Hell Street plunging again in devil’s bubblesmoke…-)

DID WALL STRETS TURN AGAIN TO A HELL STREET, or never stopped to be hellish?

“UP THE RALLY HILL, THERE’S A SISIPHO’S HELL” the City blues says.

A tale of  W street and the W recession

zerohedge

New post: Equities: Reaching The Danger Zone http://tinyurl.com/y94y8h7 /Monday 12 April, 5 pm GRT

Look at this elementary graph, that you can easily redo yourself on the 1st page of today’s wsj oL, even without being a subscriber – as I must be professionally.

Well, not only the bigger share of the dead bubble appeared in Wall Street, much more than in the RoW (Europe, BRICS and Japan: aggregated and implicit here, in the difference between the two curves – SIMPLICITY and SYNTHESIS matter, for a 1st look).

But, since from the 2009 policy-driven rallys, devil’s smokes reappear again at Hell St.; much before a recovery of Mean St. I don’t think there is any  serious debate about the fact that AT LEAST Hell\Wall St. is already in a new bubble: with all the self-evident, dramatic implications of such a tenet. The analytical-policy complex debate (where perspectives, schools and interpretations of the empirical facts necessarily diverge, before looking for a new convergence focus and a relative ricomposition of the profession) is about how much such a New Bubble is a matter of “CONGIUNTURA o STRUTTURA”, SR or LR in its very nature – i.e. the relevant dynamic forces behind this unsustainable model: of overvaluation of Western assets, at the price of a permanent Eastern overgrowth. My position is that the LR bubble is evident, and actually was never fully dried up; while we are about to enter also an additional SR one, starting from some asset markets. La musica  non cambia.

A lot of work for the world  Obamas, their teams and 1st of all the invisible college of CBs that saved us from another 1929\31 – until now. At a price.

According to the two distinct (but a bit overlapping: GLI ESTREMI SI TOCCANO SEMPRE) Austrian and post-Schumpeterian (evolutionary) schools: AT THE PRICE of  repressing the “Invisible Foot” who makes room for a New Wave of innovations and their bundles. No foot, no room.

As for the congiuntura, there are all the usual caveats about the VWL (VolksWagenLite) shapes of the recession in the different macro-regions of the world, and 20 days ago I listened to such an interesting breakfast time (03/25/2010 09:34) twitting as:

@zerohedge New post: Is Something Big In The Market Coming? http://tinyurl.com/y97jayc“.

The twitting and the post were introducing to an acute FINALE by David Rosenberg (Breakfast_with_Dave_032510.pdf), concluding that markets are signalling turnarounds

And lastly, there is no V-recovery anywhere, except in the Fed-prodded stock market.

Even that bastion might not be firm for longer. In fact, today at early dawn here in Verona, the same little Spring bird awakes me via TweetDeck sounds to tell me:

zerohedge

IMF Prepares For Cataclysm, Expands Backup Facility By Half A Trillion For “Contribution To Global Financial Stability” http://bit.ly/a4vMeh

With linguistic determinism, the philosophical WordPress blog cracking process distills down here such a nice continuation: the-gates-of-hell-open!!!

… what if the demons from Hell decided to enter Wall Street and other business sectors so as to better manipulate and corrupt society? And thus Hell, Inc. was born.

We are at a more ground level here, and we are looking at the devils in the markets details.

paper proposal for a forthc. WB Conference on Evolutionary economic policies

18 marzo 2010
To the atn of
Otavano Canuto
Vice-President
WB

A frame for XXI Century Policies

The paper starts with the a priori, intuitive assumption that the 2007-11 quasi-Great Depression is nothing but a signal of the worst to come. Even if macro-economic indicators had to improve in the immediate years after, as they probably will – for a while.

Section 1

Summarising the basic theoretical modules arguing for the unsustainability of XXI C. Capitalisms; reasons why we exclude the “climate change” bubble from these basic theories.
A) Demographic bubble (MALTHUS-DARWIN; we enlarge here the scope of “Evolutionary Economics”, back to the roots): the real problem versus climate heat rethoric
B) misdistribution of income and net savings (MARX-MANDEL-CHESNAIS, KEYNES-KALECKI-MINSKY, SRAFFA-PASINETTI, AGLIETTA)
C) specification of B): East\West regional dualism substitutes for N\S (A. WEBER)
D) technologies-institutions mismatch (SCHUMPETER – DOSI – Perez 2002)
E) further specification of D): a missing energy revolution (SCHUMPETER).

Section 2

Hypothesis c) is detailed here, not because it is euristically superior to the other ones, or more plausible. Just because the Author has been working upon it as a regional scholar.
Mentioning the inter-relations in between the 5 tenets, in eclectical approaches.

Section 3

Policies, prognoses stemming fron the 5 alternative\complementary diagnoses:
A) Malthus was right, and Marx wrong. It is too late: there will be democides and many wars; how to improve emergencies. Climate extremes (now heat) are a normal regulator of overpopulations. In the coming Ice Age (beyond XXI), underpopulation will rule.
B) A new GLOBAL FISCAL POLICY: a serious, unsolvable political puzzle; the transition from US to Chinese imperialism will make things worst in the 1st half of the Century. Are Imperialisms the only workable kind of harmonization of fiscal policies?
C) Just 1 solution: accept and smooth the Western decline (Cacciari 1994); don’t force the East to grow beyond thresholds, just to boost the Western actives; it just doesn’t work;
D) divergence: demand of an Open Democracy – versus old and new Totalitarianisms;
E) the “reverse salient” model (HUGHES) suggests that an energy Revolution is not behind the corner – there is a lot of basic research and  problem solving before. Therefore, here too “emergency” policies are key in the next decades: essentially, a strong energy-saving bias in all technologies and organisations (deepening the post-1973 trajectory).
All the approaches, also because optimistic theories are not focussed upon and reviewed here, stress the absolute agenda-and-time priority of strong and comprehensive emergency policies in the next decades, in a number  of fields: not surprisingly, quite opposite to Naomie Klein (2008). They are the necessary conditions to improve, or at least mitigate LR scenarios.
enzo fabio arcangeli
references
– Massimo Cacciari 1994, Geofilosofia dell’Europa. Milano: Adelphi. http://www.italialibri.net/opere/geofilosofiadelleuropa.html
– Naomie Klein 2008,  The Shock Doctrine. NY: Metropolitan Books. http://www.naomiklein.org/shock-doctrine
– Carlota Perez 2002, Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages. Cheltenham, U.K.: Edward Elgar. http://www.carlotaperez.org/

2B optimistic: this is the beginning of the end

BREAKING NEWS

March 2, 2009

wsj
The Dow Jones Industrial Average dropped by 300 points to end below the 6800 mark for the first time in nearly 12 years, as a broad-based selloff seized the markets, sending shares lower in every sector. The S&P 500 briefly dropped below 700 for the first time since October 1996 before ending just at that level amid across-the-board declines, including drops of more than 6% in basic materials, energy, financial and industrial sectors. The Nasdaq Composite Index fell 4%.

For more information, see: http://online.wsj.com/article/SB123599406229708501.html?mod=djemalertMARKET

I REVEAL THE TRUTH:

ANGELA IS THE ANGEL

Yesterday, sent by the Aparecida no one is keen to listen to anymore,  the Angelo della Vendetta started  cutting some heads and share values, but it was only the beginnig of  the end. The necessary “Visible Foot” freeing markets from lame ducks (the von Hayek – and  – Schumpeter, neo Austrian Foot) has just started kicking off, and will have a couple of years of hard work ahead. The ecomomic “curtain wall” has not yet come down: then the neoAustrain Angel will have no pity, not even for her country of origin (Austria); it will be CEE (Central East Europe) Tsunami soon, and little will stay alive in Western Europe, after her mission.

On the other coast of the Atlantic, there is no reason for DJIA, now that 7000 is over, to land asymptotically or not towards 6000: still, the Western Actives would B by far over-valued, at 6000 (down from top 11,000).

a) DJIA passed yesterday, in a quantum jump below 6800 (My God!) the 7000 PSYCHOLOGICAL threshold of “depression”, i.e.  Wall Street finally cut the Gordian Node (FAQ: is this a deep recession or a depression? The latter. Now we know:

the answer, my friend,

is blowing in the East European wind.

For no apparent reason, in Wall Street: just ordinary administration – adjusting the e’s in the p/e ratios, to what one can reasonably guess for next Autumn, when all things that might have gone wrong, will have (Murphy’s Law, a secularised divulgation version of Greek Tragedy’s Destiny).

b) European, namely Italian banks are just disappearing, day after day from markets. This is no violation, as most people say (banks capitalisation below book value?), on the contrary: A STRICT APPLICATION OF THE FUNDAMENTALS. Such;

giant, monopolistic, hyper-speculative, anti-social, caparbiously authoritarian and highly inefficient with their personnel, vandalised by ignorant managers, enemies of the Territory where they just steal surplus value (no help to innovation, to anything) banks

should have never been born, as they did UNDER THE CRAZY, ANTI- ECONOMIC, MONOPOLISITIC CONCENTRATION WAVE of the New Economy, version 1 and 2, in the last two ABEs, Artificial Bubble Economies, 1993-2007.

Mr Profumo (legally and apparently the UniCredit CEO, still) is already at the job office to look for another place: but

FAQ – Who will hire such a crazy man, that ruined  in just one only stupid Ego trip three  healthy  banks full of Tradition (Cassa di Risparmio di Verona- Vicenza – Belluno- Ancona, Credito Italiano, and Banca di Roma)???

ANSWER: We want them back, our 3 banks, and we’ll get them before Summer. The Angel is working for Justice to triumph, on this Earth.

I knew in advance, but I did not want to disseminate pessimism: last week rally on Italian Banks was artificial, home made and effimero. A literal Tsunami is charging its batteries very speedy, then it will lead to the “SUBCRIME no.2 – The European version” Vendetta dell’Angelo Sterminatore (who appears to have occupied the soul of Angela Merkel, dictating her what she must do, in such a way as Destiny requires):

– 1. a default of the majority of the 10 CEE States unprotected by the Eurozone;

– 2. a national economy collapse, and consequent quasi-default or default of  the Austrian State (only by the immediate, direct consequences of CEE toxic credits, by applying a multiplier 2 to Dansk Bank scenario 3: Austria will lose 22% of its neutral GNP, this year; as we say below, with a multipler 3 it makes -33%; then self-reinforcing dynamics will carry on further the Visible Foot job);

-3.  the forthcoming closure, and “week-end X nationalisation” of the majority of large Continental European Banks (British Island ones are already kaputt: RBS is a Gordon Brown’s property, Barclays is 90% down in capitalization. from £90 to 8; Switzerland is  in search of diversifying out of Credit, which after all, ex post was not its natural Vocation; after weekend “X”, there will be an ephemeral rally on Swiss Banks, the  only private ones left, but it will not last long). More in:

– Dansk Bank Research last report, and continuous, daily information flow in their precious site, an Observatory on  € subcrime: http://www-2.danskebank.com/danskeresearch

– and the interactive graphic ft representation of Dansk Bank’s € subcrime scenarios.

REFERENCES: go to last week’s euro_exposure_to_cee_230209 Dansk Bank Research impact study, put into a graph by the Financial Times. Please note:

a) Dansk Bank worst scenario (alike the Asian crisis 1997) will B the best one soon;

b) this report just estimates Banks’ sofferenze, i.e. the 1st round of money-real transmission mechanisms, and repeated positive feedback interactions (ping-pong like). The full impact is, as usual, larger by an order of magnitude, so that the Austrian GDP, e.g., (-11% according to the Report) might approximately and optimistically (multiply x 3) lose no less than 1/3 this year, as a CEE Subcrime full impact consequence. Being so close to Austrian borders as we are, is no health.

Obama New Deal, phase 1

Feb. 17 update – The final stimulus bill allocates $ 790.6 bn:  the CBO estimates tax cuts will amount to $ 288.5 bn and public expenditures about $ 500 bn (wsj) for a total est. cost of $ 787 bn. Today the President signed the bill and wrote us

enzo fabio —

Today, I signed the American Recovery and Reinvestment Act into law.
This is a historic step — the first of many as we work together to climb out of this crisis — and I want to thank you for your resolve and your support. (…)
I’ve assigned a team of managers to oversee the implementation of the recovery act. We are committed to making sure no dollar is wasted. But accountability begins with you.
That’s why my administration has created Recovery.gov, a new website where citizens can track every dollar spent and every job created. We’ll invite you and your neighbors to weigh in with comments and questions.
Our progress will also be measured by the tens of thousands of personal stories submitted by people who are struggling to make ends meet. If you haven’t already, you can read stories from families all across the country:

http://my.barackobama.com/yourstories

Your stories are the heart of this recovery plan, and that’s what I’ll focus on every day as President. With your continued support, we’ll emerge a stronger and more prosperous nation.

Thank you,
President Barack Obama

On the eve of the 200-Charles Darwin Day, the US House and the Senate have finally agreed on the mega-stimulus package, which President Obama might already sign next Monday,  February the 15th, i.e. 25 days after entering the White House (1/4 of the early 100 days, when the Beauty versus the Beast – Apocalypse Now – fight will B decided upon in the short term).

Mainstream economists, with whom this time we are tempted to almost agree once (but we have other priorities, since it is not OUR problem to save Capitalisms, but their victims), converge with the great, sublime Paul Samuelson (self-defining himself a Centre-Left, moderate Keynesian), by saying that some moderation and “watering down” (in the Congress revision) of Adm. Obama’s proposals is a first best, since  -e.g. – a demand – only perspective  is balanced with less unilateral supply-side  considerations as well (on this, our friend Michele Boldrin is writing quite important and interesting, fresh things on NfA – Noise from America blog, since early this year; we will discuss them, here and on NfA at length, soon).

Let us say that this is the state-of-the-art in academic Political Economy, and it is symbiotic with what happened in these hard Congressional fights about the final compromise, during the last weeks. One day, just symbolically Sen. Mc Cain presented a  motion to cut the stimulus to half. It comes out with a great momentum, a variety of tools and targets (see the Summary below).

A HISTORIC BILL, starting the Obama New Deal long series, in the next few years.

Sources:

http://www.slate.com/id/2211145?wpisrc=newsletter

Congress Makes a Deal

http://online.wsj.com/article/SB123436825805373367.html?mod=todays_us_page_one

Congress Strikes $789 Billion Stimulus Deal

Historic Bill Would Spur Road Building, Give Businesses Tax Breaks, Expand Broadband Access; Final Passage Expected Soon

wsj summary table:

Focal Points of Stimulus Package

Key goals and what indicators to use to gauge success.

Business confidence
Steps: Tax breaks for businesses, appropriations.
Measurement of success: Stock market results and management surveys.

Low income/unemployment aid
Steps: Benefit checks, foodstamp increases, health insurance assistance, Medicaid.
Measurement: Benefit rates

Consumer spending
Steps: Tax breaks to workers.
Measurement: Retail spending, consumer-confidence surveys.

Job creation
Steps: Infrastructure spending, aid to states.
Measurement: Unemployment.

Economic Growth
Steps: Spending, tax breaks.
Measurement: GDP.

Please also note that:

The stimulus accord is a major win for the high-tech industry, which will receive billions of dollars in subsidies to expand broadband access to rural and other underserved areas and a huge infusion of funds to computerize health-care records.

The latter is a very important point, since it marks much more, than just Silicon Valley getting repaid for the EARLY support to “Sen. Nobody” (see on this Giuliano da Empoli 2008, already a classic and comprehensive book on Obama, in Italian; and our various, often updated  static pages on Obamology in http://arcapedia.wordpress.com/).

On the other hand, it is a strong counter-tendency, a counter-factual to the MARKET SELECTION PARADIGM – e.g., theorised in Italy by the no.1 telecom expert, prof. Enzo Pontarollo.  He argues that it is not so bad that the Schumpeterian effect (sometimes called “The Invisible Foot”) and the credit crunch crisis SELECT among very expensive digital highway plans, and allocate credit only to the more rentable ones, where effective demand will repay faster, at least a part of the infrastructure investment.

This is such a complex, multi-dimensional issue. Let us just say  this, as a complement and further qualification to the important, and  theoretically well-rooted Prof. Pontarollo’s argument.

Japan (as far as I know,  the main great and still powerful State doing this) usually doesn’t bother much about “the digital market” plans selection – perhaps also because Japan’s regional economies have been levelled-up during the last half century, and suffer much more from congestion than regional, or rural\urban imbalances. They just shape and anticipate effective market demand years, or even a decade before, laying down  futuristic cooperative-public digital highways (namely in the New Generation Networks, lately).

But if the Nippon State is  now on the defensive, such programs will be delayed for many years, and this anticipatory effect will be lost. In a strong “neo- Keynesian & neo- Schumpeterian” mixed, eclectic and PRAGMATIST (“Nudge“) approach, the Obama’s New Deal starts now doing what Japan has problems to keep up to. This is another Invisible Foot effect: not across regions but across Nations: the US just elected Obama, while the Nippon political system is in search of a “2nd Republic” trajectory since 20 years ago, with no viable, longterm solution yet.

They desperately need either a Berlusconisan, or an Obamasan.

This stimulus Bull hitech component, has little to do with FDR, and we are happy about that: since you know (or at least, regular blog readers do) that we fully agree from the left with the “right” critique to FDR  –  stemming from the careful Amity Shlaes historic reconstruction of what really happened during THAT New Deal 8o years ago (on this precise point, we take a small bit of distance, a degree of freedom  from Obama’s public image and self-representation). In any case, ce n’est qu’un debut.

doctor doom’s 2009

Nouriel Roubini has now a weekly column on Forbes, where some synthesis is made of the much richer rge material (unique, very deep and informative news “clusters”; regular blogs or interventions by some of the best macroeconomists). This is an invitation to read regularly, as an amateur, both “Doctor Doom” Forbes column, and the free sections of rge-monitor.com (while a professional economist is obliged to subscribe to rge):

Doctor Doom

A Global Breakdown Of The Recession In 2009

Nouriel Roubini, 01.15.09, 12:01 AM EST

Forecasting pain, from the U.S. to Australia.

pic

With the industrial world already in outright recession and the emerging world navigating toward a hard landing (growth well below potential), I expect global growth to be flat (around -0.5%) in 2009.

This will be the worst global recession in decades as the fallout of the most severe financial crisis since the Great Depression took a toll first on the U.S. and then–via a variety of channels–on the rest of the global economy.

Here is a global breakdown of my forecast.

The United States economy is only halfway through a recession that started in December 2007 and will be the longest and most severe in the post-war period. U.S. gross domestic product will continue to contract throughout all of 2009 for a cumulative output loss of 5%.

One last look at 2008 will reveal a very weak fourth quarter with GDP growth contracting about -6% in the wake of a sharp fall in personal consumption and private domestic investment.

I see the real GDP growth contraction playing out through the year as follows: first quarter 2009: -5%; second quarter 2009: -4%; third quarter 2009: -2.5%; fourth quarter 2009: -1%–adding up to a yearly real GDP growth of -3.4% for the U.S. in 2009.

This forecast is much worse than the current consensus forecast seeing a growth recovery in the second half of 2009; I also predict significantly weak growth recovery–well below potential–in 2010. (…)

The latest cyclical upswing in the Eurozone was largely driven by a temporary but powerful boost to domestic investment from disappearing risk premia in the aftermath of the adoption of the single currency and by external demand from a buoyant world economy.

Both demand sources fizzled out by the second half of 2008, leaving the Eurozone as a whole and its largest members exposed to diverging deleveraging patterns in the face of suboptimal EMU-wide automatic fiscal stabilizer mechanisms.

The latest record-low readings of leading and sentiment indicators point to a severe recession ahead in 2009 that shapes up to be worse than the 1992-93 crisis. For the Eurozone, I expect a below-consensus contraction in real GDP of around -2.5% (…)

We believe China will experience a hard landing in 2009, with growth unlikely to exceed 5%, a sharp slowdown from the 10% average of the last five years. The reversal of capital flows and high credit cost will pull down India‘s growth significantly, to around 5% in 2009 from an estimated 6% in 2008.

END  OF NOURIEL’S QUOTATION

This graph, now in the front page of the Greenberg geo-eco think thank of the CFR (where we always read two of our favourite blogs: Follow the money by the International Economics “Sherlock Holmes” Brad Setser (*); and the delightful political incorrectness of  Amity Shlaes’ Forgotten man: healthy antidotes to FDR or BO’s santifications), is quite informative.

RAQ (Rarely Asked Q.) Did u know, before having looked at it, that the 2nd NewEconomy bubbbbbble (2003-07)  was much more  pervasive cross-country, than the so much advertised 1st one (1994-2001)?

2growths_oneline_cfr

(*) We are much more than friends, in brotherhood from decades with Otaviano Canuto, himself an rge blogger, Catou and all their beautiful family. Nonetheless, our esteem of Otaviano as an economist made a big jump upward a few weeks ago, when we discovered, in an exchange of comments on a recent post, he had … something to teach to Brad. Before, we believed anything alike impossible, i.e. beyond human limits.