Ray Dalio Is 'Da Man'

Last year I posted a quick byte on Ray Dalio of Bridgewater, 2012 - We Were Warned

-Dalio is a “macro” investor, which means that he bets mainly on economic trends, such as changes in exchange rates, inflation, and G.D.P. growth.

-In search of profitable opportunities, Bridgewater buys and sells more than a hundred different financial instruments around the world—from Japanese bonds to copper futures traded in London to Brazilian currency contracts—which explains why it keeps a close eye on Greece.

-In 2007, Dalio predicted that the housing-and-lending boom would end badly.

-Later that year, he warned the Bush Administration that many of the world’s largest banks were on the verge of insolvency.

-In 2008, a disastrous year for many of Bridgewater’s rivals, the firm’s flagship Pure Alpha fund rose in value by nine and a half per cent after accounting for fees.
 

-Last year, the Pure Alpha fund rose forty-five per cent (!!!), the highest return of any big hedge fund. This year, it is again doing very well.

We'll, Mr Dalio is now officially the world's No1 Fund Manager. Dalio Earned Clients $13.8 Billion Last Year

Ray Dalio’s Pure Alpha hedge fund made $13.8 billion for its investors last year, while John Paulson lost clients almost $10 billion after an unsuccessful wager that the U.S. economy would recover, according to a report by LCH Investments NV.

Pure Alpha, part of Dalio’s Bridgewater Associates LP, has earned $35.8 billion for investors since its inception in 1975, said LCH, a firm overseen by the Edmond de Rothschild Group. Losses for New York-based Paulson & Co. last year cut gains the firm has made for clients since its 1994 founding to $22.6 billion, LCH estimated.

Dalio’s Pure Alpha II ran up a 23.5 percent gain in the first 10 months of the year. The manager, 62, had three of the industry’s 12 best-performing funds, Bloomberg Markets reported in its February issue. The firm charges 2 percent of assets as a management fee and gets 20 percent of profits.

Bridgewater, based in Westport, Connecticut, has about $120 billion of assets and uses a macro strategy to try to profit from economic trends. It placed diversified bets in 2011 after predicting a flight by other investors to safer assets such as U.S. Treasuries and German bonds, standing out in a year when hedge funds lost 5.2 percent on average, according to data compiled by Bloomberg. Paulson posted a record loss of 51 percent in one of his biggest funds.

“Macro investing is notoriously difficult, but the best managers are able to find opportunities, especially in troubled markets,” London-based Rick Sopher, LCH’s chairman, said in the report. Funds lost a net $123 billion, LCH estimated.

From my earlier link from my post last year:

Dalio believes that some heavily indebted countries, including the United States, will eventually opt for printing money as a way to deal with their debts, which will lead to a collapse in their currency and in their bond markets. “There hasn’t been a case in history where they haven’t eventually printed money and devalued their currency,” he said. Other developed countries, particularly those tied to the euro and thus to the European Central Bank, don’t have the option of printing money and are destined to undergo “classic depressions,” Dalio said. The recent deal to avoid an immediate debt default by Greece didn’t alter his pessimistic view. “People concentrate on the particular thing of the moment, and they forget the larger underlying forces,” he said. “That’s what got us into the debt crisis. It’s just today, today.”

Dalio’s assessment sounded alarmingly plausible. But when one plays the global financial markets a thorough economic analysis is only the first stage of the game. At least as important is getting the timing right. I asked Dalio when all this would start to come together. “I think late 2012 or early 2013 is going to be another very difficult period,” he said.

I'm definitely putting Ray Dalio alongside Hugh Hendry, Kyle Bass and Peter Schiff on my 'financial gurus to watch/monitor' list.

Fly, Be Free

In December I provided a link to Kyle Bass' November newsletter, "A Global Financial Crisis of Epic Proprtions"


In the letter he describes capital flight being a precursor to default.

CNBC had their turn with Kyle in the video embedded below, “Before a default you’re going to see capital flight”:




Saxo bank updates us on 'The Flight' via Mike Shedlock, Capital Flight From Italy, Greece, Portugal Accelerates; Two Trillion Fantasy; Merkel Weaker Every Week; Crude and Geopolitical Risks

How is this going to end? Do you believe the bullshit soothing words out of the EuroSpruikers trying to save their insolvent banks, the brokers on TV business channels who want some commission, or do you listen to guys who make real money putting their money where their mouth is (and advisory newsletters)? Folks like Bass, Dallo and Hendry?

How is this going to end?

What Will 2012 Bring?

Art Cashin
Art is a 40 year trading veteran on the floor of the NYSE working for UBS.

We think a Lehman-like event would most likely be triggered by a run on a bank or a series of banks. The scramble for currency (value) protection among the public could turn into that bank run in the same way that a crowd can instantly turn into a mob. Watch the money flows out of Greece and Italy very carefully. The pot continues to bubble.

 

O' Canada

Is the party over?

Maclean's is a Canadian bi-weekly news magazine first published in 1905. A publication designed to go a little deeper than the cash-for-comment main stream media and targeting the more intelligent in the community.

Much along the lines of 'Time' magazine and Australia's 'Bulletin' (before it went under in 2008 after 128 published years as they found only 7 intelligent people in Australia that really wanted to know what is actually going on).

Canada's houshold debt to GDP is around 94%, Australia's is 97%  (almost there!).

I wish our officials in Australia had a more realistic view of the world.

Bank of Canada warns possible debt 'shock'

OTTAWA — The Bank of Canada has renewed its warning that debt-laden Canadians could face a "significant shock" if housing prices fall.

With the ratio of household debt to income reaching 153 per cent, fanned by low interest rates, there are concerns some consumers could soon be at the breaking point.

"Households are a central component of Canada's economy and, hence, its financial stability. Although Canada has weathered the global turmoil relatively well, the robustness of domestics household finances remains an important determinant of the country's economic and financial well-being," the bank said Thursday in a series of special reports.

Canada is an oil and electricity exporter as well as minerals. Canada has 34M people to Australia's 22M but Canada's exports are $450M to our $216M. Its the world's 3 largest automotive exporter, 4th largest agricultural exporter (where does your Canola come from?) and a major aircraft manufacturer. The 'Australia is a mining economy' argument is fluff in comparison.

The Bank of Canada Review focuses on household debt and changes in the value of Canadian's "single-most important asset" — their homes.

While there has been a steady rise in the ratio of household debt to personal disposable income, house prices have been steadily increasing since 2000, the review said.

Not in Australia, we are different.

"These facts are interrelated, since rising house prices can facilitate the accumulation of debt. Households could, therefore, experience a significant shock if house prices were to reverse," it said.

"The evidence indicates that a significant share of borrowed funds from home-equity extraction was used to finance consumption and home renovation in Canada from 1999 to 2010. Such indebtedness constitutes an important source of risk to household spending, since it makes households more vulnerable to a potential decline in house prices."

Not in Australia. We don't use our home equity to buy more 100% overpriced homes or rubber dog shit from China via our biggest employer, retail, or buy cars over priced to the tune of 80% . We are different.

On the upside, Canadians are a resilient bunch.

How Goldman Sachs helped mask Greece's debt

Barron's Interviews Hugh Hendry

Anyone that reads this blog knows I'm a fan of Hugh Hendry.

Eclectica's acquired a nice reputation among contrarian investors, thanks to some enviable results. The London-based Eclectica Asset Management saw a 12% return last year in its flagship Eclectica hedge fund, and an eye-popping 46% gain in a new fund that buys credit-default protection on Japanese corporations. Much owes to the relentless logic and cheeky inventiveness of Hugh Hendry, chief investment officer. The Glasgow-born Hendry tells Barron's why he expects a hard landing in China, and why hyperdeflation will precede hyperinflation.

Hugh Hendry of Eclectica talks about hyperdeflation, why China might have a hard landing, and his off-the-beaten tracks Japan plays.

Keeping an Eye on Wealth Creation

Barron's: What makes a great macro fund manager?
 
Hendry: First and foremost, an ability to establish a contentious premise outside the existing belief system, and have it go on and be adopted by the rest of the financial community. My great hero is [Caxton Associates' founder] Bruce Kovner, who was able to imagine the dollar falling to 100 yen—when the rate was 200. I am an existentialist. To my mind, the three most important principles when it comes to investing are Albert Camus' principles of ethics: God is dead, life is absurd and there are no rules. Of course, that's a doctrine of promoting the individual. You own your own decisions. As CIO of Eclectica, with $700 million [under management], I have no engagement with the sell side.

Where do you find yourself outside the existing belief system today?
 
In 2009, I made a YouTube video of the empty skyscrapers in Wuhan, China. Goldman Sachs and others articulate a very reasonable and compelling argument of being invested in China. With the evidence of my own eyes, I concluded that China had a very robust system of creating gross-domestic-product growth, but forsaking the creation of wealth.

When America was having its China moment in the 19th century, it occurred against the backdrop of a gold standard, a hard-money regime, with a public sector that was minuscule versus the overall size of the economy. As an entrepreneur, if your project failed to generate a sustainable level of cash flow, you failed.

China's great opportunity is taking place within the U.S. fiat system, and so the consequences are perhaps less stark than in 19th-century America, which had stops and starts and many depressions, though with an overarching prosperity. China has not had that volatility.

If you talk about a hard landing in China, you talk about GDP growth of 5%, not minus 5% or minus 15%. The Chinese government prints money. It can build superfast railways and overbuild airports, because the rest of the economy can subsidize it. China's swollen public sector is directing asset allocation, rather than pursuing profit maximization. They see [their system] as a success. But it creates a bubble, which can prove quite damaging.

You've already had a hard landing—in the Chinese stock market.
 
I should add something else that is contentious—U.S. quantitative easing [that eventually sent more money flowing to China], promoted because America had two sharp recessions and pursued orthodox policies, and had very little to show in the creation of jobs.


The policy was very successful. China now has inflation. Minimum wages have grown 20% annually for the past three years. This has encouraged the Chinese to tighten monetary policy. When you have bubbles and you tighten, bad things happen. China's stock and property markets are weak, a side-effect of quantitative easing. We may now have the pricking of the Chinese bubble. A year or two down the line, it could have enormous repercussions for the global economy.

How does one play it?
 
The world is very fearful of hyperinflation. Pension schemes have a preponderance of real assets, from forestry to gold to TIPS [Treasury inflation-protected securities], because they are very fearful. The road to hyperinflation is via hyperdeflation. That is why it's proving so difficult for hedge funds to make money. How does the rational mind that anticipates hyperinflation own 10-year government Treasuries yielding less than 2%? It can't. That's why people are struggling. To lay the seeds of hyperinflation, you need really, really bad things to happen. I thought the U.S. housing market having a massive crash would be hyperdeflationary. But then my Chinese friends pumped $1 trillion of credit into their $5 trillion economy, and created a global recovery, which has just come to an end. I'm speculating that hyperdeflation happens before hyperinflation. What's the worst that could happen? But the sum of all my fears would be China having a real hard landing of minus 5% or minus 10% GDP growth. If we had that—and Europe—the Fed would be printing $20 trillion, and I would have gold at $5,000. You can have a modest amount of gold, but you can't have all your assets in real assets, in case we get that hyperdeflation event.

That view would be consistent with interest rates staying low forever.
 
Last year, our fund made 12%, mostly from investing in the short end of interest-rate curves, on the presumption that rates will remain low forever. The risk premium in fixed income was huge, but the performance of global macro last year was quite disappointing. Most people understood Europe, but chose to bet on the euro being weak, which is a hard trade, because there's no risk premium or carry in foreign exchange.

This time last year, British interest rates were at a 300-year-low at 0.5%, and if you asked an investment bank to guess where rates would be in three years, it was betting above 4%. The figure today is more like 1.3%.

So how do you make money?
 
Would you believe that the AIG strategy of selling too much credit protection in risky assets like mortgage-backed securities is alive and booming today in Japan? It doesn't concern mortgages. It is credit-default swaps on individual Japanese corporations.

Do you seriously believe Japanese corporations are going to fail?
 
Clearly, they can and do go bust. I'm buying the CDS on investment-grade Japanese corporations because of the overpricing anomaly. Japan had a bust 20 years ago, and yet today the banking stocks, relative to [Japanese bourse] Topix, are making fresh lows.

If I'm a Japanese bank and I lend money to a new business, I get 1% on 10-year paper. Then the bank gets a call from me, and I'm willing to pay 50 basis points for five-year protection on this same company. So suddenly, the yield has gone from 1% to 1½%. Compare that to five-year Japanese government bonds, yielding 30 basis points. The bank thinks: This is a great trade! Japanese steel companies are investment-grade and won't go bankrupt. So, the bank gets this huge yen yield, and thinks it is not taking any risk. You'd better believe it will sell way too much of that good thing.

One of my partners told me about Japanese steel: Here is a country with no energy, no iron ore or coal, yet it's the largest exporter of steel in the world, exports half its output. To put that in context, China manufactures 700 million tons of steel and exports perhaps 30 million. Japan produces 110 million tons and exports 40 million. As long as Asia is strong, they are fine. But if Asia hiccups or reverses, plant-utilization rates go from very high to very, very low very quickly.

Then we discovered that Warren Buffett owned shares of South Korea's Posco [5490.S. Korea], and that Korea was the biggest importer of Japanese steel, but Posco and Hyundai [5380.S. Korea] are building huge, integrated steel plants. They have a surplus of steel capacity and—guess what?—they're exporting to Japan, because the yen is so strong.

Initially, I wanted to buy a three-year, out-of-the-money put on Nippon Steel. My broker said, "I've been in a 20-year bear market; my boss will kill me." Then I thought, being long credit protection is being long volatility. I redialed his credit counterpart. I said: "I'm thinking of purchasing up to a billion yen of five-year credit-default swaps in Nippon Steel." The first thing he said was, "Would you consider 10 billion?" So one part of the bank is banned from selling volatility, and the other part is having a party. I bought reams of the stuff.

In August 2010, we set up a stand-alone fund to buy this credit protection. You no longer pay 50 basis points, you pay 130 basis points. U.S. Steel credit protection is more like 650 basis points, because in America, people are cautious on selling protection on such volatile businesses. They don't share that worry in Japan. It could make them very, very vulnerable.

Any other potential disaster catalysts? 
 
Continuing yen appreciation; an exogenous shock—like a run on the Italian bond market; a slowdown in China; a sharp Asian recession. Japan is confronted by a European sovereign-type loss of confidence in the JGB market. We bought protection on steel names, and also on businesses with a huge sensitivity to the yen. I think the yen could soar from these levels [about 79 to the dollar] into the 60s, if not the 50s, with further dislocation in European sovereigns or a China hard landing.

From the early 1960s almost, Japan began recording current-account surpluses. Unlike Germany, it always invoiced in dollars.

So Japan is short its own currency, and has an enormous private-sector hoard of foreign assets. If the Nikkei falls, and your hedge and private-equity funds fall, pension funds in Tokyo will have fewer yen assets, but their liabilities will be the same. So they'd have to sell some overseas dollar assets and retrade them back to yen. If we have a series of bad events from China to Europe, that will express itself in a very strong yen rally.

What other names have you bought protection on?
 
Shipping companies, such as Mitsui OSK [9104.Japan]. The only place in the world one can buy credit protection on the shipping industry is Japan. These are very leveraged businesses, and there was overbuilding. We have protection in Nippon Sheet Glass [5202.Japan], which bought Pilkington. We have protection in trading companies like Sumitomo[8053.Japan] and Marubeni [8002.Japan]—companies leveraged, opaque and very geared to the global economy.

We've barely discussed Europe.
 
We are partly playing it through Japan. If events kick off again in Europe, the correlation across all [global] asset classes will go to one. So the steel CDS is 130 basis points, while to insure against default by the French government, I'd be paying the same amount. Which is riskier? A very leveraged steel company that can't tax you? Or a government that can? Our bearish bets are largely outside Europe. As for Greece, the end game will be the Greeks rejecting austerity. The euro is nothing but a gold standard lacking flexibility, and all the onus is on private citizens to take the pain. Eventually, a Greek politician will say, 'Vote for me, and I'll get us out of this system.'

What else do you own?
 
In the next 12 months, we'll see further pathological swings in investor sentiment. Despite my reservations, I'm modestly long equity-market futures, some nonindustrial commodities, and some bullish fixed-income positions. We are very bullish agricultural commodities and agricultural equities, and hold a global basket of businesses—with interests ranging from fertilizer to farm equipment.

What does Greece’s future hold? Ask the Argentinians

By Mathew Partridge, UK Money week.

What does Greece’s future hold? Ask the Argentinians

The Greek crisis is on every front page. Behind many of the headlines is an assumption that a default and exit from the euro would be an unprecedented, unthinkable disaster.

However, Athens’ problems are hardly unique. Little more than a decade ago, Argentina went through a similar process.

Like Greece, Argentina fixed its currency to that of a larger, more powerful neighbour, while running a chronic deficit. And like Greece, Argentina attempted to use cuts, International Monetary Fund bail-outs, and talks with bondholders to solve the problem.

Like Greece, unfortunately, this only led to a bitter recession and riots. And when the country finally devalued, the economic and political pain was huge.

Here’s what happened – and why history could repeat itself.

When did Argentina’s problems begin?

In 1991, Argentina adopted a currency board that fixed the peso to the dollar at a convertible one-to-one rate. This meant that anyone could swap the peso for an equal number of dollars. For all intents and purposes the dollar became the national currency – just as the euro replaced the drachma in 2002.

Initially, this worked well. The tighter monetary policy helped bring inflation under control. However, from 1995 onwards the US dollar began to strengthen in real terms. This meant that the peso followed suit. In turn, Argentina’s exports became more expensive for its customers, while it began to import more from its local trading partners. This meant that the gap between its exports and imports grew larger.

At the same time, government spending, especially by regions and towns, grew faster than revenues. Corruption was also a major problem. This led to public debts mounting up – just as they did in Greece.

What caused the crisis?

The Russian default in late 1998 led to investors panicking, as the assumption that emerging-market sovereign debt was risk-free collapsed. Brazil’s currency fell sharply. As a result, the 30% of Argentinian exports that went there became even less competitive.

At the same time, the US Federal Reserve began to hike interest rates from 4.75% in the summer of 1999 to 6.50% in May 2000. This caused Argentinian monetary growth (M3) to collapse – indeed, the monetary base started to shrink by the end of 2000 – driving the economy from strong growth into recession.

What did Argentina do?

Faced with its high debt levels and faltering economy, Argentina should have let its currency float freely and focused its efforts on converting any foreign debts denominated in other currencies into pesos. This would have helped exports, boosted demand, and also would have meant that a fall in the value of the peso would not have increased the nation’s debt burden.

Instead, it decided to stick with the currency board. It tried to solve its debt problems by slashing spending. It also sought aid from the IMF. In December 2000, the first of several bail-out packages was announced – contingent on austerity.

Did this work?

The strategy failed badly. Even after the US started cutting interest rates, the peso was simply far too expensive. By the summer of 2001, the government began to change course. The currency board was broadened to include the euro – making the currency slightly cheaper. It also started talking to creditors about a debt swap.

However, the new measures were too little, too late. Later in the year, the money supply plunged further, shrinking at an annual rate of 21%. Unemployment rose to 18%, while the economy shrunk by 5%. This economic collapse, combined with the austerity measures, led to widespread riots, strikes and looting. People started taking cash out of banks. There was political chaos with the country going through four different presidents in eleven days.

On Boxing Day 2001 Argentina’s government threw in the towel, ending the currency peg and defaulting on its debt. The peso halved in value against the dollar. Dollar bank accounts and foreign loans were forcibly converted at a rate that favoured debtors.

What happened afterwards?

Cheaper exports and looser monetary policy saw strong growth return by the end of 2002, with the economy expanding at an annual rate of 9% in both 2003 and 2004. While creditors only got a fraction of their money back, the IMF was repaid in full in 2006 (although it did not get all its interest payments).

However, the chaos caused by the delay in breaking with the dollar peg has created serious long-term problems. At the worst point of the crisis, many business owners shut their firms. Many of these firms were later taken over by complete strangers – with the government backing this theft when the original owners tried to reclaim their property.

What are the lessons for Greece?

The lessons for Greece - and other troubled countries - are simple. Firstly, an ill-considered currency union can cause serious damage to the economy by making exports expensive.

A fixed (or single) currency also prevents a government from using monetary policy to boost growth. The Greek money supply fell at an annual rate of 14.6% in December. This means that action is urgently needed to rescue the economy.

Another lesson is that the longer it takes for Greece to quit the euro, the more extensive the damage to its economy will be. Already the situation is getting worse, with the passage of the debt deal leading to riots, which are hardly good for business. Miserable though it may be in the short term, Greece’s best bet would be to get out of the euro now.

As for the investment lessons - they might surprise you. As James Mackintosh noted in a recent column for the Financial Times, “if a devalued drachma appears, investors should pile in.” Why? Research by Elroy Dimson, Paul Marsh and Mike Staunton of London Business School suggests that “investing in the weakest currencies of the previous five years boosted equity and bond returns significantly since 1972.” So “Greece warrants attention: not for a bet on it sticking with the euro, but to be ready to buy in once it exits.”

New York Times describes Greek awareness that its a classic asset strip:
Growing Air of Concern in Greece Over New Bailout

Ms. Katseli, an economist who was labor minister in the government of George Papandreou until she left in a cabinet reshuffle last June, was also upset that Greece’s lenders will have the right to seize the gold reserves in the Bank of Greece under the terms of the new deal, and that future bonds issued will be governed by English law and in Luxembourg courts, conditions more favorable to creditors. 

While their country’s fate is being decided in abstract, high-level negotiations in Brussels, Berlin and Paris as much as in Athens, many Greeks said they had begun to feel that the debt writedown and new loan is aimed at saving the banks more than the country and its citizens.

The gold reserves? In Greece that accounts for 111 Tonnes and is 81% of the countries foreign exchange reserves. If Greece agrees to this they are mad (and bankrupt). At the current spot price of $1774oz, 1 Tonne is $57,035,423; 111 Tonnes is $6.33B.

What did Greece do in 1930s?

http://en.wikipedia.org/wiki/Economic_history_of_Greece_and_the_Greek_world#The_Great_Depression

The Great Depression

As the reverberations of the Great Depression hit Greece in 1932. The Bank of Greece tried to adopt deflationary policies to stave off the crises that were going on in other countries, but these largely failed. For a brief period the drachma was pegged to the US dollar, but this was unsustainable given the country’s large trade deficit and the only long term effects of this were Greece’s foreign exchange reserves being almost totally wiped out in 1932. Remittances from abroad declined sharply and the value of the drachma began to plummet from 77 drachmas to the dollar in March 1931 to 111 drachmas to the dollar in April, 1931. This was especially harmful to Greece as the country relied on imports from the UK, France and the Middle East for many necessities. Greece went off the gold standard in April, 1932 and declared a moratorium on all interest payments. The country also adopted protectionist policies such as import quotas, which a number of European countries did during the time period. Protectionist policies coupled with a weak drachma, stifling imports, allowed Greek industry to expand during the Great Depression. In 1939 Greek Industrial output was 179% that of 1928.^[16] These industries were for the most part “built on sand” as one report of the Bank of Greece put it, as without massive protection they would not have been able to survive. Despite the global depression, Greece managed to suffer comparatively little, averaging an average growth rate of 3.5% from 1932-1939. The fascist regime of Yannis Metaxas took over the Greek government in 1936, and economic growth was strong in the years leading up to the Second World War.

 The path is quite clear. Exit the Euro, adopt the Drachma at a low exchange rate and tell the Germans, French and the banks to fuck off. Or, face decades of depression and servitude.

"Driving Greece Towards Violent Revolution"

Zerohedge

Summary Of Greek Reform "Pledges" 

De Spiegel
Anti-German Mood Heats Up in Greece

UK Telegraph
For Greece a tear, for Brussels a blush 

Greek death spiral accelerates 

We learn that:

Greece's manufacturing output contracted by 15.5pc in December from a year earlier.
Industrial output fell 11.3pc, compared to minus 7.8pc in November.
Unemployment jumped to 20.9pc in November, up from 18.2pc a month earlier.

I have little further to add. This is what a death spiral looks like.

It is what can happen if you join a fixed exchange system, then take out very large debts in what amounts to a foreign currency, and then have simultaneous monetary and fiscal contraction imposed upon you.

Germany discovered this on the Gold Standard when it racked up external debt from 1925 to 1929 (owed to American bankers) in much the same way as Greece has done.

When the music stopped – ie, when the Fed raised rates from 1928 onwards – Germany blew apart in much the same way as Greece is blowing apart. This is not a cultural or anthropological issue. It is the mechanical consequence of capital flows into a country that cannot handle it, as Germany could not handle it in the late 1920s.

By the way, Greeks work an average 42 hours a week, one of the highest in Europe. Just want to put the record straight on that.

 I previously posted a link to the EU's Nigel Farage: Nigel Farage Is On Fire

 Here is his latest, succinctly describes the situation in under 2 minutes.




Some previous posts come to mind
"A Global Financial Crisis of Epic Proprtions"

Youth Unemployment In The EU

Austerity will involve cutting military budgets, pensions and some charismatic officers getting forced early retirement on reduced pensions. Now add reduced social welfare to those youths and you get no hope, no future, no cash. A powderkeg. All it needs is charismatic leadership offering hope and a future (add patriotism and nationalism).

How do you think Franco, Hitler and Mussolini got traction? The stage is set and only fools can't see we are back in the 1920s 

How To Start A War

Throughout history, war planners have used various forms of deception to trick their enemies. Because public support is so crucial to the process of initiating and waging war, the home population is also subject to deceitful stratagems. The creation of false excuses to justify going to war is a major first step in constructing public support for such deadly ventures. Perhaps the most common pretext for war is an apparently unprovoked enemy attack. Such attacks, however, are often fabricated, incited or deliberately allowed to occur. They are then exploited to arouse widespread public sympathy for the victims, demonize the attackers and build mass support for military “retaliation.”

Like schoolyard bullies who shout ‘He hit me first!’, war planners know that it is irrelevant whether the opponent really did ‘throw the first punch.’ As long as it can be made to appear that the attack was unprovoked, the bully receives license to ‘respond’ with force. Bullies and war planners are experts at taunting, teasing and threatening their opponents. If the enemy cannot be goaded into ‘firing the first shot,’ it is easy enough to lie about what happened. Sometimes, that is sufficient to rationalize a schoolyard beating...or a genocidal war.

Such trickery has probably been employed by every military power throughout history. During the Roman empire, the causes of war -- cassus belli -- were often invented to conceal the real reasons for war. Over the millennia, although weapons and battle strategies have changed greatly, the deceitful strategem of using pretext incidents to ignite war has remained remarkably consistent.

Read: 

1. How to Start a War: The American Use of War Pretext Incidents.
2. Show of Force in Strait of Hormuz - Risk of 'Accidental' Gulf War on the Rise

Then lock up your sons because the Russians and Chinese (and probably the Indians who source their oil from Iran) won't be pleased....

China to Protect Iran Even if Result Starts World War III (scary videos embedded)
Russia issues stark warning against attack on Iran






At the Nuremberg trials Hitler's second in command, Hermann Göring spoke about war and extreme nationalism to Captain Gilbert, as recorded in Gilbert's Nuremberg Diary:

Naturally, the common people don't want war; neither in Russia nor in England nor in America, nor for that matter in Germany. That is understood. But, after all, it is the leaders of the country who determine the policy and it is always a simple matter to drag the people along, whether it is a democracy or a fascist dictatorship or a Parliament or a Communist dictatorship. ...voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is to tell them they are being attacked, and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same way in any country

That is why young Australian join the army to go to places unconnected to Australia like Gallipoli, Turkey or Afghanistan. We...

are being attacked

To not go is a...

lack of patriotism and exposing the country to danger.

 It always has been and always will be.

Those Turks were a big threat to Australia and Britain in 1915. Its navy was 13 ships to Britain's 160.

Gallipoli, like Afghanistan and Iraq was/is 'defending' Australia. As Iran will be.

When they come home in a box, they were a brave young patriotic man  defending Australia with weeping dignitaries fawning over the casket.

Actually, what they are is a  corpse. When a negotiated peace is finally made with the protagonists because its another un-winnable theatre someone should put a chess pawn on their grave.

US Employment Bollocks

http://www.bls.gov/news.release/empsit.nr0.htm

Total nonfarm payroll employment rose by 243,000 in January, and the
unemployment rate decreased to 8.3 percent, the U.S. Bureau of Labor
Statistics reported today. Job growth was widespread in the private
sector, with large employment gains in professional and business
services, leisure and hospitality, and manufacturing. Government
employment changed little over the month.

Why did the those "Not in Labor Force" climb by an amazing 1,177,000? 

Shadowstats: Alternate Unemployment Charts 

Monday 7th February, Edit: Mike Shedlock is all over this:

Fewer Nonfarm Employees Now Than December 2000;

There are currently 132,409,000 nonfarm employees. In December of 2000 
there were 132,481,000 employees. How's that for job growth?

Australia, You Need More Than A Paddle

A few days ago I wrote Australians, Grab A Paddle!

If home equity continues to fall at current rates and spending dries up at current rates what happens to that 'service' sector where 12% of Australia's employed are in retail, most of which are in businesses with less than 20 employees?

When those 'service' industries and shops start to lose money what happens to employment?

When unemployment climbs what happens to the housing Ponzi scheme?

Roy Morgan Research:  2.21 MILLION AUSTRALIANS UNEMPLOYED OR UNDEREMPLOYED – HIGHEST EVER RECORDED. UNEMPLOYMENT AT 10.3% – A RECORD 1.28 MILLION AUSTRALIANS LOOKING FOR WORK
  

In January unemployment is up 1.7% to 10.3% (1,278,000). The large increase is primarily driven by an increasing number of young people looking for work — youth unemployment (18-24yr olds) has increased to 24%, far higher than the next highest age groups (14-17yr olds: 9.5% and 25-34yr olds: 8.9%). However unemployment has risen across all age groups in January.

Unemployment traditionally rises in January — the Roy Morgan unemployment estimates tables below show unemployment numbers have risen in 9/11 years since the turn of the century. The rise is because young people emerging from school are waiting for University offers — especially second round offers, and other young people are yet to decide whether to continue further University study and seek employment while they consider their options. 

Recent University graduates looking for work are also uncertain about the year ahead as post-graduate job offers are yet to be made and many people who may be offered a job in February are themselves job-hunting in January just in case the post-graduate job offer doesn’t materialise. The Roy Morgan unemployment estimates show that unemployment consistently drops in February (7/11 years) as students receive formal job offers and transition into full-time work.

A further factor in explaining why unemployment this January has increased far more than it did a year ago is the fact that January 2011 was unique. Last year saw continuing Government stimulus (Building the Education Revolution, the Home Insulation Scheme) and also a spate of natural disasters around Australia that created many disaster related jobs. Many young and able-bodied people were employed during January 2011 to help ‘clean-up’ after devastating floods Australia wide, and particularly in Queensland and Victoria. The month of January has passed relatively disaster-free — although there is now severe flooding occurring in Northern NSW and Southern Queensland.

The rise in youth unemployment is occurring alongside the broader trend of rising unemployment — which has now risen in six out of the last eight months from a 2011 low of 818,000 in May 2011 (up 460,000 in eight months) — unemployment has now reached a record high of 1,278,000 (10.3%). This is the highest ever recorded Roy Morgan unemployment estimate in Australia. Additionally, a further 934,000 Australians are employed part-time but looking for more work. Incredibly, this means a record high total of 2,212,000 Australians (17.8% of the workforce) are either unemployed or underemployed. 

Today’s Roy Morgan unemployment estimates strongly support anecdotal evidence of continuing job losses throughout Australia. Just in the past week we have been told that Westpac has announced 550 jobs to go; ANZ is axing 130 jobs; Holden will cut 200 jobs at its Adelaide plant; Toyota will cut 350 jobs in Melbourne; Reckitt Benckiser (maker of Mortein & Dettol) is to retrench 200 jobs at its Sydney operations; defence firm Thales shedding 50 jobs in Bendigo — these are just the most prominent examples of job losses occurring in the Australian economy!

Economists and politicians are wrong to talk about a ‘tight’ labour market in Australia driving wage pressures. Wage demands (inflation) at the moment are being driven by unions — a small minority of the Australian workforce — not by a tight labour market with workers changing jobs to secure better wages and conditions. Today’s Roy Morgan employment estimates show why inflation in Australia is contained, and will remain contained — at its meeting next Tuesday the RBA must drop interest rates by at least 0.5% and probably more.

The most interesting quote:

youth unemployment (18-24yr olds) has increased to 24%, far higher than the next highest age groups (14-17yr olds: 9.5% and 25-34yr olds: 8.9%

Those people are primarily employed in retail and services and the first to be 'let go'.

This Ponzi scheme is unravelling far faster than I expected. And, a Eurobank failure and credit freeze is yet to occur.

16 Green Bottles Sitting On the Wall, If One Green Bottle Should Accidently Fall...

Craig Peacock of whocrashedtheeconomy, wrote

One Down, Ten to Fifteen to go . . .

That post is well worth a visit.

I've added a note to one of the graphs...

EuroBank Zombie Super-highway

The trucks below are stacked with €100 bills. Each pallet is €100,000,000 - Approximately the size of the bonuses that the CEO's of big banks got during the financial crisis (round 1!!).

€2.91 Trillion: Total amount borrowed by Bankrupt nation's citizens

€2,910,426,000,000 (€2.91 million millions).
13 biggest banks. Each bank has its own lane.
Total Convoy Length: 26.7km (16.59 miles) if you put all 13 lanes together.

The people of Greece, Ireland, Italy, Portugal & Spain owe €2,91 trillion Euros to these 13 banks.

These are only the 13 biggest banks, there are many more that lent money, that together add up to a much bigger debt numbers.

3 pallets of cash would cover the cost of all the trucks shown below, if you bought them new. You'd have enough left over for a lifetime of joy. Each truck has 20 such pallets. 

The Banks.




You can see the full graphic and country and bank specific data at:
Demonocracy - PIIGS Debt

Portugal Unemployment 13.6%
Ireland Unemployment   14.5%
Italy Unemployment         8.9%
Greece Unemployment   19.2%
Spain Unemployment     22.9%

Spanish and Greek youth unemployment is over 45%.

Eurozone Unemployment


As recession bites and unemployment climbs in the PIIGS I wonder how these debts will be repaid? The Euro bailout funds will have to be massive. Who will throw money at those funds? Why would any sane individual throw money at these funds?