In a comment directed toward the European peripherals, Pimco’s Bill Gross said that Greece was a zit, Portugal a boil, and Spain a tumor. Readers of NOTES FROM UNDERGROUND know that Spain has been on the radar for a long time. The growth numbers or lack of growth, rather, hampered by severe austerity budgets have generated ADVERSE FEEDBACK LOOPS that have rendered all economic projections null and void. When austerity bites, all growth forecasts are cast asunder. Staying with Gross’s almost biblical references, I suggest looking at Europe though the lens of the TEN PLAGUES.
1. BLOOD–What the austerity minded in Europe are trying to extract from Greece as they strive to support European creditors at the expense of the Greek populace
2. FROGS–It’s obvious but of course all things are on hold till after the French elections (sorry for flippancy)
3. LICE–The scratching that is being done to search for any asset to find to secure for collateral for LTRO
4. WILD ANIMALS–The way some creditors act when seeking to secure any asset in effort to ensure repayment of sovereign debt;
5. DEATH OF CATTLE–The selling off of herds as taxes are raised in the name of budget austerity
6. BOILS–Bill Gross cited Portugal so I will let his opinion on the impact of the Portuguese debt problem for Europe define itself;
7. HAIL–The stones that are rained down on the authorities as the austerity budgets bring civil disobedience
8. LOCUSTS–The term of endearment that the German authorities have for anybody desiring to short European sovereign debt;
9. DARKNESS–The gloom that is descending upon the European Central Bank as it realizes that LTRO is losing its power to lighten the load of stressed debt:
10. DEATH OF THE FIRSTBORN–The result of increased tax levies upon the inheritance schemes of wealthy Europeans
Overall, not a very pretty picture as Europe heads into the spring, poetically a time of resurrection. It will take a miracle of gargantuan proportions for Europe to escape the plague of AUSTERITY in a fragile global economic environment. The discomfort of Europe will be salved by more ECB action, and, most probably a soon-to-be-proposed aid program from the IMF, just in time for an attempt at Sarkozy’s rebirth. Will the monetary Pharaohs in Frankfurt relent enough to permit growth to begin before exacting the horrific repayment of debt? See Chairman Bernanke, Europe will provide the backdrop for continued FED policy. Domestic economic matters will not prevail.
***In a Fortune Magazine article this week, it was revealed that Fed Chairman Bernanke met with a group of “BANKERS”
and advised them to take “a more active role in dealing with the European Debt Crisis.” It appears to be DAVOS
on the HUDSON
as the FED
reveals it concerns about Europe to a select group of financial kingpins. Why wasn’t NOTES FROM UNDERGROUND invited?
This probably explains the recent softness in the EURO
as Mr.Bernanke raised his concerns about the global fallout from the persistent problems of Europe. The meeting was prompted by NY FED PRESIDENT
William Dudley. Now it seems that Mr. Bernanke will always have the EUROPEAN DEBT IMPULSE TO MAINTAIN ZIRP.
I tell you Jim Grant, it’s always something.
***It may be Good Friday tomorrow but the BLS
is going to be releasing its unemployment data. The Canadians released their employment report today
and it was very robust. The market had been looking for a gain in jobs of 11,000 and the UNEMPLOYMENT RATE TO BE 7.5%
The actual number was a job gain of 82,000 and the rate fell to 7.2%. This was a blowout report and what was especially significant was that manufacturing jobs rose by 11,000 and overall gain in Ontario was 45,000 jobs. The question is was this a catch up to recent positive U.S. data or an indication of stepped up growth in North America?
It is probably too early to tell but if the U.S. number is well above the consensus of 200,000 NFP it will signal that growth is picking up in NAFTA. The U.S. rate is expected to hold steady at 8.3%, but again, if the rate kicks up while jobs increase, the equity markets will view that as NIRVANA. The FED Chairman is all about jobs and employment growth. No matter what the district FED President’s opine, Mr. ’37 will keep the pedal to the floor until GDP is strong enough to bring unemployment down. Look for volatility to increase as the JOBS REPORT IS THE FOCAL POINT OF CHAIRMAN BERNANKE. Average hourly earnings are expected to be up 0.2%, but wage growth has become a secondary issue at this juncture. Happy Holidays to all!
Tags: 10 Plagues, Bernanke, Bill Gross, ECB, Fed, France, Greece, IMF, LTRO, NFP, PIMCO, Portugal, Sarkozy, Spain, unemployment, William Dudley, ZIRP