Wes Anderson From Above by Kogonada

On Vimeo, Kogonada publishes this video, homage to Wes Anderson

and the link   https://vimeo.com/album/2068774/video/35870502

“The Fed Will Destroy The World” – Mark Faber

In an interview on Bloomberg TV today, Mark Faber comments on the FED’s decision yesterday to start a QE (money printing) program of indefinite size and duration, starting at a rate of 40 billion per month of Mortgage Backed Securities (MBS).

The most interesting and frightening part of the FED’s press release reads “… If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability…”, meaning money will be diluted ad infinitum if need be.

In Mark Faber’s words: “The fallacy of monetary policy in the U.S. is to believe this money will go to the man on the street. It won’t. It goes to the Mayfair economy of the well-to-do people and boosts asset prices of Warhols…Very happy. Very good for the Fed. Congratulations, Mr. Bernanke. I’m happy. My asset values go up but as a responsible citizen I have to say the monetary policies of the U.S. will destroy the world.

Arab Spring, Arab Fall & where it all began

In Arab Fall Becomes Anti-US Blowback As “Turmoil” Spreads To Morocco, Sudan And Tunisia, Zerohedge states:

“If 2011’s Arab Spring was all about the propaganda “hope” of democracy (driven paradoxically by soaring global good prices as we predicted in early 2011 before the first Tunisian domino toppled), then 2012 Arab Fall, is all about the blowback to US policies and intervention in the region. And while we are amused by the media’s narrative that an entire continent can suddenly come to arms against Pax Americana over a YouTube clip, we are confident that what some hate-mongering preacher has to say about Mohammed is about as relevant to what is happening in the Middle East today, as how the global economy performs impact the S&P. Absolutely none. What we do know is that the anti-American revulsion, which started on September 11 in Egypt and has since taken Libya and Yemen by storm, is spreading like wildfire. The NYT writes: ‘Protests were also reported at American missions in Morocco, Sudan and Tunisia, where the police also fired tear gas to disperse crowds.” It is only going to get far worse, as suddenly geopolitics, and the US response thereto, becomes the biggest issue in the presidential debate.”

The Arab Spring movement that has swept Tunisia, Egypt, Yemen, Libya, Syria arose out of the blue in 2011. What is not as widely know is that it was planned more than a decade(s) ago, as Mr. Wesley Clark, retired US Army General and former NATO european forces chief during the Kosovo War, explains in the following video

 

Did the GCC torpedo the ECB?

In The German Constitutional Court Torpedoes The ECB’s OMT @ Fibs & Waves Blankfeind argues that the apparently bland resolution of the GCC yesterday does include some provisions that would torpedo the OMT’s effectiveness, even its existence. Please see Die wirkliche Wirklichkeit (DwW) where such provisions are discussed, but reaching a different conclusion from the one elaborated by Blankfeind. Can Blackfeind and TYR be both right?. We think so. Blankfeind, in his excellent article, explores the aspects in the GCC’s resolution that would make life difficult for the new Draghi-ECB, namely, the illegality of the ESM’s capital being levered (financing at the ECB, like a bank), and the illegality of the ECB’s buying government bonds on the secondary market aiming at financing the member’s budgets (which is what the  OMT is supposed to do). These are very strong limitations that, if applied, would effectively torpedo the ECB’s plans. DwW, while acknowledging the potential in the GCC’s ruling to abort the ECB’s plans, sustains that the “real reality” is one or several layers deeper than even a constitutional court’s ruling. In its last paragraph, DwW rethorically asks  “In whose hands does Germany’s sovereignty lay?”, hinting at the possibility that even GCC’s resolutions would, one way or another, be superseded by the real owners of Germany’s sovereignty, whose identity would certainly not be the German People. In plain words, Blankfeind is right in recognizing that with its ruling the GCC (up to a point, since it could have stopped the process of ratification of the ESM and chose not to) is preparing for a fight with the ECB, Germany will fight for its sovereignty and it might be a bitter fight. DwW fears though, that, in the end, that sovereignty was lost long ago.

Sheepie tries to reach Mars, but escape velocity might elude her

This sheepie accepted The Yogi Rock’s invitation to vacation in Mars, perhaps even legal residence. Was she too optimistic in assuming that her graceful jump would allow her to reach escape velocity? We think she was, and that she will be forced to stay on Earth. What’s in her mind? We think we know: “it’s easier in Mars”. Poor she!

Die wirkliche Wirklichkeit

We argued in a recent post that the ESM violates Germany’s constitution and the EU treaties. Today the German Constitutional Court (GCC) ruled that the ESM and its ‘fiscal treaty’ on budget discipline do not violate the country’s Basic Law and do not undermine the Bundestag`s sovereignty over budget issues, according to Openeurope. Although the full ruling is expected in early 2013, Openeurope remarks a few aspects of today’s resolution:

  1. Cap of €190bn on German ESM contribution, which can only be overturned by the Bundestag.
  2. Both houses of German Parliament need to be adequately informed about all ESM decisions – something which needs to be enshrined in “international law”.
  3. Reinforced that Bundestag approval needed for all activations of the ESM.
  4. Explicit ban on ESM borrowing directly from European Central Bank (ECB).
  5. The German Government can terminate ESM at any time, as recognised under “customary international law”.
  6. In its full ruling, expected in early 2013, the Court will also consider whether the ECB’s bond-buying programme, the OMT, has transferred illegal degrees of sovereignty to the EU-level.

If respected, #1 ruling would limit some of the potential risks that the creation of the ESM pose to the countries (and ultimately their taxpayers) funding the ESM, most specially Germany. Effective maximum potential financial costs to Germany would be capped at 190 billion Euros, invalidating the articles of the ESM allowing for potentially unlimited liabilities.

#2 and #3 reinforces Bundestag veto over ESM activation: the decision also states that any future ESM bailouts will require parliamentary approval, stating that the Bundestag “must individually approve every large-scale federal aid measure on the international or European Union level”.

#4 bans on the ESM borrowing from the ECB: the Court says that “borrowing by the ESM from the European Central Bank” would be incompatible with EU law (Article 123 TFEU). This is a surprisingly categorical rebuke, especially over an issue of EU rather than German law.

#6 addresses not the ESM but the latest ECB asset purchase program, named Outright Monetary Transactions (OMT). The GCC suggested in its press release that the ECB’s OMT will be considered in its final ruling on these complaints. The exact criteria upon which the programme will be assessed is unclear but broadly the Court will determine whether it transfers additional German sovereignty to the European level above and beyond that which the country has committed itself to in the EU Treaties.

What does it all mean? With a firm cap on the ESM, the ECB is now most certainly the only actor with deep enough pockets to put Spain and Italy on life-support – together with the OMT announcement the ruling has shifted the burden back to the ECB. However, the ruling and the role of the Bundestag highlights that activating the OMT will be challenging, since in order to qualify for ECB bond-buying, a country must first get funding from the ESM – and be subject to conditions. If the Bundestag agrees to activate more bailouts, it will most certainly push for harsher conditions than what debtor countries – most importantly Spain – are willing to accept. In the long-term, under current arrangements of linking ESM and OMT, the latter is also effectively capped and subject to a Bundestag veto.

If this is so, the caveats in the GCC’s resolution are not minor, why did markets continue to rally today? An answer to this question is hinted in today’s Die Welt’s article, Karlsruhe weiß, wo Europas Hammer der Macht hängt, whose last sentence goes like this: “the GCC, that for us is almost as holy as the Bundesbank, is only one of the Players in the european Game, and not the most powerful one” (“Das Bundesverfassungsgericht, das uns fast so heilig ist wie die Deutsche Bundesbank, ist auch nur ein Spieler im europäischen Spiel, und nicht der mächtigste”).

If, from a german perspective, its constitutional court is not the biggest, ultimate player, who is? If, as Die Welt’s article also implies, the GCC takes its decisions not only considering Germany’s Basic Law, but also in the context of the “wirkliche WirklichkeitI”, the “real reality”, what is that reality’s content?. Mr. Thomas Schmid, the author of Die Welt’s article, hints at the European Union’s centralist drive that gradually hollows national sovereignty and places it in supranational bodies, most specially the ECB, Mario Draghi’s ECB, that does no longer fear to antagonize its most important member, the Bundesbank. The ECB, that is also supposed to be the supervisor of ALL european banks, according to the latest proposal of the European Commission (EC), emerges as an almost all-powerful institution, mostly unaccountable to national governments and not even to the European Union. What and who does the ECB stand for?. Certainly not monetary orthodoxy and price stability as is written in its charter. In whose hands does Germany’s sovereignty lay? Perhaps a review of Mr. Mario Draghi’s biography would be helpful in answering this question.

“The tears I have cried over Germany have dried. I have washed my face.” – Marlene Dietrich

As 54% of Germans Want Constitutional Court to Kill the ESM doubts about next wednesday’s resolution of the German Constitutional Court (GCC) increase in the financial community

Germans could be consigned to serfdom to save the Euro @ The Guardian In this article Mr. Gunnar Beck argues that the ISM might ruin Germany and leave the country in a sutuation of practical serfdom

“Don’t Count Your Hahnchen”: 40% Chance German Court Does Not Ratify ESM @ Zerohedge Even among the anglosaxon financial communtiy, doubts arise as to the resolution of the GCC on wednesday. A “yes” to the ESM no longer seems a done deal, according to Morgan Stanley

Are The Krimson Karlsruhe Knights About To Say Ni-en? @ Zerohedge Bank of America, Berenberg and Daiwa Capital also have some doubts about the GCC`s resolution