I just received this.
Seems money managers with fiduciary responsibility are holding off on buying any euro member securities since the 50% Greek haircuts were announced.

Our Trading Desk reports “mayhem” in the AAA Eurozone markets
- France 11bps wider
- Netherlands 6bps wider
France now 178bps over Germany
Increasing talk/fear of Eurozone break up and capitulation trades in AAA markets are widespread.
We are seeing no real demand for anything – even Germany.
Tomorrow’s Shatz auction looks a big ask with a yield of 30bps and no risk appetite out there.

I’ll be at Zuccotti Park, northeast park corner near their library area at 1pm on Saturday.

All invited to drop by!

Good report on this supposed ‘job creator’ here.

Hint, it’s not…

US Daily : Profit Repatriation Tax Holiday: Still an Uphill Climb (Phillips)

Published October 5, 2011

* Media reports indicate that Sens. Kay Hagan (D-NC) and John McCain (R-AZ) plan to introduce legislation to allow for a one-time tax holiday for repatriation of corporate profits from abroad. If such a plan were enacted, it would most likely increase dividend payments and share buybacks, potentially resulting in a slight easing of financial conditions. However, we would not expect a significant change in corporate hiring or investment plans: most firms with large amounts of overseas profits are likely to have adequate access to financing, so the availability of cash on hand is unlikely to be a constraint on investment at the present time.

* Repatriation legislation also still appears to face significant legislative hurdles. The most important may be its estimated cost; the official cost estimate of a repeat of the 5.25% temporary tax rate enacted in 2004 is nearly $80bn over ten years in lost revenue. A second hurdle is the interest some lawmakers have in saving such a tax break as an incentive for broader tax reform.

Shameless

DJN: US Senators Plan To Introduce Repatriation Tax Break Bill

By Kristina Peterson

October 5 (Dow Jones) — A bipartisan pair of senators plans to introduce on Thursday a bill proposing a tax break for U.S. companies that bring home foreign profits.

Sens. John McCain (R., Ariz.) and Kay Hagan (D., N.C.) will co-sponsor legislation that would create a repatriation tax holiday, reducing the corporate taxes that U.S. multinationals would pay when bringing home overseas profits, in an effort to boost the economy. Their bill, called the Foreign Earnings Reinvestment Act, would create an incentive for companies to bring back an estimated $1.4 trillion currently kept overseas, according to an advisory from their offices.

“The voices which, in such a conjuncture, tell us that the path of escape is to be found in strict economy and in refraining, wherever possible, from utilising the world’s potential production, are the voices of fools and madmen.”- John Maynard Keynes

The Obama administration continues on the path of financial regression with the addition of Alan Krueger (no relation to Freddy?).

Note below, how he favors the govt making the tough choice of hitting the poor harder than the rich with his proposed tax.

I have yet to see anything even remotely progressive from this administration, which has somehow managed to retain it’s ‘socialist’ label.

Factbox: Obama picks labor economist as top aide

Krueger argued in the New York Times in January 2009 for a 5 percent consumption tax, to take effect in 2011. he said this would boost revenues by $500 billion a year once it kicked in, and would spur spending in the meantime as consumers race to make their purchases before the tax was implemented. He warned it might dull economic activity, and could hit the poor harder because they spend a relatively higher share of their income than the rich. But he also noted that government was all about making tough choices and once the budget position had improved, thanks to the higher revenues, the impact of the tax could be offset by reforms to corporate and income taxes.

In Nov. 1928, Hoover gave a speech (accepting the Republican nomination) saying, in part:

“We in America today are nearer to the final triumph over poverty than ever before in the history of any land. The poorhouse is vanishing from among us. We have not yet reached the goal, but, given a chance to go forward with the policies of the last eight years, we shall soon with the help of God be in sight of the day when poverty will be banished from this nation.”

This statement was issued by President Herbert Hoover on March 8, 1932:

“The whole of the administrative officials are cooperating with the special Economy Committee appointed by the House of Representatives in the drive to bring about further drastic economies in Federal expenditure.

“You will recollect that the budget sent to Congress represented reductions in expenditures for the next fiscal year of about $365 million below the present fiscal year. The House Appropriations Committee has reduced the amounts of bills so far reported out by about $112 million. Of this, however, between 60 and 70 million is a deferment until Congress meets next December when they will be compelled to meet positive obligations by deficiency bills. To this extent, therefore, the reductions do not help next year’s expenditures.

“In order to meet the requirements of the Ways and Means Committee that expenditures must be reduced by $125 million in order to balance the budget, it is necessary that further cuts be made. There is very little room left for reductions by administrative action and the House Appropriations Committee has passed upon the major supply bills except the Army and Navy. Further economies must be brought about by authorization of Congress, either by reorganization of the Federal machinery or change in the legal requirements as to expenditure by the various services.

“The Director of Veterans’ Affairs has proposed to the special House Committee on Economy some changes in the laws relating to pensions and other allowances which would produce economies of between 50 and 60 millions per annum. The Postmaster General is placing before the committee changes in the legal requirements of Post Office expenditures. The Secretary of Agriculture has suggested changes in the law requiring expenditures in the Department of Agriculture, and the other departments are engaged in preparation of similar drastic recommendations.

“I believe the Committee on Economy, through administrative reorganization and such methods as I have mentioned, will be able to find a large area of economy.

“Nothing is more important than balancing the budget with the least increase in taxes. The Federal Government should be in such position that it will need issue no securities which increase the public debt after the beginning of the next fiscal year, July 1. That is vital to the still further promotion of employment and agriculture. It gives positive assurance to business and industry that the Government will keep out of the money market and allow industry and agriculture to borrow the monies required for the conduct of business. I cannot overemphasize the importance of the able nonpartisan effort being made by the Ways and Means Committee and the Economy Committee of the House whose work are complementary to each other.

Andea Terzi is a former student of Paul Davidson, now a professor of economics at Franklin College, Lugano, Switzerland.

The institutional structure in the euro zone has been it’s own undoing since inception, very much like we all described at that time.

Current policy responses continue to support the same repressive fiscal policies that again look to be driving the otherwise prosperous euro zone into negative GDP growth.

The glimmer of hope may be that they have discovered the sector balance approach.

The next step in the right direction would be a recognition of the actual causations.

From Professor Tezi:

Does the ECB understand sector financial balances?

The August 2011 Monthly Bulletin of the European Central Bank has an interesting chart of financial balances of different sectors in the euro area. The chart is reproduced below.

The figure shows how rising deficits in Europe in 2008 and 2009 have produced higher net financial savings in the private sector.

This is evidence that automatic (anti-cyclical) stabilizers worked as usual: as growth declines, or goes negative, tax revenues fall, government deficits increase, and this stops the economy from falling further. This can only work, however, until market-constrained governments in the euro area begin acting pro-cyclically. Governments acting pro-cyclically during recessions means that deficit reductions will reduce private savings below the desired level, and this means a further fall of demand and incomes.

Looking at 2010, and considering that the euro area’s current account balance is marginally negative, there is evidence of this pro-cyclical effect, as government deficits declined, and net private lending inevitably declined.

What is remarkable is how the ECB interprets the chart:

With euro area total investment growing faster than saving, the net borrowing of the euro area increased (to 0.9% of GDP, expressed as a four-quarter sum). From a sectoral point of view, this masked further rebalancing between sectors, with another reduction in government net borrowing (the government de?cit falling to 5.5% of GDP on a four-quarter moving-sum basis, from a peak of 6.7% in the ?rst quarter of 2010) and a further decline in households net lending, while the net borrowing of NFCs increased sharply. (ECB, Monthly Bulletin, August, 2011, pp. 37-8)

The ECB is assuming that savings are needed to finance investment and sector rebalancing is always a good thing. And it makes no reference to the connection between financial balances and nominal GDP growth.

In plain language, this is what the ECB is telling us:

In 2010, Euro area’s savings were insufficient to finance investment. Business needed to borrow to finance their investments and households savings were not enough to fill the gap. This is why the euro area runs a current account deficit, and is a net borrower. European governments, however, are doing their part by reducing their own net borrowing, thus contributing to a progressive rebalancing in financial deficits/surpluses across sectors.

For the ECB, the government net borrowing bar getting shorter (in the chart above) is a reason for optimism. In our reading, this optimism is unwarranted, and what the ECB calls “rebalancing between sectors” is a most worrying financial development of the euro area.

More evidence of the suspected understanding with China- they resumed buying US Tsy secs in return for no more QE:

The U.S. economy “has been doing worse than expected” and Beijing needs to “seriously assess” possible risks to its vast holdings of American debt, said Yu Bin, an economist in the Cabinet’s Development Research Center.

Yu expressed concern about a possible third round of Fed purchases of government bonds, known as “quantitative easing” or QE. He said that might hurt China by depressing the value of the dollar and driving up prices of commodities needed by its industries.

Bernanke: No Plans to Add New Stimulus Measures Now

July 14 (Reuters) — Federal Reserve Chairman Ben Bernanke backed away slightly from promising a third round of stimulus measures, telling a Senate panel Thursday that the central bank “is not prepared at this point to take further action.

The comments during his second day of congressional testimony sent the US dollar higher and caused stock to pare their gains.

On Wednesday, Bernanke suggested to a House panel that the Fed was ready to take further steps to boost the flagging US economy. That sent stocks soaring and pushed the dollar lower.

But on Thursday, Bernanke seemed to back away a bit from that plan.

“The situation is more complex,” he told the Senate Banking Committee. “Inflation is higher…We are uncertain about the near-term developments in the economy. We would live to see if the economy does pick up. We are not prepared at this point to take further action.”

He also said a third round of stimulus may not be that effective.

Bernanke also repeated his warning that a U.S. debt default would be devastating for the U.S. and the global economy.

If they were serious they’d stop exporting it:

Australia Unveils Biggest Carbon Plan Outside Europe

When I look at the charts in general things do not look good, and today’s employment report looks like more of same as well.

The problem remains a massive lack of aggregate demand.

Valance Weekly Report

Highlights
US – Manufacturing confidence rebounds
EU – Consumer Prices held at 2.7% in June
JN – Q2 Tankan Survey weak; BoJ reports regional improvements
UK – Mfg PMI followed the global trend
CA – Real GDP stalled in April
AU – RBA held rates still but turned dovish
NZ – Business surveys were upbeat

From Bloomberg:

“…the possibility of Geithner resigning is dominating our coverage tomorrow, and I’d hate for you to get shorted your appropriate time. Would it be possible to reschedule for Tuesday? We really think you have a great story, and would love to share it with our audience.”

Modern Monetary Theory: The Last Progressive Left Standing

By Warren Mosler

Link here.

First Drive: Mosler Photon

By Jason Cammisa
Photography by Andrew Yeadon

From the June, 2011 issue of Automobile Magazine

…When you hear the name Mosler, you should instead immediately think of the MT900S, the supercar that the company began selling here at the end of 2006. The MT900S is indeed quite nice to look at, but this car’s ace in the hole lies hidden on a spreadsheet. Buried in the specifications for the track-focused but street-legal variant of the MT900S, the Photon, is one astonishing measurement: its curb weight is a scant 2394 pounds. This is a car as long as a Toyota Camry and as wide as a 4Runner, but it weighs about 50 pounds less than a Mazda Miata — and that’s despite having a 7.0-liter V-8 engine.

…While mainstream exoticar makers (now there’s an oxymoron!) like Lamborghini are just now starting to get serious about lightweight construction methods, Mosler has been quietly building featherweight monsters crafted from carbon fiber and Kevlar for years. This kind of cutting-edge engineering isn’t what you’d normally expect from a tiny, low-volume manufacturer from Florida, but it’s the result of founder Warren Mosler’s clear mission: to build amazing cars,

…J. Todd Wagner surprised us by showing up and handing over the keys to a $394,500 Photon. At the time, we knew basically nothing about the car. As we were strapping ourselves in, every eye in the paddock was on the orange thing with the exhaust note so violent it could set off air-raid alarms. Wagner yelled over the exhaust, rattling off a ludicrous horsepower number (550), that ridiculous curb weight, and explaining that the Photon — which has a custom Hewland sequential-manual racing gearbox — uses a flywheel with about as much rotational inertia as a spinning, dying housefly.

…Having never once been around PBIR’s track, and not even knowing if the Photon had antilock brakes (it doesn’t, we would learn), we begged for a pace car. When a volunteer stepped forward, he hopped into his track-prepped Porsche 911 GT3 on slicks. When we were told that he was the local Porsche club’s fastest instructor, we asked him to take it easy.

He didn’t bother — and we’re glad he didn’t. The Mosler’s vast, curved windshield provided a first-class, front-row view of the rear-engine Porsche scrambling its way around corners, oversteering, understeering, and countersteering. The Photon followed along happily, nowhere near its limits, with a big-block scream from the General Motors LS7 easily drowning out the 911′s flat-six wail — but only for a second at a time. Any longer wide-open-throttle blasts and the Porsche would have had a whole car shoved up its engine-filled arse. In steady-state corners, the Photon might understeer and its steering might not transmit much information about what the front tires are doing, but at the g-forces it generates, your author’s spinal cord wasn’t transmitting much useful information, either.

We had time for only a few laps, but the Photon’s speed, cornering, and composure is dramatic. The Photon is clearly more than a big engine strapped into a light car — indeed, a decade-long relationship with Siemens has given Mosler access to supercomputers for seriously advanced engineering.

The lightning-quick carbon-fiber MT900R qualified on the class pole for the 24 Hours of Daytona three consecutive years and scored a GTS win in 2003. The reward for this achievement? The car was essentially banned by Grand-Am, and it no longer races in the United States. But the MT900R and the MT900GT3 continue to win GT races and championships in Europe, Asia, and Australia. Ironically, the chassis of these all-American cars are assembled at Rollcentre Racing in England. At last report, no fewer than twenty-five cars were being campaigned worldwide.

For Whom Bell Tolls

“No man is an island, entire of itself; every man is a piece of the continent, a part of the main. If a clod be washed away by the sea, Europe is the less, as well as if a promontory were, as well as if a manor of thy friend’s or of thine own were:
any man’s death diminishes me, because I am involved in mankind, and therefore never send to know for whom the bells tolls; it tolls for thee.”

John Donne
Devotions upon
Emergent Occasions, no. 17
(Meditation)
1624 (published)

Glad they understand the real world problem.

The problem is their policy recommendations that cause these conditions in the first place.

And now they are asking G20 nations who they’ve led to believe they are on the brink of becoming the next Greece to pledge financial support.

World Bank president: ‘One shock away from crisis’

April 17 (BBC) — The president of the World Bank has warned that the world is “one shock away from a full-blown crisis”.

Robert Zoellick cited rising food prices as the main threat to poor nations who risk “losing a generation”.

He was speaking in Washington at the end of the spring meetings of the World Bank and International Monetary Fund.

Meanwhile, G20 finance chiefs, who also met in Washington, pledged financial support to help new governments in the Middle East and North Africa.

Mr Zoellick said such support was vital.

“The crisis in the Middle East and North Africa underscores how we need to put the conclusions from our latest world development report into practice. The report highlighted the importance of citizen security, justice and jobs,” he said.

He also called for the World Bank to act quickly to support reforms in the region.

“Waiting for the situation to stabilise will mean lost opportunities. In revolutionary moments the status quo is not a winning hand.”

At the Washington meetings, turmoil in the Middle East, volatile oil prices and high unemployment were also discussed.

IMF chief Dominique Strauss-Kahn raised particular concerns about high levels of unemployment among young people.

“It’s probably too much to say that it’s a jobless recovery, but it’s certainly a recovery with not enough jobs,” he said.

“Especially because of youth unemployment… there is now a risk that this will be turned into a life sentence, and that there is a possibility of a lost generation,” he said.