domenica 23 ottobre 2011

The Seigniorage Of Credit And Currencies Is Failing …


The Seigniorage Of Credit And Currencies Is Failing … The Seigniorage Of Diktat Will Emerge Very Soon As Regional Economic Government Arises To Replace Sovereign Nation States  0 comments
Oct 20, 2011 10:03 PM | about stocks: URTYEETUYMXPPTNAMATLEDC,YINNXLBEMMTEMFNXLFCEWICITHDIDXEPISCININDYFXERZV,ACWIVSSEEMCCXDBCUSCISLVUSOJJAUGAMXICRBIYAO,CHIMCHIICHIXCAFEUFNXLUDTEDABCSREMFNIORWWGLD
Financial market report for October 20, 2011
1) … Seigniorage, that is moneyness, began to fail in July 2011, as the financial sector and the emerging market currencies turned lower, as is seen in the ongoing Yahoo Finance Chart of XLB, EMMT, EMFN, XLF, CEW.
The seigniorage of Neoliberalism, that is the moneyness, of the Milton Friedman Free To Choose floating currency regime, has been based upon credit, that is a lending, securitization of stocks, US Federal Reserve quantitative easing, and ZIRP, rising world currencies, DBV, and rising emerging market currencies, CEW, the latter fell strongly lower today. 


Two other words for credit are trust and faith. All of these have been evaporating with the exhaustion of Quantitative Easing, the worsening of the European Sovereign Debt Crisis, and unwinding carry trade investing, as seen in the Optimized Carry ETN, ICI, falling lower. The triune bedrock Neoliberalism, consisting of US Federal Reserve Policy, European Socialism, and carry trade lending from the Bank of Japan, has given way. Thailand, THD, and Indonesia, IDX, fell lower on carry trade disinvestment. A fall in India Earnings, EPI, caused disinvestment out of India Small Caps, SCIN, and India, INDY. Credit carry trade country, ARGT, fell lower today.


William L. Watts and Deborah Levine of MarketWatch report Boris Schlossberg, director of currency research at GFT, as saying The risk rally is definitely running out of steam as high-beta currencies ran into their second straight day of liquidation sparked by weaker-than-expected GDP readings from China and continuing uncertainty over the efficacy of policy solutions that will be presented at an upcoming EU summit on the sovereign debt crisis.


Systemic risk is now apparent in as much as leadership gridlock has developed over resolution over the European Sovereign Debt Crisis and fears of debt monetization arisen. Currency traders are derisking once again out of the Eurozone currency, the Euro, FXE, and its popular carry trade pair, the EUR/JPY, seen in the chart of FXE:FXY, in response to fear over the European banking and sovereign debt crisis.


Currency traders are also derisking once again out of the emerging market currencies, CEW, and their carry trade investments, as is seen in the chart of CEW:FXY: Emerging Markets, EEM fell 2% today


The currency demand curve, that is the ratio of the small cap pure value shares to the small cap pure growth shares, RZV:RZG, has manifested bearish engulfing and is turning lower, suggesting that competitive currency devaluation, that is competitive currency deflation, is once again to commence. 


World stocks, ACWI, and World Small Cap Stocks, VSS, traded lower today. Falling commodity currencies, CCX, will mean falling commodity prices. Silver, Oil, Base Metals, Gasoline, UGA, and Agricultural Products, will all be going lower as seen in the chart of DBC, SLV, USO, DBB, JJA, UGA Base Metals, DBB, fell 3.6%, on this weeks’ strong fall in, EMMT, MXI, and CRBI. 


News reports relate the heightened concern of the soveign crisis. Ambrose Evans Pritchard reports Franco-German deadlock over ECB’s role in rescue fund and David Gow of The Telegraph reports Sarkozy flies in for emergency euro talks to cement rescue deal


Major issues abound for the EFSF monetary authority. I believe that the rating agencies know full well that the EFSF is not a sovereign authority, and its bonds are a CDO, that monetizes sovereign debt; and I fully expect that the rating agencies to come out with a downgrade of France. Ambrose Evans Pritchard reports Standard & Poor's is to warn that a double-dip recession in Europe would imperil France's AAA rating and set off a string of downgrades across Southern Europe, undermining the EU's debt crisis strategy


2) … Out of Gotterdammerung, a clash of the Gods, that is the European Leaders and the rating agencies, Sovereign Armageddon will occur.Sovereign Armageddon, is a credit bust and global financial breakdown, is coming. It will be accompanied with a contraction of credit in China, YAO, as reflected in the fall of the commodity copper,JJC, China Materials, CHIM, China Financials, CHIX, and China Infrasturcture, CHII, as well as the Shanghai Shares, CAF. These all turned strongly lower today, as is seen in this ongoing Yahoo chart ofCHIM, CHXX, CHIX, CAF as Bloomberg reports China's Stocks Fall to 31-Month Low on Economic Slowdown, Europe


The mining kings of the Age of Leverage have fallen. The king of copper and gold mining Freeport McMoran Copper and Gold, FCX, has fallen. The king of copper Southern Peru Copper, SCCO, has fallen. The kings of iron ore Rio Tinto, RIO, Vale, VALE, BHP Billiton, BHP, and Cliff Natural Resources, CLF, have fallen. Bloomberg reports Iron Ore's Worst Rout in 15 Months Seen Deepening as China's Growth Slows. Iron ore’s biggest decline in 15 months may worsen as the economy slows in China, the largest importer, the European debt crisis persists and BHP Billiton Ltd and Rio Tinto Group increase production, analysts said.An inquiring mind asks, which kings of the Age of Deleveraging will rise to replace them? 


The socialist kings of the Age of Leverage are about to fall from their prosperity, as Greek sovereign authority and sovereign power are going to fall to a greater European Superstate, a One Euro Government. Ekathimerini reported on Wednesday Brussels at odds with IMF about sustainability of Greek public debt. The differing views between the European Commission and the International Monetary Fund on the sustainability of Greece’s debt have led to a delay in the issuing of a report by Brussels on the country. The IMF is maintaining a tougher stance vis-a-vis the Greek debt and how viable it could be and is seeking the drafting of a new streamlining program, as it considers the Commission’s estimates too optimistic. Austrian Finance Minister Maria Fekter said that “Austria’s position is that the new package requires a somewhat greater participation of the private sector,” but always on a voluntary basis. However, the time frame is particularly tight for an agreement as the eurozone summit of this Sunday is fast approaching and the aim of bring Greek debt below 100 percent of GDP by 2020 seems difficult. But in juxtaposition, Reuters provides a more current report today The European Union and IMF's "troika" mission to Greece recommends paying out a sixth aid tranche as soon as possible despite finding "extremely worrying" government debt dynamics, according to a draft of its long-awaited report obtained by Reuters on Thursday. Truth be told: Greece has lost is debt sovereignty, and is now the Troika’s welfare state. The Troika acts as seignior, that is money lord, for Greece’s fiscal spending. 


Greek socialism is the most extreme form of European socialism While the latter socialism provided for national wage contracts, the Greek Constitution forbids that state workers be dismissed. Bloomberg reports Papandreou Vows Further Austerity as Strikes Shut Greek Schools, Hospitals. Greek protesters clashed with police in central Athens after Prime Minister George Papandreou vowed to push through a further round of austerity and appealed to Europe to cut Greece’s debt load at an Oct. 23 summit. Riot police in white helmets used tear gas to hold back demonstrators from the parliament building in the Greek capital today as lawmakers debated the extra austerity measures demanded by Greece’s international creditors to keep aid flowing. Police said about 70,000 people gathered in Athens at the start of a 48-hour strike in one of the biggest protests yet against Papandreou’s latest program of cost-cutting and tax rises. “Without the measures, the 2011 budget won’t be met, neither will the budget in 2012,” 


Finance Minister Evangelos Venizelos told lawmakers in comments broadcast live, as groups of hooded protesters in gas masks lobbed Molotov cocktails at the riot police outside. “We are giving the battle of battles up to Sunday evening.” With a four-seat parliament majority, Papandreou is banking on his Pasok party lawmakers to face down public anger and pass the bill in a vote due tomorrow, when the unions have called more protests. A test of support for the bill will be held in parliament later today. The package, which follows a round of austerity measures passed in June, includes new taxes, more cuts to pensions and wages and plans to dismiss 30,000 state workers.


The structural reform to dismiss 30,000 state workers, that G-Pap will have do are in violation of the Greek Constitution. The abrogation of the Greek constitution will in effect be a coup d etat not only in Greece, but in the Eurozone as well as it will officially create a debt union, and establish the Troika as sovereign authority over the Greek people. By submitting to the Troika’s demands for dismissal of state employees he will be waiving national sovereignty, and be taking additional steps forward in a super European Government. And it will mandate dismissal of many, many more Greek state workers.


Suzanne Daley in NYT article Greece’s Bloated Bureaucracy Defies Efforts to Cut It, describes the patronage and pork of Greek Socialism, where there is little meritocracy, and where there are only socialist and communist political parties. 


The Euro is a Ponzi Currency where sovereign debt authority is separated from the currency, and moral hazard is shifted to all its users. In July, 2011 investors sold out of stocks when they became aware that a Debt Union had formed in the EU. The loss of debt sovereignty by one means loss of sovereign authority for all. Ryan of Swift Economics writes Fiat Money is a Ponzi Scheme, No Better Illustrated Than in Europe The euro was established in 1992 to create a collection of countries that would rival the economic power of the US, all united under a common currency that would allow for seamless trade. The collaboration was all under the guiding principle of no bailouts to avoid any moral hazard problems. The idea is to incentivize countries to make sound fiscal decisions, and force those that over-leverage themselves to bear the costs of their poor decisions. This principle was abandoned when the Eurozone debt crisis hit with a full head of steam. First Greece, then Ireland and Portugal, spiraled toward insolvency. The other countries stepped in to supply them with the liquidity necessary to service their unsustainable levels of debt. As in a pyramid scheme, it will be the last holder of the “asset” that takes the full loss. In the case of Europe’s fiat money, it will be the taxpayer that foots the bill, rather than the original bondholders that made ill-advised investment decisions. 


The seigniorage of fiat wealth in stocks, bonds, and currencies failed, in April 2011, and in July 2011, as is seen in the ratio of world stocks, ACWI, relative to world government bonds, BWX, ACWI:BWX, turning lower and is now turning lower again. The Seigniorage of Chinese Financials is dependent to some degree upon copper; and the failure of the seigniorage of the Chinese Financials is seen in the ratio of two,CHIX:JJC, turning lower in July 2010 and November 2010. Today, that ratio is manifesting a dark cloud covering candlestick, heralding a turn lower soon as well.


Seigniorage, that is moneyness, is no longer coming from the securitization of debt; nor is seigniorage coming from investing in industrial metals, whether it be iron, copper, or silver. The seigniorage of growth has failed.


3) … In the Age of Deleveraging, the only seigniorage besides gold that will work, is diktat, specifically the diktat of the soon coming the Sovereign, meaning lord, and the Seignior, meaning top dog banker who takes a cut, who will rise to rule in the Eurozone.


The economic, political and financial global tectonic plates have shifted, and an authoritarian government tsunami is on the way. This was foreseen by the 300 elite of the Club of Rome who in 1974 issued The Clarion Call for regional economic government, as a resolution of chaos stemming from the deleveraging and disinvestment coming with the end of the Milton Friedman Free To Choose floating currency regime.


Soon an individual familiar with the scheme of regional framework agreements will step onto Europe’s stage, and provide order out of chaos. He will be the New Charlemagne, establishing a type of Revived Roman empire. Perhaps this individual might be Herman Van Rompuy, as he arraigned the first summit over the crisis in May of 2010. Having both sovereign authority and fiscal authority, he will rule over a Fiscal Union, and a Common Treasury in the Eurozone. Angela Merkel and Nicolas Sarkozy have laid the groundwork by calling for true European Economic Government, in their August Joint Communique. The Sovereign will be cunning, that is shrewd, and fierce as well as he will face a whole spectrum of angry people.


Neoliberalism “ran with” the Milton Friedman Free Script. This previous regime featured floating currencies, that generated prosperity via wildcat finance, a Doug Noland term, as it set investors and bankers free to invest in whatever they chose, with leverage coming from deregulation via repeal of the Glass Steagall Act, and ponzi financing of GSE debt, as well as HELOC lending which created moral hazard. Democracy abounded.


In contrast, Neoauthoritarianism will “run by” the word, will and way of the Sovereign and the Seignior; It will provide austerity and debt servitude for all. This developing regime features deleveraging, derisking, disinvesting, and sinking currencies, that generates adversity for all, via wildcat governance, as leaders meet in summits, waive national sovereignty, and announce regional framework agreements, structural reforms, austerity measures and apply debt servitude to all. The Eurozone’s future will be Totalitarian Collectivism.


4) … In today’s news4A) … Neoliberalism was characterized by wildcat finance, a Doug Noland term Neoauthoritarianism is characterized by wildcat governance, where leaders bite rip and tear at one another. This being seen in numerous reports such as Forbes Chinese Solar Stocks Plunge After U.S. Industry Group Alleges Dumping


Mike Mish Shedlock reports Merkel Cancels Speech to Parliament; "Merkozy Marbles"


Between The Hedges reports 21st Century Business Herald China's central bank will start a second round of investigations into the nation's private lending and may introduce a monitoring system in the future, citing a person close to the People's Bank of China.


Business Standard reports India Banks Face 560 Billion Rupees of Risky Power Debt. The ongoing Yahoo finance chart of EPI, INDY, SCIN, that is, India Earnings, EPI, a proxy for lending in India, India, INDY, and India Small Caps, SCIN, shows the deleveraging and derisking that comes with the failure of Neoliberalism’s credit. The only solution for the soon coming chaos of the failure of Neoliberalism will be diktat.


I can assure you that Ralph Nader’s cry to Let Our Farmers Grow Hempwill go unheeded. 


Of note, Huma Kahn of ABCNews reports Obama: "Dark shadow of tyranny has been lifted"


4B) … George Orwell in his book 1984 foresaw the day of a Truth Commission
Tyler Durden provides the Bloomberg report EU Weighs Credit-Ratings Bans for Nations Getting Bailouts. The European Union may ban credit- ratings companies from making assessments of nations receiving European or international bailouts as part of plans for tougher regulation of the industry. “We are actively considering suspending or banning ratings” in cases where nations are making “full efforts” to implement assistance programs, Michel Barnier, the EU’s financial services chief, told reporters in Brussels today. The measure may be included in a draft law that Barnier will present in November. The EU may also force the companies to disclose the internal analyses they use when they decide to cut a government’s rating, according to Barnier, who said that he wanted to ensure “there is a clear method” behind such downgrades. EU governments have criticized decisions by ratings companies to downgrade Greek, Irish and Portuguese sovereign debt even though the countries are receiving international assistance, saying that the decisions are unjustified and exacerbate the region’s fiscal crisis. The European Commission said that a four-level cut of Portugal’s credit rating in July by Moody’s Investors Service added “an additional element of uncertainty” to the country’s situation.


5) … Summary: Sovereignty is fatefully calling forth a sovereign to deal sovereignly with the sovereign crisis
Today’s trading in the emerging markets, EEM, and China, YAO, combined with this week’s fall in Materials, MXI, and CRBI, along with the fall in Base Metals, DBB, and Emerging Market Currencies, CEW, was the signal to be short not long. Corporate Treasurers with cash may want to consider going short these 200% and 300% ETFs: URTY, EET, UYM, XPP, TNA, MATL, EDC, YINN as found in this Finviz Screener,


Fate is not without a sense of irony, as it moves the Eurozone quickly into Totalitarian Collectivism. Steven Erlanger in Euro, Meant to Unite Europe, Seems to Be Dividing It Europe is unpopular, a local metaphor for globalization, faceless and interfering. It is by no means certain that the voters are ready to leap into a new world of economic integration. Even if they prove to be, the new treaty will be complex and take years to draft even before being put to the electorate for ratification, if there is ratification. It is easy to say that the answer is “more Europe,” not less. That can seem self-evident to Eurocrats and the political elite. But “more Europe” may not be what voters want.“The only thing that can save the euro in its current form can’t and shouldn’t be done without democratic debate and support,” said Simon Tilford, chief economist for the Center for European Reform, a research institution.“You need to bring the electorate with you,” he said. Of course, he acknowledged, a real democratic debate “could exacerbate the crisis.” That may be the largest historical irony of all. In response I relate, nothing can save the Euro in its current form, and there are two who will rise to put the electorate under them.


Today, Utilities, XLU, closed at a new rally high, with DTEWEC, and D, stable in their rally trend as is seen in this ongoing Yahoo Finance Chart.


The schemes of Neoliberalism, such as securitization of mortgage debt by mortgage REITS, REM, and creation of high yielding debt by Wall Street, ABCS, cartel like support for industrial and office lending, FNIO, US Federal Reserve Policies of credit liquidity, ZIRP, quantitative easing, and TARP support for the Too Big To Fail Banks, RWW, as well as the use of the Euro, FXE, as a currency, have stimulated the investment demand for gold, $GOLD


Physical possession of gold bullion, and diktat will be the only forms of sovereign wealth in the Age of Deleveraging. Bespoke Investment Group reports Gold Closing In On Lowest Close Since August Peak In the four weeks since that low, gold saw a modest rally of 5.5%, but it has since given up much of that rebound and is now within 1% of its closing low since its record high in August. I believe it could easily fall to $1,500 before heading much higher.


The scheme of regional economic government called for by the Club of Rome, is Clarion, that is, it is clear, ringing and distinctive. It comes with Authoritarian Imperative: it cannot be denied. Angela Merkel, has heard and heeded, with the result that true European economic government is coming.


Fate is operating to replace the former regime of Neoliberalism with the Beast Regime of Neoauthoritarianism. The latter was headed up by Milton Friedman who received a Nobel Peace Prize. The latter will be headed up by a fierce sovereign, and seconded by a European banker. Their word, will, and way will provide seigniorage, that is moneyness, and the people will be amazed, yes marvel, and follow after it, giving it their full allegiance.

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