Bernanke Officially Declares; Monetizing Debt; War Games in China

October 24, 2012

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“Once something is used for hedging purposes, it becomes useless for predictive purposes.” ~ Dave Merkel

U.S.

‘Bernanke is trying to import inflation, makes currency war overt’ – Jim Rickards ~ RT

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During QE1 & QE2 wholesale gasoline prices jumped 30% and 37% ~ Hoisington

“91% of U.S. firms say their spending plans would not change if interest rates were to fall by one percentage point” ~ Duke University Survey

Chart of US Debt That’s Monetizable ~ zerohedge

The purchase of Treasuries and MBS was telegraphed; San Francisco Fed already mentioned possibly expanding the print and buy to “other assets”, but it’s less clear which is next – non agency MBS would be the early favorite.

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C&I loans had been growing 10-20% in #operationnewbubble, but recently turned negative ~ WSJ

Are economic cycles shortening? Expansions and recessions had been shorter and less dramatic pre-WWII, before the Fed adopted bubble economics.

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U.S. Real Estate valuations differ by region – coastal regions overpriced, others great values ~ Deutsche Bank

World:

Euro Political Uncertainty Index vs Spanish – German Bonds. ~ politicaluncertainty.com

Uncertainty has become a hackneyed phrase, but the effect is real. Crises are often timed with elections for example.

If the Spanish-German spread follows the political uncertainty index again this time, it’ll be be an indicator to watch as a leading indicator. 

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Hayman Capital points to Japan’s Widening Trade Deficit as portending Dooom ~ businessweek

Japan is still posting a current account surplus, allowing the government to fund their debt without borrowing externally or printing.

I’m waiting for bonds to start falling along with equities as exports to China dry up.

Rajoy Sees Case for Slowing Spain’s Austerity as Economy Shrinks ~ businessweek

Draghi and Bernanke just do not get it – why would politicians cut off the votes they need to get elected if enabled by money printing?

The only language politicians listen to is that of the bond market.

China:

Theme parks in China act out war with Japan ~ WSJ

It brings to mind a Chinese roll playing video game where the U.S. battles China. This is indicative of the jingoism often found in rural China and disturbing if you feel public sentiment ultimately drives policy.

In the “Emperor Wears No Clothes,” I first mentioned the possibility that Chinese authorities could adopt the “rally around the flag” political maneuver amidst any economic upheaval in order to deflect attention from their own blunders .

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Rising China NPLs more evident in rural banks – Bloomberg Briefs

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