Romney: Debt is like ‘prairie fire’

One would think something so obvious and ‘in their face’ year after year, decade after decade, might get their attention…

Hollande faces budget shortfall test

(FT) François Hollande has promised that he would take whatever measures necessary to rein in France’s heavy public debt, which is rising close to 90 per cent of gross domestic product. He knows that to win backing for his growth initiative from German chancellor Angela Merkel depends on assuring her that France will meet its obligations on its own public finances. The European Commission’s forecast projected a budget deficit next year of 4.2 per cent, compared to the target of 3 per cent set by Brussels and to which Mr Hollande is committed. That amounts to a gap of some €24bn. Mr Hollande is unlikely to give further details of his plans until he gets an independent report on the public finances at the end of June (after National Assembly elections).

Dutch austerity consensus unravels

(FT) Freedom party leader Geert Wilders brought down the country’s ruling coalition last month when he pulled out of talks over budget cuts needed to meet strict EU deficit limits, triggering elections scheduled for September 12. Mr Wilders is campaigning fiercely against what he calls the government’s “subservience” to Brussels’ demands for budget cuts. A poll released on Monday suggests voters are turning against the last-minute budget deal reached after the government fell between the ruling liberals and centre-left opposition parties. The April 26 deal pledged the Netherlands to meet an EU deadline to slash its 2013 budget deficit to below 3 per cent of gross domestic product, down from a projected 4.7 per cent.

Mosler Squad Win Much Interrupted BEC Snetterton Race

By James Broomhead

Click here for larger version

And the relatively low Q1 state lending is showing the actual continuing policy constraint.

As previously discussed, China has what they consider an inflation problem, and there are precious few, if any, examples of inflation fights that didn’t cause hard landings.

Ch Headlines:

China to lower reserve requirement ratio
Q1 GDP slows in 29 provinces, regions
China 2012 Growth Forecast Cut to 8.1%, Citigroup Says
China 2012 Growth Outlook Revised to 8% From 8.2%, JPMorgan Says
China Growth Seen at 13-Year Low by Pimco as Banks Cut Forecast

The reasoning is as follows:

Any one of the many top traders working full time in their specific area of responsibility necessarily know a lot more about it than any manager possibly can.

In other words, any manager will have his hands full keeping up with what any one of the traders is up to, making it impossible, for all practical purposes, to keep up with all of them.

So shareholders should expect things to periodically malfunction from lack of sufficient oversight and supervision as a point of logic.

JPMorgan Sought Loophole on Risky Trading

By Edward Wyatt

May 1 (NYT) — Soon after lawmakers finished work on the nation’s new financial regulatory law, a team of JPMorgan Chase lobbyists descended on Washington. Their goal was to obtain special breaks that would allow banks to make big bets in their portfolios, including some of the types of trading that led to the $2 billion loss now rocking the bank.

Additionally, my guess is the whale has been liquidating a long oil position (and maybe paying on long bma ratios) for the last several weeks.

That is, this announcement probably came after their liquidations were pretty much over to minimize losses.

This means the market effects are probably behind us.

Japan Will Follow Europe With a Debt Crisis: Kyle Bass

By Jeff Cox

May 10 (CNBC) — Japan is about to join Europe in the debt crisis ranks, with the two regions offering the best opportunities for investors to bet against, hedge fund manager Kyle Bass said.

While the world’s attention has been focused on sovereign debt issues in Greece and elsewhere, Japan will emerge as a problem area as well as the European developments accelerate, Bass told attendees at the Skybridge Alternatives, or SALT, conference.

“Greece will circle the drain and be ungovernable in the next 30 to 60 days,” said Bass, founder of Heyman Capital and famous for presciently shorting subprime mortgage bonds before the industry collapsed. “Japan is in the crosshairs of the market…I’ve never seen more mispriced optionality in my entire life.”

The Bank of Japan, the nation’s equivalent of the U.S. Federal Reserve, is effectively monetizing the national debt by buying up 50 trillion yen-worth of Japanese Government Bonds, commonly referred to as JGBs in the marketplace, Bass said.

There are a number of perils commonly associated with the strategy of a central bank trying to print its way out of a debt crisis, not the least of which is inflation and lack of confidence in stability of debt, though Bass did not mention specific threats.

However, he said it’s easy to see a crisis coming.

“The fact of the matter is this is no longer an exercise in quantitative analysis,” he said. “It’s a question of when, not if.”

An aging Japanese population and entitlement culture are primary factors contributing to the national debt problem. Bass used disgraced money manager Bernie Madoff to make a point.

“Madoff taught us something,” Bass said. “You can make promises for a long time as long as you don’t have to live up to them.”

Greece’s Tsipras: We Want Euro, but Not Austerity

By Michelle Caruso-Cabrera and Jennifer Leigh Parker

May 10 (CNBC) — The head of Greece’s Radical Left Coalition, Alexis Tsipras, told CNBC Thursday that he will “go as far as I can” to keep Greece in the euro zone, despite declaring earlier this week that the Greek bailout agreement is “null and void” and should be abandoned.

Tsipras (pronounced SEE-Pras), who was unable to form a coalition government this week after his party came second in Sunday’s election, said a Greek exit from the euro zone would be “disastrous.”

Tsipras said he is willing to negotiate with the so-called troika — the International Monetary Fund , the European Union, and theEuropean Central Bank — to keep Greece in the euro zone.