Sunday, December 1, 2013

Today's Links

1--Iceland Jubilee: Iceland thumbs nose at international opposition to advance $1.2 billion debt relief plan, RT

Iceland’s government has announced that it will be writing off up to 24,000 euros ($32,600) of every household’s mortgage, fulfilling its election promise, despite overwhelming criticism from international financial institutions.
The measure was introduced by the country’s prime minister, Sigmundur David Gunnlaugsson, the leader of the Progressive Party which won the late-April elections on a promise of household debt relief.

According to the government’s website the household debt will be reduced by 13 percent on average. 
Citizens of Iceland have been suffering from debt since the 2008 financial crisis, which led to high borrowing costs after the collapse of the krona against other currencies.
 
“Currently, household debt is equivalent to 108 percent of GDP, which is high by international comparison,” highlighted a government statement, according to AFP. "The action will boost household disposable income and encourage savings.”
The government said that the debt relief will begin by mid-2014 and according to estimates the measure is set to cost $1.2 billion in total. It will be spread out over four years....

http://rt.com/business/iceland-crisis-policy-rating-757/
In 2008 Iceland faced the worst financial crisis in its history as three leading banks defaulted under the weight of huge foreign debt. As it became clear the default were inevitable Iceland’s government nationalized the banks, while foreign creditors were left holding the bag.
“A Major part of Iceland’s debt has been written off. That means the country has more chances to pay its debts. So Iceland’s bonds are more attractive to investors than those of Greece or Portugal”, commented Tamerlan  Khassimikov, the head of BST Capital Management

2---Russell Napier: "We Are On The Eve Of A Deflationary Shock ", zero hedge

Inflation has fallen to 1.10/0 in the USA and 0.7% in the Eurozone and we are now perilously close to deflation. Reflation is needed to relieve debt burdens throughout society and in doing so to bolster corporate equity. Investors are cheering the direct impact of QE on their equity valuations, but ignoring its failure to produce sufficient nominal-GDP growth to reduce debt. In a market where such bad news has been seen as good news (as it leads to more QE.), the reality of QE's failure will become bad news as we head towards deflation.

 When US inflation fell below 1% in 1998, 2001-02 and 2008-09, equity investors saw major losses. If a similar deflation shock hits us now, those losses will be exacerbated, since the available monetary responses are much more limited than they were in the past.

 For investors who cannot take the risk of leaving the bull-market party too early, this report focuses on three leading indicators of imminent deflation: copper prices; inflation expectations, as implied by the difference in yield between five-year Treasuries and Treasury inflation-protected securities (TIPS); and the spread on BAA corporate bonds....

the Fed's failure to create normal broad-money growth is intensifying as bank credit growth slows rapidly, while in the Eurozone, bank credit to the private sector is now contracting more rapidly than it did in 2009. The failure of monetary policy to defeat deflation is about to become apparent, with dire consequences for equity prices.


Conclusion

 We are on the eve of a deflationary shock which will likely reduce equity valuations from very high to very low levels. This research seeks to provide investors with some lead indicators as to when the current disinflationary forces erupt into a destructive deflation. Each investor must decide for themselves just how close to midnight they want to leave this particular party. The advice of Solid Ground is leave now as it is increasingly likely that one event will be the catalyst to very rapidly change inflationary into deflationary expectations. Indeed, when key prices are already falling across the globe, one should expect one key major credit event to occur.

3---Every move you make...Testosterone Pit

And we can’t say we weren’t warned. In his 1973 book Between Two Ages: America’s Role in the Technetronic Era, uber-globalist and Obama advisor Zbigniew Brzezinski wrote the following passage*:   
The technotronic era involves the gradual appearance of a more controlled society. Such a society would be dominated by an elite, unrestrained by traditional values. Soon it will be possible to assert almost continuous surveillance over every citizen and maintain up-to-date complete files containing even the most personal information about the citizen. These files will be subject to instantaneous retrieval by the authorities. 
In the technotronic society, the trend would seem to be towards the aggregation of the individual support of millions of uncoordinated citizens, easily within the reach of magnetic and attractive personalities exploiting the latest communications techniques to manipulate emotions and control reason. 
This regionalization is in keeping with the Tri-Lateral Plan which calls for a gradual convergence of East and West, ultimately leading toward the goal of one world government. National sovereignty is no longer a viable concept.

4---Off Siberia’s Arctic coast, the seafloor belches methane, ars technica
And it's belching more than we had thought it was.

5---Housing blues: Cash investors packing it in?, Dr Housing Bubble

In 2001 8.8 percent of all sales went to cash buyers.  In 2012 it was 30 percent.....Foreclosures are now a tiny piece of the sales market, making up only 6 percent of all sales (versus 56 percent in February of 2009).

Cash sales were up by 3 times the normal volume from 2001 and nearly twice the historical average going back to 1998.  This average is skewed because it starts around the time of the massive real estate mania.  So what happens when the cash crowd starts pulling back?

The volume of cash buying
In economics you usually look at historical precedents and try to forecast the future as best as you can.  Yet we have never had a situation where investor buying has been so big.

6---'Subprime MBS With a Government Guarantee', economists view

anne said in reply to Peter K....
Remember that I have repeatedly showed the weakness in employment during the housing bubble years, then too the labor share of business income was declining through those years. What was driving consumer spending and the economy was rising home prices to 2006 and then the hissing of housing bubble began to undermine consumption.

7---Less global demand from US, Bloomberg

The U.S. current-account deficit, which reflects the excess of imports over exports, has narrowed. It was 2.5 percent of GDP in the second quarter compared with almost 6 percent in the third quarter of 2006. The last time it was as low as now was in 1999, when the U.S. was in the midst of a 15-year trend of ever-greater deficits

Another reason expansion in the U.S. doesn’t foster as much global growth is simply that it’s a smaller piece of the world economy. Americans accounted for 22 percent of worldwide GDP in 2013, down from 31 percent in 2000, according to IMF data. China’s portion tripled during the same period, to 12 percent of global activity.

8---They're Baaack! Executives From Biggest Subprime Lenders Are Peddling Risky Mortgages Again , Huff post

9---Great Graphic: Rent Relative to House Prices in High Income Countries , marc to market


10---"We don't talk to terrorists". US in secret talks with Hezbollah, wsws

The US is exploring to what extent Hezbollah is prepared to accommodate US strategic interests. Immediately at issue is Hezbollah’s role in the Syrian war and its readiness to assist the US in working out a “political solution” that would see much of the US-backed, Islamist-led opposition brought into a “transitional government” in Damascus.

Less than three months ago the Obama administration was on the brink of launching war on Syria, a war that could have rapidly triggered war with Iran. Instead, it has chosen to see if it can harness Tehran to its strategic agenda, using it and its allies to help stabilize the region under US hegemony. One of its leading concerns is concentrating its military resources on the so-called “pivot to Asia”—an effort to militarily isolate, and if necessary, confront China.

Like Tehran, Hezbollah has indicated that it is looking for a bargain, welcoming Tehran’s own overtures to the US and entering into secret talks with Washington.


 

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