled to culminate this Friday.
The Islamic group organizing the event reported that 100,000 Muslims participated in the rally. Arab media said the protest was spawned by anger at the participation of Israeli diplomat David Saranga in a Euro-Mediterranean Partnership (euromed) meeting at Morocco's parliament. Morocco's ruling party boycotted the meeting because of Saranga's involvement, and many legislators and citizens voiced disapproval of his participation. At the rally, activists waved Palestinian flags, set Israeli flags on fire, and chanted for the freedom of the al-Aqsa Mosque from Israeli occupation.

Pentagon backs expanding Israel's Iron Dome
(Xinhua) ChinaDaily.com
WASHINGTON - US Defense Department on Tuesday said it supports expanding Israel's anti-rocket defense system Iron Dome, and is to ask Congress for money to install more suchsystems.
In a statement, Pentagon Press Secretary George Little said supporting the security of Israel isa "top priority" of President Barack Obama and Defense Secretary Leon Panetta, and thePentagon intends to "request an appropriate level of funding from Congress" to supportacquisition of additional Iron Dome systems "based on Israeli requirements and productioncapacity".

Syria accepts Annan peace plan, but clashes continue
By msnbc.com staff and news services
Syria accepted a cease-fire drawn up by U.N. envoy Kofi Annan on Tuesday, but the diplomatic breakthrough was swiftly overshadowed by intense clashes between government soldiers and rebels that sent bullets flying into Lebanon.
Opposition members accuse President Bashar Assad of agreeing to the plan to stall for time as his troops make a renewed push to kill off bastions of dissent. And the conflict just keeps getting deadlier: The U.N. said the death toll has grown to more than 9,000, a sobering assessment of a devastating year-old crackdown on the uprising that shows no sign of ending.

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