John Hussman Is Stating The Obvious......

I´ve promised to come back after QE 3.0 has started.... Well, it looks like Bernanke started at least the "campain" to hint QE 3.0..... Initially my comment that the break would take only a few weeks should sound ironic... With Bernanke in charge i should have known better...;-) Thank god he is 100 PERCENT! ( no typo ) certain ( his "brilliant" track record ,see Youtube : Bernanke in Denial, should insprice confidence.... ) he could stave off ( core LOL ) cpi inflation when and if it came to that... Probably no coincidence that the topic asset price inflation aka bubbles & the US$ didn´t made it into the interview .... ;-) ( Quote Mish : That was not really an "interview" on 60 minutes, it was an infomercial for Bernanke ) On the topic Bernanke & QE 2.0 i urge you to read the latest comment from Hugh Hendry, Jeremy Grantham & Mish.

Habe ja angekündigt spätestens nachdem QE 3.0 gestartet worden ist wieder etwas regelmäßiger zu bloggen.... Nach diesem Wochenende kann man sagen das Bernanke zumindest die Kampagne für QE 3.0 gestartet hat..... Eigentlich war mein Hinweis, das die Bloggerpause wahrscheinlich nur einige Wochen dauern wird, ironisch gemeint....Mit einem wie Bernanke an den Schalthebeln hätte ich es besser wissen müssen.... ;-) Nur gut das sich Bernanke zu 100 PPROZENT! sicher ist ( leider kein Übersetzungsfehler.... Nach Ansicht von Youtube : Bernanke in Denial sind Aussagen wie diese bestenfalls als bedenklich, bin halt ein höflicher Zeitgenosse, zu bezeichnen ) auf den eh schon massiv geschönten ( hedonisch, Kernrate, usw ) Warenpreiskorb auswirken .... Sicher kein Zufall das die Frage nach der Vermögenspreisinflation sprich BLASE sowie der US$ es nicht in das Interview, das Mish richtig als INFOMERCIAL für Bernanke bezeichnet, geschafft hat.... ;-) In diesem Zusammenhang empfehle ich einen Blick in den den letzten Kommentar von Hugh Hendry , Jeremy Grantham & Mishz u werfen...

John Hussman

It doesn't take much thought to recognize that, like Bernanke's actions, the actions of the ECB are ultimately likely to represent not monetary policy but fiscal policy.

When you buy the debt of countries that have a high likelihood of defaulting on this debt, or will avoid default only by the creation of currency that could have been issued to finance fiscal expenditures, it follows that you are engaging in fiscal policy without the authorization of elected governments.

We are allowing 99% of the world to accept budget cuts and austerity in order to defend bondholders from taking losses or having to accept debt restructuring. When bondholders lend money to a financial company or to a country, at a spread over the yield available safe debt, they are explicitly accepting the risk that the bet will not work out, and that they may lose money in the event of a restructuring.

When government policy at every level focuses on making bondholders whole, then government policy at every level focuses equivalently on protecting the inefficient and dangerous misallocation of capital.

Almost a miracle that so far the populist backlash & the social unrests against the "war on taypayers" are still minor... I fear that this will change rather sooner than later...... UPDATE: Video: Fire bombs, Stones Fly in Greek Riots; All Flights to/from Athens Cancelled

The daily headlines about trillions in black holes & the people in charge should be at least enough to give the Special Gold Report "In Gold We Trust" - Erste Group a shot..... In contrast to Hendry & Grantham i still think GOLD is not a bad long term hedge against the wisdom of the "Central Banksters" & politicians... ;-)

Bin überrascht das es bisher in Sachen Populismus und vereinztelten ( zu 99% glimpflich verlaufenden ) Demos vorwiegend in Südeuropa ( UPDATE: Video: Fire bombs, Stones Fly in Greek Riots; All Flights to/from Athens Cancelled bisher kein größerer Gegenwind für ständig wiederkehrende Rettungsaktionen einzig und allein zu Lasten der Steuerzahler gibt... Dank des bisher eingeschlagenen Weges befürchte ich allerdings das sich das demnächst ändern wird....Spätestens dann dürfte speziell Europa und der € irreparablen Schaden davon getragen haben....

Die inzwischen zur Gewohnheit gewordenen tagtäglichen ( und noch vor 12 Monaten für unmöglich gehaltenen) Schlagzeilen über gigantische Summen sowie die Historie der handelnden Personen sollten ausreichen zumindest mal einen Blick in den Special Gold Report "In Gold We Trust" der Ersten Group zu werfen... Obwohl ich damit anderer Meinung als Hendry & Grantham bin, denke ich das GOLD langfristig nicht die schlechteste Absicherung gegen die geballten Wesiheiten der weltweiten ( aber inbesonders der angelsächsich geprägten ) "Central Bankster" sowie der momentan handelnden Politiker ist....;-)

Without a good dose of humor the daily spin is almost impossible to withstand... So enjoy an almost instant classic.....

Da dies alles mit einer gehörige Portion Humor wesentlich leichter zu ertragen ist lege ich allen dringend den nachfolgenden Clip ans Herz....Dürfte bereits jetzt ( 4 Wochen nach Veröffentlichung ) als Klassiker durchgehen....

Update:

Did Bernanke Pull a Fast One Last Night? The Mess That Greenspan Made

Guest Post: Bernanke Is 100% Sure Jim Quinn of The Burning Platform via ZH

Lies, Half-Truths, and 100% Hubris on 60 Minutes Mish

Money Printing and 100% Confidence – Day 4 Pento & Baum via Tim

Helicopter Ben gets in a spin The Economist

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
The Big Bank Theory
http://www.thedailyshow.com/
Daily Show Full Episodes Political Humor The Daily Show on Facebook

Interesting Irish National Debt Stats......

Stunning....If you want to put a positive spin on it one can argue that there is a lot of room for improvement for the Irish to boost their share.... Of course only if the ECB is willing to slow down their ongoing buying "frenzy" ;-) For more charts click here

Positiv formuliert bleibt da für die Irischen Mitbürger, Banken und Versicherungen noch viel Luft nach oben.....Natürlich nur für den Fall das sich die EZB in den nächsten Jahren mit Ihren Käufen zurückhält....;-) Für mehr Charts in Sachen Irland und Staatsverschuldung bitte hier klicken....

Irish government debt needs you Barclays Capital’s Laurent Fransolet via FT Alphaville

In common with a number of other countries, one of the problems Ireland has faced is the limited domestic investor base for its debt. There is only limited data on who owns the Irish debt. On the domestic side, the Irish central bank has detailed data on holders… Only 15% of the debt is held domestically (the lowest proportion in the euro area), and domestic buyers have not stepped up their purchases recently, in contrast to a number of other euro area countries (eg, Spain, Portugal).

…Irish domestic banks own just €8.5bn of the debt, compared with balance sheets of about €700bn

Similarly, insurance companies and pension funds hold just €3-4bn of Irish government bonds, compared with total fixed income assets of €66bn. These low domestic holdings probably reflect the fact that for a long time, Irish debt was scarce and low yielding, and thus shunned by domestic investors. We think it also shows that in a way, there is potential for more domestic buying, even if these changes in investment policies can take time.

To have an idea of who owns this external debt, we utilise a number of sources. First, we take into account the ECB Securities Markets Programme buying (SMP): in total, about €61bn of Greek, Irish and Portuguese securities have been bought by the ECB. We believe the majority was Greek debt, with the rest slightly skewed in favour of Irish debt (say 15bn to 20bn).

Overall, we assume 30% of the ECB SMP buying has been in Irish debt (€18bn – the SMP likely makes the ECB the biggest single debt holder of Ireland, Portugal and Greece).

Read the last paragraph twice & ( even if i have to repeat myself over and over again ) the Joke Of The Day From ECB´s Smaghi "€ More Stable Than Deutsche Mark" is getting even more "funny".... ;-)

Lasst den letzten Absatz in aller Ruhe nocheinmal Revue passieren und (ich wiederhole mich da gerne) der Witz des Tages von Smaghi das der "€ stabiler als die DM ist" nur noch witziger... ;-)

Importantly… Ireland built up a lot of cash deposits in 2008, which it could run down more than €10bn if market access remains limited/too expensive. With monthly cash deficits of about €1.5bn, limited bills redemptions (€2.75bn in Q1 11) and no bond redemption until November 2011 (€4.4bn), Ireland is not under severe pressure to issue large amounts for meeting cash needs. As such, the NTMA confirmed on 9 September that Ireland was fully funded until next June, which is our assessment as well, if Ireland decided to run down its cash balances entirely (although we suspect it will want to keep some cash buffer to hand).

Put the € 18 billion ECB number since March 2010 into perspective with the monthly cash deficit of only € 1.5 billion.... All this in the name of "tightening the unrealistic high spreads vs BUNDS"...... Spin at its best....UPDATE: Irish banks' ECB loans rise to 95.1 bln euros

Die ganze Sache wird dadurch nicht weniger witzig wenn man die geschätzten 18 Mrd € die die EZB seit März 2010 aufgekauft hat ins Verhätltnis zu dem monatlichen Cash Defizit von 1,5 Mrd € setzt..... Und all das läuft noch immer unter dem Motto "die unrealistischen hohen Renditeaufschläge vs den BUNDS mit dem Marktbild der EU / Politiker / EZB in Einklang zu bringen "..... Mir würden da haufenweise treffendere Begriffe einfallen.... UPDATE: Irish banks' ECB loans rise to 95.1 bln euros

Got GOLD ? ;-)

Greek Debt Crisis – Apocalypse Later

Almost "shocking" to see a rationale market response.... ;-)

Fast "unheimlich" mal eine rationale Marktreaktion zu sehen... ;-)

Greek Debt Crisis – Apocalypse Later CFR

The difference between Greek and German government bond yields can be used to estimate the market’s view of the likelihood of a Greek default. The chart above shows these probabilities over different time frames on three different dates. On April 30th, no European plan was yet in place to address the ballooning Greek debt, and default was considered a real possibility in the short term. On May 11th, just after the European Stabilization Mechanism (ESM) was announced, markets sharply cut their view on the odds of default across all time horizons. However, the market’s analysis of the ESM has become much more nuanced since then. On September 1st, the market’s view of the probability of default within two years was lower than before the ESM was announced, but higher over longer time frames.

Greece will happily borrow from the ESM to avoid having to close its primary deficit (that is, excluding interest payments) too rapidly. Yet if Greece is successful in eliminating its primary deficit, its temptation to default will actually grow, as it can wipe out huge amounts of accumulated debt without any longer needing the financial markets to fund current expenditures. If faced with the choice between paying Greek debts and letting Greece default, its northern neighbors may, once their banks are on more solid footing, find it more attractive simply to let Greece default. This is the story line that the markets are now pricing into government bond spreads

Greece Default Risk Is ‘Substantial,’ Pimco’s Bosomworth Says

“Greece is insolvent,” Bosomworth, Munich-based head of portfolio management at Pimco, which oversees the world’s largest bond fund, said in a telephone interview today. “I see it as being quite a substantial risk that Greece eventually defaults or restructures.”

In a best-case scenario, Greece’s government debt will swell to 150 percent of gross domestic product, Bosomworth said.

“Debt servicing as a share of government revenue will increase substantially, particularly if current yield levels do not decline,” Bosomworth said.

Greece Sees €4 Billion (2%) In Deposit Outflows In July ZH

Outflow troubles continue for the time bomb in Europe's periphery, Greece, whose second default is approaching. The central bank has just reported that in July household and business deposits declined from €216.5 billion to €212.3 billion: so much for the ECB's presence inspiring confidence. So €4 billion a month in deposits taken out, and applying a fractional reserve multiplier, means Greek banks lost another €40 billion in monetary supply in July alone. Deflation + Austerity = Kaboom.

National Bank of Greece Greek debt warning FT Alphaville

The most denied cash call of recent times has finally happened. Late on Tuesday night National Bank of Greece announced a €2.8bn ‘Comprehensive Capital Strengthening Plan

NBG says the equity issue and disposal will ‘create an additional, sizeable capital buffer to face the macro-economic situation in Greece in the short-to-medium term’.

But what does that mean? Could it be that NBG is raising the money to cover a Greek government bond haircut? Very possibly.

GREECE: SOUNDING VERY LEHMAN-ISH Prag Cap

If you recall the early stages of the financial crisis there was one glaring trend from the various bank CEO’s and CFO’s – they just couldn’t wait to get on TV with their slogan:

“We are well capitalized.”

Of course, that turned out to be a lie as it’s now clear that most banks in the USA were woefully undercapitalized. Today, Greece’s finance minister is out with similar comments:

“Restructuring is not going to happen. There are much broader implications for the eurozone should Greece have to restructure its debt. People fail to see the costs to both Greece and the eurozone of a restructuring: the cost to its citizens, the cost to its access to markets. If Greece restructures, why on earth would people invest in other peripheral economies? It would be a fundamental break to the unity of the eurozone.”

In other words, “we are well capitalized”.

As i have said from the beginning, the entire bailout stunt wasn´t to help the Greek..... Combine this with the latest "Unlimited & Extended" action from the EU, ECB & the Joke Of The Day From ECB´s Smaghi "€ More Stable Than Deutsche Mark" is getting even more "funny".... ;-) Judging from recent IMF attempts to desperately broaden their "safety net" it´s almost certain that Greece won´t be alone......In this context headlines like IMF Sees G7 Net Debt At 200% Of GDP By 2030; 441% By 2050 should further boost confidence...."Pray & Delay" seems to be the top priority around the globe... The long term bull case for GOLD isn´t getting weaker on a daily basis....

Wie bereits seit Anfang der Krise gesagt ging es weniger um das Wohlergehen der betroffenen Griechen..... Wenn man zudem noch die letzten unlimitierten und zeitlich unbegrenzten weiteren Rettungsmaßnahmen der EU & ECB mitberücksichtigt wird der Witz des Tages von Smaghi das der "€ stabiler als die DM ist" nur noch witziger... ;-) Die neuesten Verrenkungen des IMF um das "Sicherheitsnetz" fast um jeden Preis zu erweitern können nur dahingehed gedeutet werden das wir in naher Zukunft etliche "Griechenländer" sehen werden...In diesem Zusammenhang sollte nachfolgende Meldung IMF Sees G7 Net Debt At 200% Of GDP By 2030; 441% By 2050 eine Erklärung geben warum sich die langfristigen Perspektive für GOLD tagtäglich trotz stark gestiegenem Kurs nicht gerade verschlechtern....

You Know You Are In Trouble When Supersizing A Backup Rescue Facility By Half A Trillion $ Isn´t Enough 4 Month After The Introduction....IMF Version

In April i wrote at the beginning of the Greece / € Crisis

No wonder the IMF has just SuperzisedTheir "Backup Rescue Facility" By Half A Trillion ( no typo ) for "Contribution To Global Financial Stability"......

Im April im Angesicht der Griechenland und € Krise schrieb ich

Kein Wunder das "vorsorglich" der IMF die Mittel zur "Stabilisierung" der Sorgenkinder mal eben still und heimlich auf 500 Mrd $ verzehnfacht hat ( kein Tipfehler )....

Fast forward to August...... I´m not sure how credible the 1 trillion $ number is but the fact that the IMF is implementing / modifying another credit facility on top of all the existing ones does at least raise eyebrows..... Looks like even "Shock & Awe" isn´t able to stop the flooding.....

Hat ja immerhin einige Monate gereicht...... Ich habe keine Ahnung wie "belastbar" die genannte Summe von 1 Billion $ für die neuen "Rettungsschirme ist....Wenn man aber bedenkt das bereits wenige Monate nach dem letzten Programm bereits wieder Bedarf an neuen Rettungsschirmen besteht muß man befürchten das besonders im Hinblick auf die Zukunft diese Summe nicht zu hoch gegriffen ist....Schon erstaunlich das selbst diese "aberwitzigen Summen" anscheinend nicht mehr ausreichen zumindest mittelfristig die ständig größer werdenden Problemzonen zu überdecken.....

IMF Changes, Expands Crisis-Prevention Credit Lines Bloomberg

Talks are ongoing with member countries to raise the IMF lending capacity to $1 trillion as part of G-20 discussions.

John Lipsky, IMF first deputy managing director, told reporters on a conference call today that the institution has enough money to fund the new credit lines. At the same time, he said he is confident that member countries will continue to demonstrate a commitment for the IMF to have the resources to make the new credit lines “credible and usable.”

IMF Eliminates Borrowing Cap On Rescue Facility In Anticipation Of Europe Crisis 2.0; US Prepares To Print Fresh Trillions In "Rescue" Linen ZH

today the IMF announced it "expanded and enhanced its lending tools to help contain the occurrence of financial crises." As a result, the IMF has as of today extended the duration of its existing Flexible Credit Line (FCL) to two years, concurrently removing the borrowing cap on this facility, which previously stood at 1000 percent of a member’s IMF quota, in essence making the FCL a limitless credit facility, to be used to rescue whomever, at the sole discretion of the IMF's overlords.

Additionally, as the FCL has some make believe acceptance criteria (and with countries such as Poland, Columbia, and Mexico having had access to it, these must certainly be sky high), the IMF is introducing a brand new credit facility, the Precautionary Credit Line (PCL), which will be geared for members with "sound policies [which just happen to need an unlimited source of rescue funding] who nevertheless may not meet the FCL’s high qualification requirements." In other words everyone.

Lastly, for those lazy readers who always scroll to the very bottom looking for a video clip summarizing all previously said, you are in luck. Here is the IMF's Reza Moghadam condescending, and blatantly lying to all who care, as to what the purpose of tonight's "Crisis Prevention Toolkit" expansion is.

IMF Expands Loan Options to Developing Countries WSJ

WASHINGTON—The International Monetary Fund said Monday it would broaden the kinds of loans it offers to encourage a large swath of developing countries to get financial help before they are engulfed in crisis.

Under a new "precautionary credit line," the IMF said it would lend a substantial amount of money to countries whose policies it generally endorses, before those nations run into trouble. The loan would operate like a line of credit, so a country wouldn't have to use the money, and rack up interest charges, unless it needed the financing.

The program would offer loans of as much as five times a country's quota, meaning its financial stake in the IMF, with the possibility of doubling that after a year. Indonesia, for instance, has a $3.1 billion quota, so it could be eligible for a credit line of up to $31 billion. ....

The IMF is working on yet another new loan, the "global stabilization mechanism," which would be available for groups of countries, as a way to overcome the stigma of borrowing from the IMF. The IMF is even considering approving countries for such loans without them having to apply for the money.

Among issues still being debated is whether to simply allow existing credit lines to be more broadly deployed or come up with a new facility that would provide short-term liquidity, he said.

The IMF devises a new way to lend to vulnerable countries before they suffer from financial crises Economist

IMF Sees G7 Net Debt At 200% Of GDP By 2030; 441% By 2050 ZH

Got GOLD ? ;-)

More Proof That China´s Real Estate Market Is Fueled Mainly Via State & Local Owned Enterprises.....

To get the entire picture you should read China : State & Local Owned Enterprises vs Madoff, Ponzi, Enron...... first..... Just last week i labeled the headline as a little bit "provocative"..... As usual i was too polite... ;-)

Empfehle zur Einführung und um das ganze Ausmaß zu erfassen vorweg China : State & Local Owned Enterprises vs Madoff, Ponzi, Enron...... zu lesen..... Letzte Woche habe ich die Überschrift bewusst noch als eine leichte Übertreibung tituliert.... War wie üblich mal wieder zu höflich.... ;-)

State-Owned Groups Fuel China’s Real Estate Boom NYT

WUHU, China — The Anhui Salt Industry Corporation is a state-owned company that has 11,000 employees, access to government salt mines and a Communist Party boss.

Now it has swaggered into a new line of business: real estate.

The company is developing a complex of luxury high-rises here called Platinum Bay on a parcel it acquired last year by outbidding two other developers to win a local government land auction.

Anhui Salt is hardly alone among big state-owned companies. The China Railway Group is developing residential complexes in Beijing after winning the auction for a huge piece of land there.

Likewise, the China Ordnance Group, a state-led military manufacturer best known for amphibious assault weapons, paid $260 million for Beijing property where it plans to build luxury residences and retail outlets.

And in one of China’s biggest land deals yet, the state-run shipbuilder Sino Ocean paid $1.3 billion last December and March to buy two giant tracts from Beijing’s municipal government to develop residential communities.

All around the nation, giant state-owned oil, chemical, military, telecom and highway groups are bidding up prices on sprawling plots of land for big real estate projects unrelated to their core businesses.

By driving up property prices, the state-owned companies, which are ultimately controlled by the national government, are working at cross-purposes with the central government’s effort to keep China’s real estate boom from becoming a debt-driven speculative bubble — like the one that devastated Western financial markets when it burst two years ago.

Here in Wuhu, a sleepy industrial town about 70 miles west of Nanjing, Anhui Salt is breaking ground on its high-rise project in the center of town — next to a hotel operated by Anhui Conch Holdings.

The land was put up for auction in May 2009, and there were just three bidders — another of which was also a state-owned company. Anhui Salt, which also boasts of operating a steel trading arm, a financing vehicle and even two Honda dealerships, says it is eager to expand beyond industrial products and table salt.

“Platinum Bay is Anhui Salt Industry’s first luxury project and targets the very rich, the very elite class of Wuhu,” said Su Chuanbo, marketing manager.

Asked why Anhui Salt wants to be a developer, Mr. Su said the central government had encouraged state companies to be more profitable, and that real estate was incredibly lucrative.

Add the following story to the mix ........

Das kombiniert mit der nachfolgenden Meldung......

Chinese Manufacturing Weakens in ‘Slowdown, Not a Meltdown’ Bloomberg

China’s July manufacturing data were the weakest in more than a year as the government clamped down on property speculation and investment in polluting and energy- intensive factories.

A purchasing managers’ index released today by HSBC Holdings Plc and Markit Economics showed a contraction. A government-backed PMI slid to 51.2 from 52.1, the Federation of Logistics and Purchasing said yesterday.

The HSBC PMI slid to 49.4, the first reading below 50 in 16 months, from 50.4 in June. Measures of output, orders and export orders all showed contractions. The government PMI, released by the statistics bureau and the logistics federation, showed the weakest expansion in 17 months.

H/T Chart BI

Needless to say that stocks in tandem with commodities surged to a multi month high.....;-)

Überflüssig zu erwähnen das die Aktienmärkte Hand in Hand mit den Rohstoffen diese Nummer mit neuen Mehrmonatshochs abgefeiert haben.... ;-)

HSBC's July China services PMI points to expansion MW

China's service-sector growth accelerated in July, marking the fastest pace of expansion in three months, according to HSBC's Purchasing Managers' Index. The PMI came in at 56.3 in July, up from 55.6 in June, HSBC said in an emailed statement Wednesday. "This improvement in the July service PMI reading, though modest, reflects the resilience of the domestic part of the economy, in particular consumer-related sectors. Combined with the sustained recovery in the labor market, this should cushion the economic slowdown in the coming quarters," The July PMI marks the 20th consecutive month of expansion for the services sector

This "transition" is good in the long term..... Rebalancing is needed....

Immerhin ein Silberstreif am Horizont.... Die Entwicklung des Servicesektors ist dringend notwending um die Ungleichgewichte zumindest auf Lange Sicht halbwegs ins Lot zu bringen....

China : State & Local Owned Enterprises vs Madoff, Ponzi, Enron......

The headline is for sure a little bit "provocative" but at least in part some similarities are difficult to deny.... A nice follow up to Another Reason Why The Chinese Banking Financial Strength Rating Is Just Beating Iceland & Kyrgyzstan..... Looking more & more like an injuste to Kyrgyzstan & Co.....;-)

Die Überschrift ist sicher ne leichte Übertreibung..... Trotz allem kommt man schwer darum herum zumindest in Teilbereichen gewisse Gemeinsamkeiten zu entdecken.....Nette Ergänzung zu Another Reason Why The Chinese Banking Financial Strength Rating Is Just Beating Iceland & Kyrgyzstan..... Inzwischen fast als Beleidigung Islands zu bezeichnen.... ;-)


Just how risky are China’s housing markets? VoxEU

We collected data on all the residential land parcel auctions in Beijing dating back to Q1 2003, and created a constant quality price index for Beijing residential land, controlling for a number of location and site quality variables that are described in Wu et al. (2010).

Figure 5 shows that real, constant quality land values increased by over 750% since 2003 in the Chinese capital, with more than half of that rise occurring over the past two years. Additional regression analysis showed that state-owned enterprises controlled by the central government played a meaningful role in this increase, as prices were 27% higher on the parcels they won at auction compared to otherwise equivalent land sites purchased by other investors.

The role of state-owned enterprises also is potentially worrisome. It could be that these entities are superior investors and are purchasing sites that are of especially high quality in ways that we cannot control for in our empirical analysis. However, it also could be that moral hazard is at work here, as these entities are thought to have access to low cost capital from state-owned banks and may believe they are too big to fail. If this is the driving force, then prices are being bid up as one arm of the government buys from another.

More on the same topic.....

Mehr zum gleichen Thema.....

Meanwhile, in the Chinese property market… FT Alphaville

And once you’ve picked your eyeballs off the floor after seeing that 800 per cent figure, do note the interesting finding about the SOEs.

In particular, the paper says that a ‘meaningful fraction’ of the rise in prices was driven by the few but huge companies backed by central government — ‘central SOEs’. And central SOEs are getting more influential in the market — see chart:

And as the paper continues, by way of explanation:

…Central SOE developers pay high prices relative to the values of nearby housing unit sales prices. That suggests these particular buyers simply pay more and that this does not merely reflect omitted quality effects. Moral hazard arising from these entities believing they are too important to fail, combined with their access to low cost capital from state-owned banks, also could help explain their bidding behavior… It remains an open question as to why central SOE developers became so much more active in housing development over the past few years.

Here Comes The Real Stress: Only 27% Of China Project Loans To Be Repaid In Full ZH

Chinese banks may struggle to recoup about 23 percent of the 7.7 trillion yuan ($1.1 trillion) they’ve lent to finance local government infrastructure projects, according to a person with knowledge of data collected by the nation’s regulator

Local governments set up the financing vehicles to fund projects such as highways and airports due to limits on their ability to directly borrow money. The central government this year restricted borrowing on concern money isn’t being used for viable projects.

Only 27 percent of the loans to the financing vehicles can be repaid in full by cash generated by the projects they funded, the person said

Chinese rating agency criticises … Chinese rating agencies FT Alphaville

July 27 (Bloomberg) — Credit ratings assigned to yuan- denominated bonds issued on behalf of local governments in China are misleading and don’t reflect risks investors face, Dagong Global Credit Rating Co.’s chairman said.

Local government-backed borrowers shop around for the best rankings from Chinese ratings companies and “whoever gives them a better rating gets the business,” Guan Jianzhong, chairman of privately owned Dagong, one of China’s five official ratings agencies, said in a Bloomberg Television interview in Beijing yesterday. “This is very dangerous.”

Needless to say that every large bank has China Inc. as a majority owner.....

Denke man muß nicht extra erwähnen das zudem jeder der großen Banken unter Mehrheitskontrolle des chinesischen Staates steht.....

The PBoC can’t easily raise interest rates M. Pettis / China Financial Markets

One of the problems with a severely repressed financial system, especially one with rapid credit expansion, is that there tends to be a huge amount of capital misallocation supported by borrowing, and in an increasing number of cases it is only the artificially-reduced borrowing costs that allow these investments to remain viable. I worry that even if the PBoC wanted to raise rates, it would not be able to do so without exposing how dependent borrowers are on artificially cheap capital.

Take the most obvious example, the PBoC itself. The central bank officially has about $2.5 trillion in reserves. The PBoC has funded this position with an equivalent amount of RMB liabilities, which makes it very vulnerable to changes in the value of the currency.

Weirdly enough, although the numbers are huge, it has proven difficult to convince anyone that the PBoC is not the richest institution in the world, and that it is actually very vulnerable to big losses

The problem for the PBoC occurs not just because of the currency mismatch but also because it needs repressed funding costs to keep it profitable. How much do the PBoC foreign currency assets earn? I would guess probably between 3% and 4%, maybe less. The RMB funding cost, on the other hand, is roughly between 1.5% and 2.5%. This leaves the PBoC with a net positive carry of between 1% and 2%.

If the RMB appreciates by as little as 2% a year, in other words, the PBoC runs a negative carry on its assets. Every further 1% increase in interest rates, or additional 1% rise in the value of the RMB, then, erodes its capital by at least $25 billion (annually, if it happens through an increase in interest rates).

Many years of very low cost borrowing has created a huge dependency on low interest rates among SOEs, local governments, and other creditors of the bond markets and the banks (not to mention the banks themselves), all of whom are directly or indirectly funded by long-suffering households.

As I discussed in an entry several weeks ago, repressing the interest rate is the equivalent of granting hidden debt forgiveness

Moral Hazard everywhere.....

Moral Hazard wohin das Auge blickt......

UPDATE:

ICBC May Raise $6.6 Billion, Adding to China Bank Share Sales

ICBC’s offer brings to more than $60 billion the amount China’s five largest banks are raising after a record $1.4 trillion in lending last year put pressure on capital levels.

Bank of China Ltd. has also said it plans a CNY60 billion rights issue in Shanghai and Hong Kong and China Construction Bank Corp. is planning a CNY75 billion rights issue in both markets

I assume the term "Drop in the bucket" fits perfectly....

Denke die Bezeichnung "Tropfen auf den heissen Stein" dürfte passen....

"Enron-Esque Accounting" Still Rampant......

"Austerity" New York Style........For more on this topic you should read Payback Time : State Debt Woes Grow Too Big to Camouflage & Seven State Pension Plans Out of Money by 2020 or just visit the Madoff, Ponzi links on Wikipedia..... ;-)

In Sachen Buchführung sehen im Vergleich mit den Amis selbst die Griechen alt aus....Mehr zum Thema entweder Payback Time : State Debt Woes Grow Too Big to Camouflage & Seven State Pension Plans Out of Money by 2020 oder direkt unter Wikipedia nach Madoff oder Ponzi suchen.... ;-)


State Plan Makes Fund Both Borrower and Lender NYT

ALBANY — Gov. David A. Paterson and legislative leaders have tentatively agreed to allow the state and municipalities to borrow nearly $6 billion to help them make their required annual payments to the state pension fund.

And, in classic budgetary sleight-of-hand, they will borrow the money to make the payments to the pension fund — from the same pension fund.

As word of the plan spread, some denounced it as a shell game and a blatant effort by state leaders to avoid making difficult decisions, like cutting government spending or reducing pension benefits.

Under the plan, the state and municipalities would borrow the money to reduce their pension contributions for the next three years, in exchange for higher payments over the following decade. They would begin repaying what they borrowed, with interest, in 2013.

No wonder the "In Fiat Money We Do Not Trust Camp" is getting more popular, but when considering the following headline Households Bust $1 Trillion Muni Mark it should be clear that the term "crowded" could be used for other asset classes than GOLD....;-) Thanks to the World Cup posting will be very light during the next few weeks.....

Bei solch absurden Geschichten muß man sich nicht wundern wenn das "In Fiat Money We Do Not Trust Camp" merklich an Popularität gewinnt....Und wenn man sich die nachfolgende Zahl Households Bust $1 Trillion Muni Mark ansieht sollte sich auch die angestiegende Beliebtheit von GOLD relativieren....Da momentan auch bei mir das WM Fieber grassiert wird in Sachen Blog die nächsten Wochen eher wenig passieren...

UPDATE

61% Underfunded Illinois Teachers Pension Fund Goes For Broke, Becomes Next AIG-In-Waiting By Selling Billions In CDS ZH

“If you were to have faxed me this balance sheet and asked me to guess who it belonged to, I would have guessed, Citadel, Magnetar or even a proprietary trading desk at a bank.” So begins a story by Alexandra Harris of the Medill Journalism school at Northwestern, which, however, does not focus on some exotic product-specialized hedge fund, or some discount window (taxpayer capital) backed prop desk (hedge fund) at a TBTF bank, but instead at the 61% underfunded, $33.7 billion Illinois Teachers Retirement System (TRS), which just happened to lose $4.4 billion in 2009 (a year when, courtesy of America's conversion from capitalism to socialism, the market rose 60%), and 5% in2008.

Yet underperformance can be explained. What can not, is that the TRS has now become a shadow AIG. As Harris notes "TRS is largely on the risky side of the contracts, selling and writing OTC derivatives, including credit default swaps, insurance-like contracts that guarantee payment in the event of a default, that were blamed in part for the 2008 collapse of Lehman Bros. and bailout of insurance giant American International Group Inc., or AIG."

Suddenly NY pension plan isn´t looking as bad....... ;-)

Plötzlich sieht selbst die NY Pensionskasse ganz passabel aus..... ;-)

In Fiat Money We Do Not Trust

Nice addition to Gold...The Ultimate Triple-A Asset . If you are still not in the GOLD camp & "stunned" by the recent price action you really should give the link a chance..... Especially if you think GOLD is a bubble...... I think it´s more important than ever that a prudent asset allocation should at least have "some" GOLD exposure.......Doesn´t mean you have to do the "SPROTT","PAULSON" or "KAPLAN"......

Passt perfekt zu Gold...The Ultimate Triple-A Asset . Denke jeder der bisher die Preisbewegung beim Gold mit ungläubigem Staunen betrachtet sollte sich den Link zwingend zu Gemüte führen.... Gilt besonders für alle die ( oftmals seit Jahren ) im "GOLD IS A BUBBLE" Lager zu finden sind......... Ich bin mehr denn je der Meinung das jede vernünftige Portfolio Strukturierung zumindest "etwas" mit GOLD zu tun haben sollte.....Man muß ja nicht gleich den "SPROTT", "KAPLAN" oder "PAULSON" machen.....

H/T Wall Street Follies

The image from Wall Street Follies is well over 10 years old and an updated version would obviously include "QUNATITIVE EASING" aka "PRINTING MONEY"..... ;-)

Der Cartoon von Wall Street Follies ist deutlich über 10 Jahre alt..... Eine aktuelle Version würde sicher die Wörter "QUANTITIVE EASING" bzw "PRINTING PRESS" beinhalten..... ;-)

David Rosenberg ZH

Gold has broken out to the upside even as the U.S. dollar has done likewise on the back of a renewed flight-to-safety bid. What this means, of course, is that gold has managed to hit new highs even as, (i) the U.S. dollar has risen, which means gold is breaking out against all major currencies; and, (ii) other industrial commodities, such as oil and copper, have slumped from their recent highs.

So what this all means is that gold is no longer being considered as part of a resource complex that is outperforming the segment but is increasingly being viewed as a currency of its own.

Gold is a hedge against instability of all kinds — don’t think for a second that deflation does not engender instability whether it be financial, economic or political. To be sure, gold is also a hedge against inflation — but that is going to come much, much later and will be the icing on the cake.

Totally agree on the his deflation / inflation view & timeline....

Stimme zu 100% mit der Deflations / Inflationszeitachse überein....

In Fiat Money We Do Not Trust FT Alphaville

....the price of gold is rising against every major currency, not just the embattled euro.

Gregg Gibbs : "If the market won’t buy the government bonds, the central banks have to. There is no other choice. The alternative is just too damaging for the economy to contemplate. If the central banks don’t buy the debt, then governments are forced into a budget surplus (a surplus is required to cover interest payments on existing debt).

Imagine the carnage if major economies were forced from double digit deficits to surplus, you are talking Great Depression type scenario or worse."

Even though inflation is yet to break out, the price of gold is telling us that this threat is very real over the longer term. People rightly so do not trust fiat money anymore.

Pimco’s Mohamed El-Erian via Felix Salmon

I am inclined [to warn] against the long-term implications of additional steps to turn monetary authorities (with revolving balance sheets) into fiscal agencies (with more permanent exposure to dubious assets).

An even larger-scale use of central bank balance sheets, if it were to materialize, would provide only a temporary respite, and the collateral damage and unintended consequences would be serious, including the impact on inflationary expectations.

Welcome to the OECD debt trap George "Minsky" Magnus via FT Alphaville

There is little on offer in the underlying details of most governments’ deficit and debt arithmetic moreover that would suggest these debt ratios are about to peak and then decline to more manageable levels in the period ahead.

Indeed on current policy settings the evidence suggests that debt-to-GDP ratios will continue to climb.

The reasons are two-fold and relate to conventional textbook definitions of a ‘debt-trap1’

The first reason is that most governments will still be running a deficit on their cycle-adjusted primary budget balance in 2011 – the budget balance excluding interest payments that would appear if the economy was operating at full capacity.

The second reason concerns the relatively high real borrowing costs that governments are confronting at present, partly a function of low levels of inflation and – for some economies – the increasing premium that investors have been demanding to hold their sovereign debt. The ‘effective’ real borrowing rates for most OECD governments last year on their accumulated debt position was north of 3 percentage points (see charts below). For some economies it was north of 4 percentage points. Against an underlying backdrop where potential growth rates for most OECD economies are probably south of 2% and for many closer to 1.5%,this is deeply concerning.

Bill Gross WaPo

"In order to pay the interest and the bill when it comes due, we'll simply have to issue more IOUs. That, to me, is Ponzi-like," Gross said. "It's a game that can never be finished."

AMEN.....

Hinde Capital - ECB the European Commisssion's Whore May 2010

H/T ZH

Debasing the ECB’s Balance Sheet Hussman via Tim

A “sterilized intervention” is one where the euros created through the purchase
of distressed Euro-area debt will also be absorbed by selling other assets from
the ECB’s balance sheet

Therefore, we are fundamentally promising to debase the quality of our balance sheet, by exchanging higher quality Euro-area debt with lower-quality debt of countries that are ultimately likely to default.”.

Looks like even Hussman is too otimistioc when it comes to the ECB & "sterilisation"......

Beim Anblick des nächsten Links muß man leider sagen das wie zu befürcvhten war selbst Hussman beim Thema EZB und "Sterilisation" noch zu optimistisch ist....

Sterilised and scandalised FT Alphaville

But here’s the key bit from the ECB’s statement:

Fixed term deposits held with the Eurosystem are eligible as collateral for the Eurosystem’s credit operations.

Which means the ECB’s govt bond purchases will be offset for a full week — until the banks can repo the fixed term deposits at things like the Long-Term Refinancing Operation (LTRO). What liquidity the ECB takes away with one hand, via the term deposits, it gives in unlimited amounts with the other.

JP Morgan’s David Mackie

In the event, there was less symbolism than we expected . . .

what the ECB is doing is potentially far more worrying. The ECB is now purchasing the government debt of sovereigns whose solvency is in question: neither the Bank of England nor the Federal Reserve did that

"CENTRAL BANKSTERS".....;-)

Gold...The Ultimate Triple-A Asset

This is a perfect follow up on Eric Sprott Still Makes A Lot Of Sense...... ( !!! ) and shows that if you would eliminate the "Enron-Esque Accounting" probably 90% percent of all sovereign ratings are more than a little bit inflated...... UPDATE: Timing of the post could have been worse..... See end of the post.....

Die perfekte Ergänzung zu Eric Sprott Still Makes A Lot Of Sense...... ( !!! ) die eindrucksvoll aufzeigt das wenn man die "Enron-Esque Bilanzierung" miteinbeziehen würde wohl knapp 90% aller Staatsratings zum Teil erheblich "inflationiert" sind..... UPDATE: Timing des Postings hätte schlechter sein können... Siehe Ende des Postings....

Eric Sprott: Weakness Begets Weakness: from Banks to Sovereigns to Banks via ZH

The rating agencies’ ranking of the United States is even more disconnected from reality. To believe that the US sets the benchmark for sovereign debt credit ratings is preposterous.

While we have written ad nauseam about the excessive debt issuance by the United States, we found a recent update written by United States Government Accountability Office (GAO) to be particularly instructive. The update noted the US’s budget deficit equivalent to 9.9% of GDP in 2009 - the largest since 1945 - and stated that without significant policy changes the US government would soon face an "unsustainable growth in debt". This was not news to us.

It goes on to state, however, that using reasonable assumptions, "roughly 93 cents of every dollar of federal revenue will be spent on the major entitlement programs and net interest costs by 2020." This is news!

In less than ten years, using reasonable assumptions, there will essentially be no money left to run the US government - 93% of all tax revenues the US government collects will go to pay social security, Medicare, Medicaid and the interest costs on their national debt.

This implies no money left over for defense, homeland security, welfare, unemployment benefits, education or anything else we associate with the normal business of government. And the US government is rated AAA!?

Speaking of Rating Agencies :-)! ....

Da wir gerade bei den Rating Agenturen :-)! sind....

In our view it’s time for investors to acknowledge sovereign risk. The ratings agencies can opine all they want, but it seems clear to us that the only true AAA asset to protect your wealth is gold.

The risk inherent to investors, of course, is what happens when the bond market begins to realize and react to this new level of risk.

Banking To Debt Crisis Roundabout GLG Partners via FT Alphaville

Bond Traders Declare Inflation Dead After Yields Fall

The bond vigilantes who punished governments for profligate spending in past years have gone into hiding.

Sovereign bonds yield an average 2.385 percent, about the same as a year ago and below the average of 3.08 percent in 2008 when the credit market seizure led investors to seek the safety of government debt, according to Bank of America Merrill Lynch index data.

The cost to borrow is steady even though the amount of bonds in the index that includes nations from the U.S. to Germany and Japan has grown to $17.4 trillion from $13.4 trillion two years ago.

SUPERB RISK/REWARD........ ;-)

Scheint mir ein ausgewogenes Chance/Risikoprofil zu sein..... ;-)

Bob Janjuah: "We Are Trapped In Some Sort Of Horrendous Keynesian/Monetarists' Nightmare...." via ZH

We are trapped in some horrendous Keynesian/monetarist nightmare, where policymakers, aided/abetted/advised by their buddies in the media, in the lobbyist cabal and in financial system, have YET AGAIN decided to go down the route which merely delays the problem/pushes it down the road, but which virtually guarantees that when the NEXT bubble collapses (I assume it will be the Global Government Debt/Bond Bubble and/or the Global Fiat Money/Paper Money/FX Bubble), there is NO pleasant way back.

Bill Gross WaPo

"In order to pay the interest and the bill when it comes due, we'll simply have to issue more IOUs. That, to me, is Ponzi-like," Gross said. "It's a game that can never be finished."

Read this twice... Bill "The Bond King" Gross from PIMCO is hinting the obvious.....Glad that i didn´t have to bring PONZI into the mix myself....... All this should make all the "GOLD BUBBLE TALK" even more "credible.... ;-)

Das letzte Zitat von Bill "The Bond King" Gross, der ja mittels PIMCO bekanntlich der weltweit größte Investor in Anleihen ist, sollte zur Sicherheit lieber zweimal gelesen lesen werden........Bin dankbar das ich PONZI nicht selber ins Spiel bringen mußte.....Dieser "grundsoliden" Fundamentaldaten geben speziell all denen die noch immer nicht genug von der "GOLDBLASE" bekommen können sicher noch mehr "Nahrung"... ;-)

"GOLD BUBBLE CHART" ;-) from Todd Harrison / Minyanville via Pragmatic Capitalist

I highly recommend to read the entire links & to subscribe to the free Sprott Asset Management Newsletter.... No wonder the IMF has just Superzised Their "Backup Rescue Facility" By Half A Trillion ( no typo ) for "Contribution To Global Financial Stability"......

In dem Link sind noch etliche andere unangenehme Weisheiten speziell im Hinblick auf Griechenland. Empfehle daher sich die kompletten Links etwas genauer durchzulesen sowie den kostenlosen Sprott Asset Management Newsletter zu abonnieren....Kein Wunder das "vorsorglich" der IMF die Mittel zur "Stabilisierung" der Sorgenkinder mal eben still und heimlich auf 500 Mrd $ verzehnfacht hat ( kein Tipfehler )....

UPDATE:

S&P cuts Portugal’s ratings two notches to A- FT Alphaville

S&P cuts Greece ratings to junk status MW

S&P Downgrades Spain To AA On "Risks To Budgetary Position", Outlook Negative ZH

Glitch In The Matrix......

The "Wall Of Worry" is getting steeper...... Should the spreads remain elevated even after Greece has ""activated" the EU/IMF rescue package i think we could see the VIX spike to over 17.... ;-)

"Schockierend" .... ;-) Sollten jetzt selbst nach Aktivierung des EU/IMF Programmes die Auschläge nicht "merklich"sinken dürften mit hoher Wahrscheinlichkeit die nächste Stufe der Krise gezündet werden....

The Greek debt merry-go-round goes round again FT Alphaville

The 10-year Greek bond – German bund spread widened to 426 basis points on Thursday.

That’s up from 406bps on Wednesday — and nearing an 11-year high

Keep in mind that the bailouts are not to rescue Greece ( see Foreigners Holding 75 % of Greece’s Current Debt Stock & Bank Exposure To PIIGS / Chart ) .....

With everybody "Too Small To Fail" the prospects for a "GOLD-BUG" could be worse... ;-)

Nur zur Erinnerung, die teilweise wahnwitzigen Konstruktionen sind nur auf den ersten Blick zur Rettung der Griechen gedacht ( siehe Foreigners Holding 75 % of Greece’s Current Debt Stock & Bank Exposure To PIIGS / Chart ) ....

Da inzwischen weltweit die oberste Maxime selbst bei aussichtslosen Fällen "Too Small to Fail" ist dürften sich auf absehbare Zeit die Aussichten für einen "GOLD-BUG" nicht gerade verschlechtern....;-)

UPDATE: Fixing the Matrix........

IMF Prepares For Global Cataclysm, Expands Backup Rescue Facility By Half A Trillion For "Contribution To Global Financial Stability" ZH



EXTEND & PRETEND .......

Andie Xie: "China's Property Market Is One Of The Biggest Bubbles Ever..."

We really live in very interesting times.....The update comes just in time for todays headline Property prices in China grew at the fastest pace in nearly five years in March.... The "Wall Of Worry" is getting steeper on a daily basis.... For more on the "China Syndrome" see here, here, here , here & here.....

Aufregende Zeiten.......Passend hierzu die heutige Nachricht Property prices in China grew at the fastest pace in nearly five years in March nicht passen....Eine ausführlichere Betrachtung des immer ernster werdenden "China Syndrome" gibt es hier, hier, hier , hier & hier.....

Empty : Though many of the properties in Kangbashi have been sold and a million people were projected to be living in Kangbashi by 2010, the city is still empty.

Ordos,China: A Modern Ghost Town Photo Gallery TIME

H/T The Mess That Greenspan Made

No Room To Relax Andy Xie / China International Business

The central government has unleashed another round of property tightening measures. This time it is focusing on mortgage lending terms: the mortgage interest discount for first-time homebuyers has been reduced; the discount for second-time homebuyers has been abolished and the down payment requirement raised to 40%; and the rate for third-time buyers is being left to the banks' discretion with down payments raised to 60%.

Predictably, sales volumes in both primary and secondary markets have collapsed. But no one is panicking, not even those who live off the property bubble. Why? Aren't they supposed to be terrified of the government's crackdown?

It seems we have seen this movie before. China has launched property-tightening measures several times but it relaxed them just when they began to bite.

The bottom line is that local governments, and the central government through them, depend very much on property for revenue. The market doesn't believe the government will cut off the hand that feeds it.

Local governments and developers are sitting on massive liquidity that they raised last year through land and property sales and borrowings, taking advantage of the "anything goes" window during the stimulus period. They seem to believe that the central government will change its mind before they run out of liquidity. So they are comfortable waiting and not cutting prices.

Cutting prices doesn't make sense if the government is expected to loosen policy again soon. The current lending terms effectively keep second- and third-time homebuyers out of the market. To sell, developers must cut prices to levels affordable to the buyers of first homes, who have low incomes and little wealth. All the players will play by the new rules only if the central government proves its credibility by maintaining the tightening policy until local governments and developers run out of money.

Contrary to the policies' intent, local governments are readying for another round of property inflation. Local governments have been using bank loans to resettle residents, and resettlement costs have skyrocketed since those being moved need enough compensation to buy properties at today's prices. Unless property prices rise considerably, local governments will end up losing money, which they cannot afford to do.

Resettlements played an important role in supporting demand for property last year. The overwhelming majority of end-user purchases probably came from resettled residents who used their compensation money for a down payment.

Resettlement compensation is the biggest transfer of wealth from the government to the household sector since the privatization of public housing at low prices a decade ago. It is probably the most important government action supporting today's economy.

The positive elements of resettlement compensation come with two major negatives. First, it is using a form of leverage to support demand. Local governments borrow to pay the compensation packages, using the land as collateral. The resettled residents use the compensation as down payment for mortgage borrowing; so government debt becomes equity for mortgage debt.

There is no real equity in the financing chain

China's property market is a massive bubble. The stock of residential properties, developers' inventories, and land that local governments have pledged to banks may exceed by three times the gross domestic product.

Get the yuan right, and prove pundits wrong Andy Xie / Caixin

Yuan appreciation hype ignores China's need for higher rates

The intensity and persistence of yuan appreciation expectations point to support for China's vast property bubble. These expectations have increased the concentration of hot money in China, which in turn has caused excess liquidity and speculation, fueling the property bubble.

By all measures (stock value to gross domestic product ratios, inventory value to GDP ratios, new property sales to GDP ratios, price to income ratios, rental yields and vacancy rates), China's property market is one of the biggest bubbles ever. It's probably much bigger than the U.S. property bubble relative to GDP.

Now, the same liquidity that fueled the property bubble is leading to a rapid pickup for consumer price inflation. One just needs to look around to see the seriousness of the inflation picture, regardless of how it's measured. Denying that inflation is serious in China right now is akin to burying one's head in the sand. This sort of denial is how countries in Southeast Asia got into a crisis situation in the past: They kept real interest rates too low and fueled speculation that eventually destroyed their banking systems.

If China's economic stimulus is withdrawn, the property bubble will cool. And it may even burst. This is why so many interest groups consistently argue against higher interest rates. Instead, they support using currency appreciation to cool inflation.

Many analysts argue that raising interest rates would attract more hot money. This is wrong. Hot money comes to China for currency appreciation and asset-bubble reasons, not to chase interest rates. When an interest rate is raised, expectations for property-price appreciation wane and hot money is more likely to fall than rise.

Increasing the yuan's value a bit would certainly trigger more frenzy. Any new property booms that follow may support the economy for a time. But the long-term consequences would be severe. Indeed, a small appreciation could make a crisis inevitable.

UPDATE:

Top ten reasons you know China has a financial bubble on its hands Ed Harrison

Jim Chanos On Charlie Rose - Full Interview ZH

China’s Debt Bubble: When Will the Ponzi Unravel? NC

Chinese consumer credit binge begins FT Alphaville

China - The Mother of All Black Swans ZH

Red hot real estate Economist Free Excahnge

China Bond Risk May Offset Reward WSJ

Payback Time : State Debt Woes Grow Too Big to Camouflage

Fits perfectly to this post.....

Passt hervorragend zu diesem Posting.....

State Debt Woes Grow Too Big to Camouflage NYT

California, New York and other states are showing many of the same signs of debt overload that recently took Greece to the brink — budgets that will not balance, accounting that masks debt, the use of derivatives to plug holes, and armies of retired public workers who are counting on benefits that are proving harder and harder to pay.

Joshua Rauh, an economist at Northwestern University, and Robert Novy-Marx of the University of Chicago, recently recalculated the value of the 50 states’ pension obligations the way the bond markets value debt. They put the number at $5.17 trillion.

After the $1.94 trillion set aside in state pension funds was subtracted, there was a gap of $3.23 trillion — more than three times the amount the states owe their bondholders.

I highly recommend to read the entire NYT link..... Some pretty sobering details how desperate some states are already acting to mask the shortfalls.....

Empfehle wärmstens den kompletten NYT Link zu lesen..... Einige ziemlich verzweifelte Versuche um die aktuellen Lücken möglichst "kreativ" zu stopfen......

Summary via Mish

• New Hampshire took $110 million from a medical malpractice insurance pool to "balance its budget". The State Supreme Court said put it back.
• Colorado tried to grab a $500 million surplus from Pinnacol Assurance, a state workers’ compensation insurer that was privatized in 2002.
• Hawaii went to a four-day school week.
• Connecticut tried to issue its own accounting rules.
• California is making companies pay 70 percent of their 2010 taxes by June 15.
• New Jersey and other states make their budgets look balanced by pushing debts into the future. While Greece used a type of foreign-exchange trade to hide debt, the derivatives popular with states and cities have been interest-rate swaps, contracts to hedge against changing rates.

Fitch Downgrades Illinois and Warns of Further Actions as Budget Gap Widens Jesse

Illinois is financially the fifth largest US state with a 2008 GDP of approximately $633 Billion.

To put this in perspective, the 2008 GDP for the nation of Greece was approximately $357 Billion.

The usual political reflex is already underway.... Blame the speculators......

Der übliche politische Reflex ist einmal mehr bereits aktiviert.....Stoppt die Spekulanten....

The CDS inquisition, California edition FT Alphaville

It was only a matter of time. California — following in the footsteps of Ireland and Iceland, Greece, Spain, and politicians of all stripes and nationalities — has called for an examination of credit default swaps sold against its bonds.

California Treasurer Bill Lockyer has sent a letter to six big banks that underwrite the state’s municipal bond sales, asking what the banks’ role may be in also selling credit default swaps on Californian debt

The Muni Market is so far not worried ( surpirse, surprise ) that this house of cards will face any difficulties at least in the near term.........

Wenn man sich den Muni Chart so ansieht hat dieser ( welch Überraschung ) die beste aller Welten eingepreist....

Bespoke

Investing in municipal bonds is a paradox for investors right now. On one hand, they are attractive because of their tax-free status since taxes are expected to rise. On the other hand, with the economy as bad as it is, municipalities could come under duress and be at risk of default.

Based on the performance of the National Muni Bond ETF (MUB) in recent months, it looks like investors are weighing the tax advantage more heavily against default risk. As shown below, MUB is up 14.4% from its lows last year, and it is trading near its all-time highs since the ETF was released in 2007.

The chart above is even more "impressive" when you add the following story to the mix.....

Der Chart ist noch "eindrucksvoller" wenn man die nachfolgende Geschichte miteinbezieht.....

Bond insurer blow-up fallout, Las Vegas Monorail edition FT Alphaville

March 29 (Bloomberg) — Holders of bonds sold by the Las Vegas Monorail Co. likely won’t get their next payment due July 1 because the insurer, Ambac Financial Group Inc., won’t cover them.

The monorail, linking the city’s casinos, seeks to reorganize under Chapter 11 bankruptcy and has minimal funds to cover its next scheduled debt disbursement of $9.6 million in July, Wells Fargo, the trustee for the bonds, said in a March 26 announcement. While Ambac guarantees payments of $1.2 billion for the monorail, its obligation has been transferred by Wisconsin insurance regulators to a segregated account that temporarily can’t honor claims, according to the filing.

The Las Vegas Monorail example highlights what really matters about the dire state of the bond insurance industry – municipalities, and muni bondholders, are going to get hurt.

The halt marks the first time that a regulator has raised the possibility that Ambac, which insures $256 billion of municipal bonds, may be unable to pay current municipal bond insurance policy claims to preserve reserves for future obligations

Got GOLD ?

Foreigners Holding 75 % of Greece’s Current Debt Stock

One of the main reasons why the "Smoke & Mirrors" ( excellent link via Yves Smith / NC ) Greece "Rescue" & a hidden bailout ( see the ECB U-TURN My Big Fat Greek Collateral Conversion ) has been orchestrated..... It´s still the number one goal to bail out banks & insurers ( see PIIGS Claims On European Banks: $1.5 Trillion; France Most On Hook In PIIGS Implosion & Ireland Stunned To Uncover "Truly Shocking" Information By Its Banks ).....Nobody is too small too fail....Sarcastically one can argue that in hindsight it seems the Lehman "incident" was one of the best things that could have happened to the industry......

Denke das wir hier einen der Hauptgründe für den "Smoke & Mirrors" ( fantastische Zusammenfassung via Naked Capitalism ) Rettungsversuch bzw die indirekten ( siehe die 180 Grad Drehung der EZB My Big Fat Greek Collateral Conversion ) Bailoutbemühungen sehen.... Es geht wie leider immer noch darum Banken und Versicherungen vor möglichen Schäden zu "beschützen" ( siehe PIIGS Claims On European Banks: $1.5 Trillion; France Most On Hook In PIIGS Implosion & Ireland Stunned To Uncover "Truly Shocking" Information By Its Banks )...... Keiner ist unwichtig genug um zu fallen...."Spitz" formuliert könnte man fast meinen das im Nachhinein Lehman für die Branche der bestmöglich anzunehmende Unfall gewesen ist......

The kindness of (bond market) strangers FT Alphaville

With foreigners already holding three quarters of Greece’s current debt stock, convincing them to buy even more becomes increasingly difficult. Here’s what Deutsche’s Gillian Edgeworth says:

"Euroland insists that the Greek sovereign continues to access the market if possible. The sovereign issuer will hope that foreigners remain keen buyers of bonds, though foreigners already hold 75% of the total debt stock.

In the absence of further foreign buying, local institutions will only likely be able to absorb government issuance if domestic banks continue to draw off [European Central Bank] liquidity facilities in size."

Lucky, then, that the ECB decided to revise its acceptance rules for the collateral pledged by Greek banks on Friday

Too bad for the "architects" that so far the spreads havn´t narrowed in a meaningful way.....;-)

Leicht problematisch für die Bailoutakrobaten lediglich das sich zumindest momentan die Spreads nicht wesentlich "eingeengt" haben...... ;-)

Greek debt – spreading like it’s 1999 FT Alphaville

It looks like Hellenic Republic bond spreads over German bunds are back at 1999 levels — when Greece first attempted to join the eurozone but failed because it didn’t meet the required economic criteria

No wonder Gold has been hitting a series of new ATH in € terms ...

Da verwundert es wenig das Gold seit Wochen eine Serie von neues Allzeithoch auf € Basis markiert.....