NJB Deflator

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.

Boom and Bust-Evolution of Markets

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.

Retail stores are so 20th century.  Really, between Starbucks, McDonald's, and Facebook, who has time to walk around the block, let alone read a book?  Never read a book before?  Don't worry; Fifty Shades of Grey is on audiobook, so you can live Tweet your favorite sex quotes.  Amazon's got you covered.

Best Buy, Barnes & Noble, and the likes are closing stores and slashing jobs like it's 1929 in order to prevent bankruptcy like the barely profitable Circuit City (Rest In Peace).

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. 

Spain

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.

Market-top economics could be an entire university course, if people cared enough about such phenomena.  Most only consider the signs of a market top months or years after a crash when some unyielding economics researcher puts the pieces together.  As human-beings we have developed an uncanny ability to rationalize what we know to be bad news and convince ourselves, "This time is different," despite the fact that it usually is not.

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.