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Central bank success story: The global market for luxury goods grew 38.6% in three years. From $200 billion in 2009, luxury goods sales jumped 13% in 2010, 11% in 2011, and 10% in 2012, to end up at $275 billion. Despite the Eurozone debt crisis and austerity, despite the earthquake and tsunami in Japan in 2011... no matter what happened in those three years, luxury goods boomed, sez the the just released "Worldwide Luxury Markets Monitor," by Bain & Company for Fondazione Altagamma (PDF). “Absolute luxury items (high-end products with no logo, highest quality materials, and exquisite craftsmanship) lead the way,” the report reassured us, but there were some losers, including “watch consumption” which crashed in China. The report confirmed what we’ve seen everywhere: when central banks hand out trillions to their cronies, it doesn’t do much for the real economy as a whole, nor for employment, but it does one heck of a job at the very top of the pyramid.

"Threat of Default": US hits debt limit on Saturday, but by using a slew of shuffle maneuvers, shell games, tricks, and devices, the US won't actually run out of money until "after Labor Day," Treasury Secretary Jacob Lew told Congress in a letter. In his previous statement, the US would be "okay until Labor Day." Today, he was more frantic. He begged Congress to get its act together and do something "sooner rather than later" to “remove the threat of default.” In its infinite wisdom, Congress had suspended the debt limit till May 18, rather than dealing with it. The debt, though still over the limit, declined in April and early May; tax extractions were fattened by asset bubbles. But since May 10, the debt has once again been rising.

US Consumers haven’t felt this good since July 2007, just before all heck broke loose. An "encouraging sign," Reuters sez. For short sellers? The preliminary results of the Thomson Reuters/University of Michigan's consumer sentiment index jumped to 83.7 in May from 76.4 in April. Big part of the reason: households in the upper third of the income bracket felt flush from the ballooning stock market – the wealth effect. The Fed giveth.... They were able to brush off the payroll tax increase, which Wal-Mart shoppers, as we’ve seen, had a harder time brushing off. The Consumer Expectations index rose to 74.8 from 67.8. And the Current Economic Conditions index leaped to 97.5 from 89.9, the highest since October 2007, a month before the stock markets began to swoon. Impeccable timing, the hallmark of consumers.

Car sales in the EU crept up 1.7% in April, from a horrible April last year. The fact that the parade of ever worsening numbers has finally stopped, at least for a moment, was greeted with a huge sigh of relief. The details of the report aren’t that rosy: sales in the UK, now the second largest market after Germany, jumped 14.8%. Without the UK, sales for the rest of the EU actually dropped 0.46%. It wasn't exactly a smooth trend across the member states: Greece finally seems to have hit bottom, and sales increased 20.9%; in Denmark, they jumped 30.7% and in Finland 142.6%; but they crashed 26% in the Netherlands and 51.9% in Cyprus; they rose 3.8% in Germany but dropped 5.3% in France.

Deafening US media hype: Japan Core Machinery Orders jumped 14.2% in March, seasonally adjusted, from February. The eternal money-printing and fiscal-stimulus apologists dragged it out as proof that Abenomics is working massively. Alas, these are highly volatile big-ticket items, though “core” orders exclude container ships, nuclear reactors, etc., which are even more volatile. To iron out the volatility, the Cabinet Office also offers quarterly numbers. Soooo, core orders in the first quarter of 2013 were actually 4.8% lower than in the first quarter of 2012, when Noda was prime minister. Kampai!

The Japanese take care of their college grads: 93.9% of all those who graduated on March 31, the end of the academic year, had jobs by April 1, the beginning of the business year. This was the second year in a row that the percentage increased, so it’s NOT related to Abenomics, please! College recruitment, like so many things in Japan, is a highly structured process with the idea to get pretty much everyone squared away before the end of the academic year. But those who miss this entry into Japan Inc. have the greatest difficulty getting through the door later. The system is unforgiving punitive to those who don’t toe the line.

About that secret inflation in Argentina: famously, no one is allowed to accurately track or discuss inflation, but all the whisper numbers floating around peg it at over 20% annually. Now confirmation has come from official sources: wage negotiations between unions and the government of President Cristina Fernández Kirchner. Unions are her base. In fact, she personally met with the leaders of six unions that represent about 2 million workers, or 40% of all workers covered by wage negotiations, and made a deal, similar to the deals she’d made with Railway and Bus Drivers’ unions. The agreed-upon wage increases this year to keep the purchasing power of her voters intact? The closest estimate to official CPI that Argentina has? 24%!

Thursday, May 16, 2013

Last time French-made cars were sold is the US? 1980? Long time ago. But... French-made models of the Toyota Yaris are coming to the US, Canada, and Mexico, apparently to keep the plant in Onnaing, near Valenciennes, busy. Car sales in Europe have been catastrophic, and plant shutdowns and layoffs are hard to do, especially in France where even thinking about it causes a huge political ruckus. In 2012, 182,841 Yaris were sold in Europe, accounting for 22% of Toyota's total European sales - a highly successful model at the low end of the lineup. North America will get US versions, not EU versions. So no diesels.

Plunging price of gasoline shaves 0.4% from Consumer Price Index in April. Total energy prices dropped 4.3%, with gasoline down 8.1%. We’ll remember those days fondly because that cheap gasoline is now history; prices have been climbing in May! Food prices rose 0.2%. Core CPI, which excludes food and energy, rose 0.1%. For the 12-month period, CPI is up 1.1% and core CPI 1.7%. The Fed might complain that this is below target; but it’s still inflation, and it still whittles down the value of your and my dollars, and everything denominated in them, and it’s still higher than the interest that banks pay on most deposits and CDs, though it’s better than 4.3%, as we had some months in 2011.

Another blow to US manufacturing: Philadelphia Fed's Business Outlook Survey – for manufacturing in eastern Pennsylvania, southern New Jersey, and Delaware – dropped into the negative, to -5.2 in May, from 1.3 in April (below zero = decline). The New York Fed's Empire State Manufacturing survey, reported yesterday (below), had also pointed at a contraction. Ominous: new orders dropped to -7.9, the worst since June last year, from -1 in April; the Workweek Index dropped to -12.4, and the Employment Index dropped to -8.7. Manufacturing is only a small part of the US economy, and this region is a small part of the US, so we’re not going to panic just yet...

US Housing Bubble confirmed: Heard an ad on the radio on how to get rich quick by flipping houses – and we’ll show you how. It conveniently offered an 800-number. Something or other was free.... but keep your credit card handy. These kinds of things usually appear late in a bubble.

Death penalty for financial fraud in China. A court in Wenzhou slapped a local, 39-year-old gal, former general manager of Wenzhou Xinfu Investment Consulting Co., with the maximum penalty available, death, for having illegally raised funds for investments starting in 2007. Everything worked fine until October 2011, when her scheme collapsed and she ended up defaulting on a 428 million yuan loan ($69.6 million). Leaves open the question if they’d slap the same penalty on TBTF bank CEOs every time their banks need a bailout. A bit draconian maybe, but something the US might want to consider as well, after not having prosecuted anyone responsible for the financial crisis and for the Fed’s bailouts that followed, though they did hound, as in China, small-scale crooks like Bernie Madoff.

Bad loans at Chinese commercial banks swelled by 6.8% in the first quarter, to 526.5 billion yuan ($85.6 billion), the sixth consecutive quarter of increases, raising the non-performing loan ratio to 0.96%. And NPLs are expected to rise further. One of the many elements in a boundless debt-fueled scheme that will eventually, like the micro-case above, unravel.

The Japanese Diet rubber-stamped the ¥92.6 trillion ($926 billion) budget for fiscal 2013, which started April 1. A breath-taking ¥43 trillion ($425 billion) will have to be borrowed to make ends meet - that's 46.4% of the total outlays! But no problem. Abenomics will get Japan out of its fiscal quagmire, one way or the other, by printing money. Government spending on public works – welfare spending for Japan Inc. – will rise to ¥5.3 trillion. In a show of rare fiscal discipline, welfare spending for the poor will be cut by ¥67 billion. Priorities of Abenomics are becoming clear.

Japanese GDP growth less than a year ago! The economy grew 0.9% in the first quarter 2013 from Q4 last year, or a 3.5% annual rate. Private demand was up some, with investment in housing being fairly strong, but corporate investment lackluster. Public demand – government spending and investment, including boondoggles – jumped, as promised by Abenomics. Exports rose, and so did imports, but not as much. All seasonally adjusted. Great? Give credit to Abenomics for that 0.9% growth in GDP? Because it was the fastest growth since... oops, well, since the first quarter of 2012, when the economy grew 1.3%. Abenomics can't even keep up with Noda's maligned era.

Wednesday, May 15, 2013

Megabanks "are NOT too big to jail," claimed Attorney General Eric Holder today in a heroic about-face at a House Judiciary hearing, after he'd explained to the Senate Judiciary Committee in early March why exactly they were indeed too big to jail. The Justice Department has not prosecuted any megabanks despite their shenanigans leading up to the Financial Crisis and continuing to this day. A debacle I wrote about.... 'Regulatory Capture' Emasculated The Regulators Of Megabanks.

French purchasing power plunges 1.5% per capita, and 0.9% for all households together in 2012 (difference due to population growth), the worst performance since 1984. Combination of: disposable income creeping up only 0.9%, and prices rising 1.9%. Ah yes, the many benefits of "moderate" or even "below-target" inflation.

Tough day for US manufacturing: industrial production dropped 0.5% in April, after increasing in February and March; year-over-year, it's up only 1.9%. Within it, manufacturing fell 0.4%; fingers point at motor vehicles and parts, down 1.3%. Capacity utilization fell 0.5% to 77.8%, and is 2.4 percentage points below long-term average. Add to that: the New York Fed's Empire State Manufacturing Survey for May dipped into the red (-1.43, from 3.05 in April). Employment sub-indices were mixed, with number of employees up slightly, but hours worked down sharply. Darkest cloud: new orders were negative. Executive optimism for the next six months declined, second month in a row. Not an exemplary picture of a growing economy.

"My question is, who is going to jail?" wondered House Speaker John Boehner about the IRS scandal. So why didn't he and other Republicans ask that question after the financial crisis, the largest scandal in the US ever?

Swooning energy prices, particularly gasoline, pushed down wholesale prices by 0.7% in April, seasonally adjusted. Food prices also dropped, a godsend for those of us who like to eat, with veggies and meat down the most. Without food and energy, which are highly volatile, the core Producer Price Index rose 0.1%. For the 12-month period, the unadjusted PPI is up a scant 0.6%. If they could just keep it that way!

Warning shot: Russian car sales plunged 8% in April. For the year, they are now 2% below the same period last year, a record year during which sales had jumped 11% from 2011. The good times appear to be over. Is the EU malaise heading east?

Europe stuck in recession: the Eurozone economy shrank 0.2% in the first quarter, from Q4, the sixth quarter of recession in a row, another glorious record. The 27-nation EU contracted 0.1%. Year over year, they’re down 1.0% and 0.7% respectively. Germany's economy inched up 0.1% in Q1, after having plunged 0.7% in Q4, thus barely avoiding the red stamp of recession. Both quarters combined, Germany is in the hole. The lousy performance in both quarters surprisingly surprised pundits. France is formally in a recession; its economy contracted 0.2% in Q1, third contraction in four quarters. Italy and Spain both shriveled 0.5%. Unperturbed, German stocks, while down a smidgen for the day so far, are still above their prior all-time intra-day high of July 2007. This will be seen as the greatest accomplishment of the central bank money-printing binge: separating (at least temporarily) stock markets from reality and allowing them to float in a dream world.

China's pile of foreign exchange grew by 294 billion yuan to 27.363 trillion yuan ($4.41 trillion) in April, according to the People's Bank of China, the fifth month in a row of increases. For the first four months of 2013, the monthly influx averaged 400 billion yuan, nine times the average in 2012. Earlier this month, the State Administration of Foreign Exchange, the top forex regulator, had threatened to crack down on foreign money flooding the country. China is where the hot money goes – on the bet that the yuan will continue to rise against the dollar which, through the arduous and heroic efforts of the Fed, will continue to lose value.

Nikkei jumps 2.29%, to 15,096, highest since December 28, 2007. If it keeps going like this, it will be above 40,000 soon. This thing has become a joke – even more so than the US stock markets. Japanese government bonds continue their descent, pushing yields up, with the 10-year JGB hitting 0.90% but then settled down at 0.85%. The yen skidded.

Tuesday, May 14, 2013

Ex-leaders of consumer electronics: Sharp's huge loss is a sign of how Japanese powerhouses have lost the edge to Korean, US, and Chinese rivals. A doozy: ¥545 billion ($5.3 billion) in red ink, a record in its storied century-long history. A top exec reshuffle has been announced, but it won't fix the real issue that is bedeviling Sharp and other Japanese consumer electronics companies, once world leaders, now not even also-rans. Abenomics won't be able to cure that either. This isn't an issue of costs and exchange rates, but of innovation, products, and now increasingly brand (they squandered it).

China's white paper on human rights, helpfully issued in English so that foreigners like me can get their brains washed, starts out promisingly: "Since the arrival of the 21st century, the Chinese people have been making constant efforts in advancing human rights protection along the path of building socialism with Chinese characteristics under the leadership of the Communist Party of China (CPC) and the Chinese government." Further into it, the paper clarifies priorities: "China has a population of over 1.3 billion. For such a populous country, it would be impossible to protect the people's rights and interests without first developing the economy to feed and clothe the people." Money before rights. But it also points out how the government has become much more transparent in many ways, which few people will dispute (text in full).

Inflation hits Japan: wholesale prices rose for 5th month in a row in April, by 0.3% from March, with the index at 101.4 (2010 prices = 100). Electricity, gas, water, lumber, and wood products jumped over 3%. Some of it was due to the weakening yen that made imported fuels and raw materials more expensive. How exactly higher prices would cure Japan’s economic ills remains a mystery, though it will give a stylish haircut to all those owning Japanese Government Bonds....

Japanese Government Bonds skid once again: yields rose, for the 10-year JGB to 0.85%, from 0.79% yesterday, from 0.69% on Friday, and from 0.315% on April 5, the day they went bonkers. While yields are still ultra-low, the rise has been relentless, not at all what the BOJ wants – and now there's also volatility, rare sight in the JGB market. Japanese institutions and individuals are buying foreign bonds with higher yields to diversify out of the yen that has been doomed by Abenomics to decline. If this turns into a massive dumping of yen, if the BOJ cannot keep it under control, the selloff might turn into a rout, and the BOJ and government-controlled institutions will be the only ones left buying. In sympathy, mortgage rates are creeping up, as are bank loans. The opposite of what Abenomics wants to accomplish. Free money is suddenly becoming more expensive.

Click for Older Rumblings....

VIDEOS

Wolf Richter on Max Keiser's "On The Edge"
"The Pauperization of America"

Wolf Richter on the Keiser Report
"Where the Money Goes to Die"

Clarke and Dawe: European Debt Crisis
Two favorite Australian Comedians

Clarke and Dawe: Quantitative Easing
Big industrial-strength printers, all facing the window

The Fastest Drive Ever Through San Francisco
Don't try to do this yourself

humanERROR - by "Frying Dutchman"
Powerful, lyrical appeal to the Japanese. Slams nuke industry, MSM, bureaucrats, and politicians.

Tuesday

Dec042012

Serial Government Defaults In The Eurozone

Tuesday, December 4, 2012 at 6:47PM

At their meeting on Monday, Euro Group finance ministers had some hot topics to stew over. There was the thorny issue of who’d replace Euro Group President Jean-Claude Juncker, who has had it with this zoo—”I no longer have any illusions about Europe,” he’d muttered earlier [The Euro Will Blow Up Europe Instead Of Bringing It Together]. The bailout of Spanish banks was finalized; €39.5 billion would be transferred next week, a down payment. Primary beneficiaries: German and French banks.

And the new bailout of Greece got some finishing touches. The mechanics had already been decided. Interest rates would be lowered. There’d be no interest payments for the first ten years. Times to accomplish the austerity goals would be stretched out. Profits on Greek debt held by the “official sector,” as it’s called in the jargon of the euro bailout mania, would be repatriated. And so on. It was one heck of a sweet deal for Greece.

It followed the bond swap last March that had already whacked private sector investors with a 74% haircut on €206 billion in bonds. The first sovereign default in the Eurozone, albeit a “voluntary” one. It set the tone. Greek Finance Minister Evangelos Venizelos proclaimed afterwards in his victory speech: “We owed it to our children and grandchildren to rid them of the burden of this debt.”

Alas, private sector is a rubbery term in the Eurozone. Most of the bondholders that lost their shirts were banks, including banks in Greece, Spain, and Cyprus—and they’re now getting bailed out by the official sector. Their losses from the private-sector haircut are landing on the lap of the taxpayer.

Now the Eurozone’s second sovereign default is underway. The new bailout package for Greece includes a loan of €10 billion with which to buy back some of its bonds at a hefty discount from private sector investors. The process has started. If Greece ends up paying 34% of face value, it could buy back about €28 billion in old bonds. In this manner, it would for all practical purposes default on €18 billion. The deal would also roll €10 billion from the private sector to the official sector.

A few hedge funds that bought this stuff for cents on the euro stand to make a killing. But the Greek and Cypriot banks that are losing a fortune on this deal are the very ones that are already getting bailed out. Hence their private-sector losses from the buyback deal are rolled over to the official sector [The Bailout Of Russian “Black Money” In Cyprus].

After this transpires, almost all of Greece’s debt will have been transferred to the official sector, spread over the EFSF bailout fund, the IMF, the ECB, the national central banks of the Eurozone including the Bank of Greece, and the EU. And just when the official sector is up to the gills into Greek debt, but not a minute before, German Chancellor Angela Merkel announced the big haircut, the one that politicians have been denying for years: the official sector would write off a big chunk of this debt, starting in 2014. Greece’s default will be complete.

A sweet deal for Greece. And taxpayers elsewhere now know, rather than having to guess. This cements the principle of piling private-sector losses on the public sector, while claiming that it won’t cost anything, or at least not much ... until the real costs seep from the woodwork.

Now Portugal wants the same deal. So does Ireland. And Cyprus. Spain is thinking about it. The can has been opened: last week, Portuguese Finance Minister Vítor Gaspar reminded his colleagues of the EU summit in July 2011—when the Eurozone decided explicitly that all countries to be bailed out would be offered equal terms and conditions. That principle of equal treatment, he said, was also valid for Portugal and Ireland. Then during the Euro Group meeting, Portugal presented its demands.

Dutch Prime Minister Mark Rutte wasn’t amused—and made his voice heard in an onslaught of interviews. There should be a way for Greece to leave the Eurozone, he said. And haircuts for official sector creditors? Not a good idea. Out of principle. “That would send the wrong signal to other countries that have debts ... like America” [read... The Relentless Eurocratic Power Grab].

Juncker too tried desperately to stuff some of the worms back into the can. “I don’t believe that the Euro Group is prepared to let these countries have equal treatment,” he said. And German Finance Minister Wolfgang Schäuble claimed that Greece was a special case. “For Ireland and Portugal, which are in the process of returning to the markets step by step, that would be a catastrophic sign,” he said. That’s how things start out in the Eurozone.

Every country in the Eurozone has its own set of big fat lies that politicians and eurocrats served up to make the euro and subsequent bailouts or austerity measures less unappetizing. Like in 1999: “Can Germany be held liable for the debts of other countries? A very clear No!” said the CDU, the party of Chancellor Merkel. Read.... Ten Big Fat Lies To Keep The Euro Dream Alive.

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Reader Comments (2)

We just have to wait till the OSIs begin. As that means that public sector losses will be recognised. Which means that they will start being seen as budget expenditure (and not as a budget neutral item like most guarantees). Which means that something else has to be cut (read entitlement, civil servant wages, or the European/Obama way of cutting raising taxes).
People will really like that in a no growth/deleveraging enviroment with no real wages increases for most but the costs of aging hitting in fully. Juncker will be right this time, they will not know how to get reelected.
My guess about a year from now. Doubtful (but possible) if it will make the next German election. Greece and/or Cyprus will not meet the conditions (and possibly Spain as well).
From there things get really interesting.

December 4, 2012 |

Rik

Time to reject and stop funding the UN. What does this have to do with the Eurozone?

The UN (UNESCO) and NATO are controlled by the NWO "intellectual elites and world bankers" who are increasingly supplanting all nation’s sovereignty and law makling ability.

How about 'carbon taxes' based on fraudulent science riddled 'climate change being man made? 'Sustainable' spending and your taxes:

In the USA one 'federal' dollar spent costs 10 times more than a similarly spent 'state' dollar simply because of the necessary added bureaucracy (agencies salaries, benefits and pensions, office complexes, information/documentations systems, vehicles, energy/maintenance costs, etc), also the more complex the bureaucracy the easier it is to siphon off or redirect money for ideological or corrupt purposes. This happens with every new 'federal' program. These expensive agencies produce nothing and generate no revenue. NOW IMAGINE WHAT AN 'INTERNATIONAL' OR 'WORLD' DOLLAR WOULD NEED TO COST YOU (your higher taxes -absolutely) to regulate 'you' and your private property by foreign national technocrats. Do we really want to hand out country's sovereignty AND WEALTH over to the UN (mostly 3rd world dictatorships whose votes are easily bought) to regulate the world and us? DEMOCRATS AGAINST U. N. AGENDA 21 - OK, So what is Agenda …www.democratsagainstunagenda21.comDemocrats to Stop Agenda 21. We are making common cause with others to end UN social engineering and communitarianism.

United Nations IS Taking Over Towns AROUND THE WORLD (the people pushing this are getting big bucks from the government to do so, watch how the conversation 'changes' in the later apart of the video. Your taxes are funding this effort to removing you from your property. Universities have it as part of their curriculum for school of architecture?
http://youtu.be/po6kaUqgPqI

Just when you think things couldn't possibly get any worse, you realize this has been going on under your nose (and above; drones watching you).A liberal democrat and the Tea Party coming together on Agenda 21:

U.N. Agenda 21 w/ author Rosa Koire BEHIND THE GREEN MASK

http://youtu.be/8Oevj6XokV...

Here’s ANOTHER recent example:
The (US) EPA is now working ‘internationally’ (INTERNATIONALLY'???) with the UN and UNU (United Nations University); the US EPA has awarded a five-year, $2.5 million grant (US citizens taxes) to the UNU Institute for Sustainability and Peace (UNU-ISP)….and where the fek did they get the money? Did they mention that to the the taxpayers or the people freezing in New Jersey?

“for Sustainability and Peace” right … maybe Susan Rice and Hillary Clinton ought to share the next ‘Nobel Peace Prize’?

US citizens and elected representatives, did YOU know that? Remember the efficiency and accountability (NOT) of 'world' dollars now funding international bureaucracies.

...and this:

Should Law Enforcement Agencies Have The Power To Write And Enforce Whatever Laws They Desire?
Posted on August 4, 2011

"This is how unelected bureaucrats, such as those in the EPA, can write law that wasn’t necessarily intended by the Congress. We see it all the time. A good example are the recent new regulations being promulgated by the EPA to control carbon emissions from power generating plants that effectively will enforce a carbon cap-and-trade law that the Congress has in fact already rejected."

Now add in the 'federal' DOE, TSA, SEC, FCC, FDA, etc. and all the unelected czars that don't answer to congress (if you really want to scare yourself look into the background and ideology of just two (of 32) czars; John Holdren and Cass Sunstein).

December 5, 2012 |

DADDY WARBUCKS

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