Fiscal Cliff Contingencies

Let's call the collection of investors and traders that have been ceaselessly squabbling over the Fed's policy decisions, card players, and let's call Bernanke, the dealer.  Throughout this summer and fall, investors have been playing cards against a guarded Bernanke, until September 14's FOMC meeting wherein Uncle Ben slated the Fed to purchase an additional $40billion in agency mortgage-backed securities (MBS) per month (increasing total monthly agency MBS purchases to $85billion).

With "unlimited" bond purchases confirmed by Super Mario and the ECB and the Fed essentially doing the same thing without calling it so, it is nothing short of integral to juxtapose the current western world central banking revolution with that of the Bank of Japan in the 80s.

A few weeks ago PIMCO's founder and co-CIO Bill Gross penned a piece on "the death of the cult of equities."  It doesn't take a financial wizard to figure out the validity of his statement--I wrote a paper earlier this summer on the Fed's long-term malevolent effects on markets--but it is nice to hear someone with clout actually come out and speak the truth.  The Old Wall St. likes information from the "experts" for some reason.

Being in Europe over the past couple of weeks presented me with a mixed bag of surprises: I was exposed to new notions and some of my previous notions were solidified, while some of the "truths" that I held as a US media consumer were not so.  Below are some of the most relevant thoughts I had while overseas. 


It is difficult not to notice the eerily accurate stencil spray-painted busts of Marian Rajoy throughout the crosswalks of Barcelona.

Below is the second half of a timeline on the Russian/Asian Credit Crisis of the late-90s that I amended with what I think are the analogous happenings of the Euro Crisis.  Italicized text is the Euro Crisis equivalent of the Russian analog; full Russian Crisis timeline can be found here.  No event has been rearranged, removed, or edited, so there are some temporal discontinuities between the months leading up to the Russian default and the current Euro Crisis, but the resemblance is remarkable.

And so it begins...Last Friday the Spanish government published a proposal to cut government expenditure and raise taxes to reduce the fiscal deficit by 56.4billion euros by 2015.  I have outlined why austerity will not work in Europe, but it looks like this is a lesson Europeans will have to learn for themselves--for a second time.  The writing is on the wall in Ireland, who ailed in the same ways that Spain is currently ailing, but what Lord Merkel wants, Lord Merkel gets.

In May I wrote:

"The world econo-politocal paradigm is shifting, and it is shifting very rapidly due to the dire implications of a decade-long international financial crisis.  We can no longer rely on what were sound economics to lower unemployment and dissolve developed nation hunger problems.  We are entering the age of a world government, and an age of sovereign financial engineering, because these are the luxuries that political evolution have granted us.

Boating in the height of Florida’s summer heat will clear a man’s head and give him perspective.  Upon taking the past couple days off, I have been left with a lot of time to analyze my own work retrospectively.  It is easy for me to form an opinion, but it is more difficult for me to maintain one.  I often assay my Twitter stream of news and opinions with such a sharp eye that I micro-analyze my position and disregard time horizons.