I was invited by Manfrommiddletown to stray from my usual Blog home at European Tribune and post on the subject of Credit Default Swaps.
I find it hard to post on CDS without reference to the wider context, and in fact the reference here yesterday to the proposed Gas OPEC gives me the perfect excuse, since I have in recent days had a direct and intimate exposure to that initiative.
I have just returned to Scotland from ten days in Teheran, and was asked - by the head of the Iranian Majlis (Parliament) Energy Commission among others, to propose my ideas as to a possible structure for such a global gas market initiative.
For those who don't know, I was once upon a time a Director of the International Petroleum Exchange (now ICE Futures Europe), and since then have been busy in the area where markets and the Internet converge.
At some point over the last few years, many of us have considered moving our retirement savings overseas in order to avoid the financial calamity now sweeping the nation.
Almost without exception that strategy turned into a major loser. Amazingly when you consider the collateral damage on Wall Street, just about every market in the world has done worse than America's this year.
And just when you didn't think it couldn't get any worse, the global financial crisis appears to be mutating from a credit crunch to a more serious global currency crisis.
Iceland's financial system and currency suffered a complete collapse last week. A default on sovereign debt now seems imminent.
The question on the minds of everyone on Wall Street is: who's next?
The House Committee on Oversight and Government Reform is holding multiple hearings on the financial crisis. Today's hearing, the 3rd of 5, was Credit Rating Agencies and the Financial Crisis.
Rummaging around for information regarding the average lead time for "leading economic indicators", I came across this 2005 article at Economist's View written by Catherine Baum who accurately called the banking crisis last year, explaining why economic forecasters are so often wrong:
The Index of Leading Economic Indicators [ ] isn't a bunch of randomly selected components .... The 10 components of the LEI were all chosen because of a demonstrated ability to predict future economic activity.
The index includes both financial (stock prices, the money supply and the spread between the funds rate and 10-year Treasury note yield) and real-side variables (building permits, capital goods orders and vendor deliveries).
....
The level of the LEI [ ] has an average eight to nine months lead time at peaks and troughs -- shorter at troughs ....
Today's UK Guardian has an article about how Russia, Iran, and Qatar are forming a natural gas cartel rivaling what OPEC has done for oil.
The move by the three countries, which control 60% of the world's gas reserves, was met with immediate opposition from the European commission, which fears the group could drive up prices.
Alexey Miller, chairman of Russia's Gazprom, said they were forming a "big gas troika" and warned that the era of cheap hydrocarbons had come to an end.
"We are united by the world's largest gas reserves, common strategic interests and, which is of great importance, high cooperation potential in tripartite projects," he explained. "We have agreed to hold regular - three to four times a year - meetings of the gas G3 to discuss the crucial issues of mutual interest."
Pat Choate's new book, Dangerous Business: The Risks of Globalization for America is a must read book on the realities of globalization, trade, the lobbyists surrounding D.C., corporatism and China's modern mercantilism. Choate not only describes some of the corruption, insanity and erosion of the United States through bad trade deals, elitism and globalization, he prescribes solutions.
In the below talk on his book, Choate details massive intellectual property theft, biased trade deal provisions, emerging markets, deficits with minute detail :
In my last diary, I explained how an increase in the money supply faster than the rate of inflation, coupled with a "positively sloped bond yield curve 12 months prior, which has in the past always indicated the ending of a recession, appeared to be going positive now. A much more detailed explanation, with supporting graphs going back about 50 years, of this "Kasriel recession indicator" can be found here. While almost all financial indicators are based strictly on the post World War 2 inflationary period, the "Kasriel infallible recession predictor" accurately "predicts" the 1929 downturn, the 1933-37 and 1939-41 expansions.
Happy Monday, folks, I do hope you all had a good weekend! Welcome to another installment of Manufacturing Monday! Now things are looking bad out there, as many of you probably already know. We start out with more dire jobs news at GM. Turning to some good news, it seems economic forces that made us "costly" has now turned the tables of sorts, with ironically the biggest pusher of China, Wal-mart (or is it Walmart? I've seen this store both ways.) forcing suppliers to look domestically. Lastly, we got Honda moving more work to North America. But first, as is par for the course, we get to the latest economic info related to manufacturing. So without further adieu...
Earlier this week David Sirota wrote what I think is the best column I've ever seen on an important topic in American politics: the role of class in American politics and how the GOP has been able to capture the votes of working class whites. Let's be clear, it wasn't grand strategy by the Republicans that resulted in the white working class exiting the New Deal Coalition. It was the utter arrogance of the gang of liberal elitists that have seized the mainstream party of the American Left from the working class.
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