"De Gaulle avait annoncé la crise actuelle dès 1965"

- Bank credit analysts can see a financial market crash within weeks

The blow-out in the credit default swaps on major banks in Europe can point to only one thing say the bankers who spend their lives working with these instruments, a financial crash within weeks in September or October.

Bankers watching their video monitors have not seen this happen since this month in 2008, and that then forewarned of the global financial crash that was only forestalled by a $16 trillion tsumani of liquidity from the Federal Reserve.

Neutered Fed

Where it is going to be different this time is that the Fed has shot its bolt. Giving a third credit card to a person who has maxed out on two cards is less effective at boosting spending power. Besides the Fed’s reaction is already priced into these widening CDS spreads.

CDS are the cost of insuring debt, and it is rising for the top European banks as the eurozone crisis grows and banks become less and less sure of the credit risk. In short, they fear a sovereign default that will implode the system and leave the exposed banks with huge losses.

Inter-bank lending is also beginning to dry up causing a liquidity squeeze, part of the same process as the rise in the cost of CDS. Yet oddly bank stocks could still rally yesterday along with Wall Street, perhaps because equity analysts are turning a blind eye to the reality of the credit markets.

Japan downgraded

But whereas the stock market can be moved by animal spirits and loose money from the Fed, the credit markets tell a very different story. The downgrading of Japan by Moody’s to Aa3 was a far more significant event of the day and to be fair left the Nikkei down over one per cent.

Optimists are still hoping for a stock market rally after the speech by Fed chairman Ben Bernanke tomorrow. But whatever he says this is not going to change the deteriorating credit position in the European banks with their enormous contagion through to the US banking system.

That makes it even more difficult for the Fed to deal with the coming storm. Batten down the hatches and consider the ArabianMoney bear ETF portfolio that we present to our subscribers this month (click here). Bank credit anlaysts can see the storm approaching now like weather forecasters flagging up a hurricane season.

- Federal Reserve Policy + Extreme Weather = Revolution + World War III

By David DeGraw - Federal Reserve Policy + Extreme Weather = Revolution + World War IIIFederal Reserve Policy Mixed With Extreme Weather Has Put The World On A Fast Track To Revolution And War.

There are many factors that clearly demonstrate why it would be disastrous for the Federal Reserve to repeat their vicious Quantitative Easing (QE) policy. If you want to know a significant reason why they cannot get away with another round of QE, here is an equation for you:

(Quantitative Easing + Extreme Weather = Revolution + World War III)

From the very beginning we knew that the Federal Reserve’s QE program was going to cause the cost of food to rise and the dollar to decline in value, and that these intended results would lead to an increase in poverty and civil unrest. Now there is a new study that gives us some more proof of this obvious fact:

Are food prices approaching a violent tipping point?

A provocative new study suggests the timing of the Arab uprisings is linked to global food price spikes, and that prices will soon permanently be above the level which sparks conflicts….

… there is a specific food price level above which riots and unrest become far more likely. That figure is 210 on the UN FAO’s price index: the index is currently at 234, due to the most recent spike in prices which started in the middle of 2010 [coinciding with QE2].

Lastly, the researchers argue that current underlying food price trends – excluding the spikes – mean the index will be permanently over the 210 threshold within a year or two. The paper concludes: “The current [food price] problem transcends the specific national political crises to represent a global concern about vulnerable populations and social order.” Big trouble, in other words….

The next part of the study identifies that the serious unrest in North Africa and the Middle East also correlates very closely with [the QE2] food price spike. Bar-Yam also notes: “Several of the initial riots in North Africa were identified in news stories as food riots.” From there, the researchers make their prediction of permanently passing the 210 threshold in 12-24 months. [read full report]

In other words, if the Fed engages in another round of QE, the global unrest that they have already ignited will go hyperbolic.

Before getting into the details on how the Fed deliberately made these food prices spike, let’s look at another new study, which also helps demonstrate the obvious, extreme weather is linked to war:

Climate cycles linked to civil war, analysis shows

Changes in the global climate that cut food production triggered one-fifth of civil conflicts between 1950 and 2004

Cyclical climatic changes double the risk of civil wars, with analysis showing that 50 of 250 conflicts between 1950 and 2004 were triggered by the El Niño cycle, according to scientists.

Researchers connected the climate phenomenon known as El Niño, which brings hot and dry conditions to tropical nations and cuts food production, to outbreaks of violence in countries from southern Sudan to Indonesia and Peru.

Solomon Hsiang, who led the research at Columbia University, New York, said: “We can speculate that a long-ago Egyptian dynasty was overthrown during a drought. This study shows a systematic pattern of global climate affecting conflict right now. We are still dependent on climate to a very large extent.”…

Mark Cane, a member of the team, said global warming would have greater climatic impacts than El Niño, making it “hard to imagine” it would not provoke conflicts. [read full report]

Put all these factors together and you have, “The Road Through 2012: Revolution [and/or] World War III.”

In summation, Ben Bernanke and the Fed’s economic central planners were clearly aware of the hostile climate and weather patterns when they engaged in QE2. The Fed’s infamous policy, as I said before, “deliberately threw gasoline all over those brush fires. QE2 was another economic napalm bomb from the global banking cartel.” They knew that they were deliberately attacking (sacrificing) tens of millions of people, but that was secondary to keeping their global Ponzi scheme going by pumping another $2.1 trillion into their fraudulent, insolvent banking system through both QE programs. This is why Ben Bernanke is guilty of crimes against humanity.

- La très inquiétante remontée du chômage en juillet

Le nombre d'inscrits à Pôle emploi le mois dernier a progressé de 36100 en catégorie A, la plus forte progression enregistrée depuis plus deux ans.

Un bond de plus de deux ans en arrière. Il faut remonter à avril 2009, soit en plein cœur de la crise, pour retrouver des chiffres mensuels du chômage aussi catastrophiques.

- Les aléas du climat fauteurs de guerres

Une sécheresse massive a coïncidé avec le développement de conflits en Indonésie, en 1997.

Un conflit civil sur cinq, dans l'hémisphère Sud, est lié aux retours cycliques du courant océanique El Niño.

- L'AMF prolonge "jusqu'à nouvel ordre" l'interdiction des ventes à découvert

Le Point.fr - La mesure, décidée le 11 août pour enrayer la dégringolade boursière, devrait se poursuivre au maximum jusqu'en novembre 2011.

- Lagarde au FMI : pas de cadeau pour la France

Le Point.fr - Paris ne doit rien espérer de l'ancienne ministre de l'Économie. "Bien au contraire."
Lagarde au FMI : pas de cadeau pour la France

- Financial Turbulence - Market Chaos 'Potentially Dangerous for Humanity' - Financial markets don't function properly and endanger humanity, Woolley says.

Financial markets don't function properly and endanger humanity, Woolley says.

Financial markets are inefficient and growing to the point of overwhelming the economy, according to Paul Woolley, an expert on market dysfunctionality. In an interview with SPIEGEL he explains why it's up to investors to stop dangerous trends and hold financial institutions accountable.

- Greece Activates Last-Ditch Liquidity Rescue Package To Preserve Its Financial System

The biggest news of the day today was not that some old crony capitalist had doubled down yet more of his non-taxable wealth on a bet Bank of America would yet again be bailed out, or that Wall Street is about to be sumberged under 3 feet of water. No, the most notable event from today was what wecommented on in our first post from 7 am, namely that: "If we crossed through some spacetime vortex that brought us back in time just two short months ago, to July of this year, today's confirmation that the second Greek bailout has now failed, following the Finnish finance minister's comments that the country will defy Germany and will not give in to demands to abandon its deal for Greek collateral, which in turn has sent the Greek 2 year bond bidless, its yield up 227 bps to an all time record 46.38%, would have been enough to send the futures and the EURUSD plunging." Well, a few hours later, we did get a plunge, even if it was not in the US, but in Germany, where the entire local market flash crashed upon realizing what we noted hours prior: that Greece is now pretty much done. Yet it turns out there was more: unwilling to admit defeat yet, Greece was forced to pull out the last rabbit hiding deep in the recesses of the hat. As the Telegraph reports, "In a move described as the "last stand for Greek banks", the embattled country's central bank activated Emergency Liquidity Assistance (ELA) for the first time on Wednesday night." Such efficiency out of the Greeks for once- not a single Persian was harmed, or even needed, in this 21st century version of Thermopylae: the Greeks did it all on their own.



- Debt and Democracy - Why Germany's Rich Must Pay Higher Taxes

A Commentary by Jakob Augstein - A stockbroker drinks champagne at the Frankfurt exchange. Germany's rich need to pay higher taxes.

A stockbroker drinks champagne at the Frankfurt exchange. Germany's rich need to pay higher taxes.

Germany is a land of inequality. The gap between rich and poor has widened, and cutting public services to balance the budget will only make things worse. If we're serious about saving German democracy, we have to raise taxes on the rich.
Info

A crisis is a turning point. In medicine, when a disease is at its worst, the patient's future hangs in the balance. The doctor does what he or she can, then waits to see if the crisis results in a recovery -- or death.

We know how the death of our society will look from the recent riots in London. We are threatened by social instability, which could lead to societal collapse and anarchy -- our own private Somalia. To avoid that will require a serious effort by the powerful. Our system needs a complete change of course. A politics of inequality got us into this crisis. If we keep going down that road, it will cause our downfall.

It's time to use the crisis as an opportunity for change. It's high time, in other words, to raise taxes.

Germany is a land of inequality. That's not some left-wing dogma, but a simple fact. Our system leads to a "redistribution of wealth from poor to rich." That was the recent conclusion of Paul Kirchhof, a conservative law professor and tax expert that Angela Merkel once wanted to appoint as finance minister. If our political system is to survive in the long term, something needs to change.

[The Surging Franc
- Swiss Fear the End of Economic Paradise->http://www.spiegel.de/international/europe/0,1518,782116,00.html]

By Christian Teevs - By seeking safety in the Swiss franc, global investors have caused its value to skyrocket. But the currency's rapid appreciation hassignificantly hurt exports and tourism -- and given rise to serious worries about the future.

- Resentment in the North - Rich EU Members Lose Patience with the 'Olive Zone'

The rich countries of the northern euro zone are bearing the brunt of bailing out their debt-stricken fellow members. Resentment is growing among their populations, helping euroskeptic right-wing populists to win support. But there is little awareness of how much the European Union has done for their own countries. By SPIEGEL Staff.

- Collateral spat sparks new Greek default fears
Finland’s insistence on getting collateral stirs controversy

By William L. Watts, MarketWatch

FRANKFURT (MarketWatch) — Little more than a month after euro-zone leaders presented a united front on a second rescue package for Greece, a spat over collateral and other issues is renewing fears of a potential default.

Finland last week reached a deal with Greece that would see Athens provide cash guarantees in return for Helsinki’s participation in the 109 billion euros ($157 billion) rescue plan. That caused an uproar in capitals across Europe, with Austria on Wednesday saying it would ask the collateral terms to be applied to all countries participating in the plan.

Germany has said it can’t back a plan that favors Finland over other countries.

Subsequent talk has centered on the possibility of coming up with a plan that would see Greece offer collateral to all bailout participants. European officials will discuss the issue later Friday, Greek Finance Minister Evangelos Venizelos told the country’s parliament, Dow Jones Newswires reported.

Regardless of the outcome, the conflict marks a “very, very dark episode in policy-making in Europe,” said Piet Lammens, head of markets research at KBC Bank in Brussels.

The incident signals that Greece’s euro-zone partners don’t believe the package will ensure the country’s solvency, sending a decidedly negative message to bond markets, he said.

The collateral controversy has in turn renewed fears of a possible Greek default. Greek bond yields soared anew, with the two-year yield trading well above 40% this week.

- New Project Armageddon study forecasts 30% fall in UK house prices

A sweeping analysis of the outlook for the UK economy from Tullett-Prebon entitled ‘Project Armageddon’ predicts a house price ’slump of at least 30 per cent that would take the (price/income) multiple down to three times’

The 64-page strategy insight from the blue-chip brokers concludes that the government has made a critical error in projecting the maintenance of high rates of economic growth while cutting government expenditure. This will severely undermine efforts to tackle the highest debt mountain of any country, something hidden by the way official data is presented.

House prices too high



- Second-quarter GDP trimmed, spending raised

Crews load and unload consumer products at the Port of New Orleans along the Mississippi River in New Orleans, Louisiana June 23, 2010.

(Reuters) - The U.S. economy grew slower than previously thought in the second quarter as business inventories and exports were less robust, a government report showed on Friday, although consumer spending was revised up.

Gross domestic product expanded at an annual rate of 1 percent the Commerce Department said, a downward revision of its prior estimate of 1.3 percent. It also said after-tax corporate profits rose at the fastest pace in a year.

Economists had expected GDP growth to be lowered to 1.1 percent. The economy advanced just 0.4 percent in the first quarter. The second GDP estimate for the quarter confirmed growth almost stalled in the first six months of this year.

- Greece Ups Ante With Minimum Level for Debt Plan

Greece warned on Friday it may opt out of a debt swap crucial to its second international bailout if too few investors rally behind it, raising the ante on the stricken country's 150 billion euro ($215 billion) lifeline.

The swap to shave 37 billion euros off its existing debt is now conditional on 90 percent of private sector investors agreeing to the deal, the country said in its formal letter of inquiry to other governments. It had previously set that threshold as a target, not a condition.

The condition applies to the holders of Greek bonds maturing by both 2014 and by 2020.

"If these thresholds (or either of them) are not met, Greece shall not proceed with any portion of the transaction," the letter said.

- Jackson Hole, capitale de la pensée économique

Par Pierre-Yves Dugua - Jackson Hole, Wyoming : 1712 km au nord-ouest de Kansas City. Tous les soirs vers 18 heures, pendant la période estivale, les touristes se pressent sur la place centrale de cette ville de 10.000 habitants au sud du splendide parc national Grand Teton, pour assister à la reconstitution costumée d'un duel entre cow-boys.

Autant dire qu'il s'agit du dernier endroit où l'on imagine voir les plus puissants banquiers centraux au monde discuter de l'avenir du système financier international. C'est précisément la raison pour laquelle la Réserve fédérale de Kansas City a choisi ce lieu depuis 1982 pour son grand symposium. Il réunit chaque fin août dans un cadre sauvage et grandiose une centaine de hauts responsables de la planète monétaire et de têtes pensantes du monde économique triés sur le volet. Ouvert aujourd'hui, le symposium 2011 se terminera demain.

Pas question de façonner Jackson Hole à l'image de ce qu'est devenu Davos : une série de débats hypermédiatisés entre chefs d'entreprise, investisseurs et responsables politiques. La Fed de Kansas City n'autorise qu'une poignée d'organes de presse à suivre le symposium. Les personnalités invitées une année ne seront pas forcément conviées la suivante. Le nombre de sièges dans la grande salle du Jackson Lake Lodge est limité. De même que le nombre de cabanons rustiques mais confortables où les privilégiés passeront une, deux, voire trois nuits.
Des élans et des bisons

Tous les participants, y compris les quelques journalistes «sélectionnés pour fournir une transparence importante au symposium», doivent payer 900 dollars pour participer à l'événement, sans compter le logement et les «frais d'activités». Côté ludique, Ben Bernanke et Jean-Claude Trichet, le président de la Banque centrale européenne, auront la possibilité, si l'envie leur en prend, de faire une promenade à cheval de deux heures pour un montant de 55 dollars, jusqu'au lac Emma Matilda. Pour 10 dollars, Christine Lagarde et le professeur Eswar Prasad pourront revenir sur la question délicate de la gestion des réserves de change des pays émergents à l'occasion d'une promenade en bus puis en canoë jusqu'au lac Jenny et ses cascades. À moins qu'ils ne préfèrent choisir, avec Marek Belka, président de la Banque nationale de Pologne, l'option - gratuite - d'une promenade à pied avec un guide naturaliste. Ce n'est pas tous les jours que l'on peut débattre des effets de la réglementation financière sur la croissance et l'épargne, tout en observant dans leur habitat naturel des aigles, des hérons, des élans et des bisons…

Côté professionnel, ces hauts responsables assisteront à des conférences d'universitaires spécialistes des questions monétaires et économiques. Les conversations volent bien plus haut à 2 000 m d'altitude que les déclarations politiques délibérément ambiguës qui caractérisent les sommets du G20. Au programme cette année, entre autres : le professeur de Harvard Dani ­Rodrik expliquera si la croissance des pays émergents peut continuer à un rythme soutenu, alors que les vieux pays développés sont en crise. Sa collègue française Esther Duflo - du Massachusetts Institute of Technology - s'exprimera quant à elle sur les imperfections du fonctionnement des marchés dans les pays émergents et leur impact sur la pauvreté.


- Chance of Recession Is as High as 80%: Study

By: John Melloy
Executive Producer, Fast Money & Strategy Session

A plunge in recent economic data puts the probability of a double-diprecession above 80 percent, according to modeling by Bank of America Merrill Lynch released Wednesday, reflecting the toll the U.S. debt downgrade, Europe’s woes and stock market volatility has taken on economic activity.



- Consumer Sentiment Sinks, Hurt by Political Wrangling

U.S. consumer sentiment sank in August as consumers lost confidence in lawmakers' ability to stave off the threat of another recession, a survey released Friday showed.

Stressed out man

The Thomson Reuters/University of Michigan's consumer sentiment index edged up from its mid-August level but was still consistent withrecession-era lows [cnbc explains] . The index has only been lower in three other surveys, which were taken in April and May 1980 and November 2008.

The final August reading on the overall index of consumer sentiment was at 55.7, down from 63.7 the month before. It was slightly better than August's preliminary reading of 54.9, which had been the lowest level since May 1980.

Economists polled by Reuters had forecast a reading of 56.0.

"Consumers have shifted from being optimistic about the potential impact of monetary and fiscal policies to a sense of despair and pessimism about the role of the government," survey director Richard Curtin said in a statement.



- MAP OF THE DAY: Food Inflation Riots Around The World

The first map is a disturbing illustration of food and inflation riots around the globe in 2011 (updated through Feb. 19) I came across on Google.

Most of the inflation riots and protests are concentrated in the MENA (Middle East and North Africa) region, but as you can see on the Google map, they are starting to migrate into Europe, as well as China and India.

In the U.S., anemic growth, an ongoing housing depression, high unemployment and two rounds of quantitative easing (QE) probably have laid a pretty solid foundation for a similar riot map if Chairman Bernanke decides to grace us with QE3. I guess we shall find out when he delivers his speech at Jackson Hole on Friday morning, Aug. 16.

Adding to the food inflation riot is the international military action against Libya. It looks like Muammar Qaddafi's 42-year rule of Libya has finally come to an end. As the rebel put up a $1.7 million bounty on Gaddafi, the mystery of the day is the whereabouts of Gadaffi who's last known to be still in Tripoli.

Regardless, it might take some time to restore Libya to the pre-NATO state, which undoubtedly would give oil speculators plenty of excuse to drive up oil prices touting the Sweet Libyan Crude shortage myth.

- GREECE: What Can Go Wrong And When

Simone Foxman - Tensions mount in Greece as collateral negotiations threaten to jeopardize the bailout EU leaders agreed upon in July and Greek banks show signs of stress.

What happens in the worst-case scenario? Pressure intensifies from two sides:

1) Finland recuses itself from the bailout, and other eurozone countries follow suit. Regardless of continuing participation by Germany and France (not a given, considering Germany's political situation), this could be enough to make July's bailout unfeasible.

We could see this scenario play out as soon as next week.

If Germany and France (and maybe Spain and Italy) can get their acts together, they will try to negotiate a different "selective default" solution, which will undoubtedly be more painful.

2) Greek banks are in worse shape than previously thought, and the bailout cannot be implemented before a default takes place. This is probably the worst case scenario. While EU politicians may find a lot more common ground once there's a fire under them, Greece has a tendency to play down the scale of its economic problems until it's too late. Essentially, all of Europe would quickly go under. (Click here for a good idea of how that might play out.)

Unfortunately, this second scenario is more likely than anyone would like to think.

Bickering over collateral has emphasized that local politicians will not jump to action until fire nips at their toes. No one in their right mind wants to risk a true default, but the debate over a bailout puts politicians in a politically risky situation.

Germany -- despite spearheading the crisis resolution -- will not vote on the bailout agreement until September 23. Other countries could take even longer to agree to the plan, and any changes or special requests must be approved by all member states.

Powerless under the current structure of the eurozone, organizations like the European Central Bank or even the International Monetary Fund will be able to do little if the crisis escalates.

Either situation could also entail the breakdown -- reorganization would be too kind a word -- of the eurozone. Some peripheral nations with profligate spending could find themselves kicked out of the eurozone, or core EU nations could take themselves out voluntarily.

Both situations are also likely to bring about a global crisis.