Around the Globe 04.30.2013

EU considers protecting savers against future bank collapses | Reuters.

Spanish and Italian NPLs 03.2013

There are two issues with protecting depositors from banking crises.  As we have observed in prior EU led bailouts, no law is applicable to the troika when its handing out bailout euros.  Whether its confiscating deposits in Cyprus, ignoring bond covenants in Greece or changing member governments, anything and everything is on the table once a country enters the crisis zone.

The only rule that they follow is that Germany and the northern tier will not pay any more money for bailouts.  Hence, a banking deposit guarantee is only as solid as the country issuing it.  Perhaps, we will soon see how this will all work.  Spain’s NPLs have gone parabolic, and Italy has reached the launch point.  (TIP: move your money from Eurozone banks now, like the rich have already done.  Do it now.  Don’t wait.)

Bernanke Watch: Is He Eyeing the Exit?.

Ben Bernanke - 4chon Wiki.

Ben Bernanke – 4chon Wiki.

Ben Bernanke will not serve another term as Fed chief, but don’t worry permabulls.  His likely successor, Vice Chairman Janet Yellen, is actually a more enthusiastic money printer.  Ceasing current policy would likely cause a market swoon with unknown consequences, so whoever winds up with the job will not dare to make abrupt changes.

Home Prices in 20 U.S. Cities Climb by Most Since May 2006 – Bloomberg.

Home prices rise, seen helping economic recovery | Reuters.

LA Market Housing Prices

The Fed’s plan is to reinflate burst asset bubbles via money printing in the hopes that the paper wealth created will induce consumption.  Rising housing prices are only good news for those who are looking to sell.  If you wish to buy, your housing cost will take a bigger chunk from your income for the next fifteen to thirty years.  If you have no plans to move, then rising housing prices will increase property taxes.

Note that against the backdrop of newly forming bubbles the employment situation remains dismal for the majority of Americans.

Business Activity in U.S. Unexpectedly Shrank in April – Bloomberg.

Chicago PMI 04.2013

No matter how much money is printed and how much future generations are indebted, the story remains that all the magic bullets fired to revive the American economy have failed.  Removing red tape and reforming the country’s byzantine tax code would probably kickstart the economy, but politicians are loathe to propose these policy choices.  Reducing laws and taxes decreases the government’s power, so this strategy is essentially a nonstarter.

Special Report: Kuroda’s calculus – How the Bank of Japan staged its big bang | Reuters.

Japan Debt to GDP

Since I began following the financial markets as a teenager in the 80’s, a distinct trend has emerged in mainstream media reporting.  The central banker is lionized and treated like a rockstar among the financial outlets.  This report is typical of the trend.

Whenever you read these articles, keep in mind that there are no simple solutions to the present quandary in Japan.  Years of economic stagnation, runaway spending and demographic decline have created a disaster waiting to happen.  No amount of Bank of Japan action will change the endgame, though it will alter the timing somewhat.  Japan will now collapse either sooner or later than otherwise.  Take your pick.

In the meantime, whenever the mainstream media blathers about the Japanese recovery keep the chart above in mind.

Japan household spending surges as Abenomics gains momentum | Reuters.

Older shoppers lead Japan’s surge in consumer spending –

Japanese Retail Sales

Slap a few anecdotes together, cherry pick your statistics and you have a recovery meme.  This type of article has been quite popular during the eurocrisis, and now it begins to appear in Japan.  Consumer spending rose 5.3% in March, but retail sales simultaneously fell 0.3%.  How can both those facts be true? Methinks higher import prices caused consumer spending to rise taking a bite out of other sectors.

Japan-to-Korea Output Misses Estimates as Taiwan Cools: Economy – Bloomberg.

The biting reality of the Japanese situation is contained within this article.  This information was not hyped as much as the rise in consumer spending, but it is just as important.  Industrial production continues to remain soft in the Pacific Rim.  With that fact in mind, who will buy all of those Japanese exports to spur a recovery?

UPDATE 3-Cyprus bailout scrapes through island’s parliament | Reuters.

The Cyprus bailout passed parliament by a 29-27 vote.  The Cypriots just condemned themselves to a decade of depression and stagnation in order to maintain their euro membership.  The people support the euro by a two to one margin, so they only have themselves to blame now.


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