Getting Screwed Bigtime - By Karl Denninger (26/3/13) PDF Print E-mail
Karl Denninger   
Tuesday, 26 March 2013 09:22

Market Ticker

So having learned that Parliament would not approve a deposit levy in the name of a "tax", and that the government was deeply opposed to forcing citizens and other depositors in its banks to bear losses without the bondholders being wiped out first as one would expect in the capital structure, Germany, the ECB and rest of the EuroThieves did something innovative.

They simply ignored Parliament and came up with a scheme that didn't require a vote.

We'll see how this works out for them.

This, incidentally, is exactly what happened here with GM.  It was blatantly unlawful to protect the UAW's pension fund, which had no senior standing while trashing senior bondholders.  The government did not care and did it anyway -- and the courts permitted it.

This has been the repeated means by which you are stolen from.  When you enter into an investment, whether you make a deposit in a bank or buy a bond or something else, you are buying into a capital structure in a given place with a given and declared level of both risk and potential reward.  You price that risk and your willingness to enter into the transaction with the full understanding of where you are in that capital structure.

When that is unilaterally changed retroactively you are being stolen from. 



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What Could Cause Interest Rates To Rise? - By Charles Hugh Smith (25/3/13) PDF Print E-mail
Charles Hugh Smith   
Monday, 25 March 2013 08:36

Of Two Minds

There is an interesting paradox at work as central banks suppress interest rates.

Correspondent Mark H. recently asked: "What is your take on what the outcome will be if/when interest rates start rising?" Let's break this excellent question into two parts:


1) what might cause rates to rise, and
2) what consequences will likely result from rising rates/yields?

There are two articles of faith in the central-bank religion:

1) We can keep interest rates near-zero for as long as we deem necessary, and
2) We can suppress inflation at will, too.

The question is: can they do both at the same time for as long as they wish?



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Spending Patterns Paint Half Truth - By John Browne (25/3/13) PDF Print E-mail
John Browne   
Monday, 25 March 2013 08:33

Prudent Bear

On March 13th, the Commerce Department announced a 1.1% increase in food and services retail sales, doubling a prior Dow Jones survey of economists that forecast an increase of just 0.6%. This new data has led to a fresh wave of enthusiastic commentaries that the U.S. economy is set for a strong recovery. Less examined the underlying factors that supported the increase.

Through the persuasive powers of its chairman, Ben Bernanke, the U.S. Federal Reserve has convinced the world’s three other key central banks—the Bank of England, the ECB, and the Bank of Japan—and many others to adopt its policies of quantitative easing (QE) to spur economic growth. By lowering the cost of borrowing and lessening the rewards of saving, I believe that these policies have led to increases in spending. But to call it a success requires looking at only one side of the balance sheet. The supposed benefits come at a high cost.

Gasoline prices rose by nearly 15% from January to February of this year. Spending also rose in grocery stores, which are considered to be a gauge of necessity spending. On the other hand, declines in department store, restaurant, and furniture spending would seem to indicate consumers are cutting back in areas economists deem to be "discretionary."

Four years of annual trillion-dollar-plus government deficits and the Fed's creation of more than $2 trillion of synthetic money since the crisis began have injected almost unimaginable amounts of "stimulus" into the U.S. economy. In addition, the Fed's downward distortion of the rates of interest, inflation, and unemployment is cynically designed to encourage a false sense of economic growth and economic optimism.



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A Beginner’s Guide To The European Debt Crisis - By Gonzalo Lira (25/3/13) PDF Print E-mail
Gonzalo Lira   
Monday, 25 March 2013 08:32

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The Dollar And The Real Inflation Story - By Toby Connor (25/3/13) PDF Print E-mail
Toby Connor   
Monday, 25 March 2013 08:30

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