Happy 40th Anniversary for Nixon's Worst Move, Roubini Predicts Tax Increases in U.S, Warren Buffet Acts Like a Liberal, and Paul Krugman Comes Up With His Worst Idea Yet

Happy 40th anniversary for the decision that doomed the global economy for good!  Okay, that may be a bit of an exaggeration (not really judging by today's circumstances), but today marks the day 40 years ago when Tricky Dick Nixon closed off the gold window for foreign central banks and governments for good.  Keynesians rejoiced at such a prospect.  "Finally we can print our way to prosperity!!"  A couple of bouts of inflation and numerous recessions later, political leaders around the world still continue to play a race to the bottom in terms of currency devaluation.  Yet this is all good news for those gold bugs out there (I bought myself a nice shiny new ounce of silver today) who keep cashing in bureaucrats addiction to printing presses.  Check out Bank of America's new target ounce price for gold: $2,000!

"High commodity prices have now created a terms-of-trade shock for importers, feeding into current accounts, the financial sector and, ultimately, sovereign debt. How will these imbalances unwind? Physical gold is the ultimate collateral because it has no credit risk, so EM Central Banks have been diversifying their foreign exchange reserves into gold and other non-dollar, non-euro assets in recent quarters. Looking ahead, the deterioration in credit quality in Europe and the US coupled with an increased probability of QE3 means these pressures will continue. As a result, we revise our 12-month gold target to $2000/oz."

Translation: "ECB just monetized Italy and Spain debt, Swiss is hell bent on unconstitutionally devaluing the franc, Japan is devaluing the yen, and QE3 is all but assumed to be on the horizon by the market.  Better start treating gold like the currency it was and should be."

The impeccable John Tamny has a wonderful column on RealClearMarkets today outlining the damage dropping the gold standard has done:

Indeed, as Brookes calculated in his essential book The Economy In Mind, "In 1970 an ounce of gold ($35) would buy 15 barrels of OPEC oil ($2.30/bbl). In May 1981 an ounce of gold ($480) still bought 15 barrels of Saudi oil ($32/bbl)." Fast forward to the present, and an ounce of gold ($1750) buys roughly 20 barrels of oil ($85), but given the historical reversion to a 1/15 gold/oil ratio, it's not a reach to suggest that oil is due for a spike upward to roughly $116/bbl assuming gold remains where it is.

So while prices to some degree remain stable measured in gold terms, the fluctuations in the dollar prices of the commodities most sensitive to monetary error have wrought profoundly negative implications. Brookes referenced the "money illusion," and while it can't be quantified, policy is distorted by price signals falsely transmitted through the weak dollar, particularly during periods of monetary debasement.

Now main critique of fiat currency regimes is always the use of debasement to pay for loveable welfare programs and perpetual warfare, but Tamny points out another economically damaging aspect of fiat currency:

In short, when money lacks definition, and worse, when monetary authorities lean toward currency weakness, the economy suffers a painful detour into assets of the past that already exist, and away from stocks and bonds that represent income streams from assets that don't yet exist. Adam Smith himself observed that stationary economies are declining ones, and in periods of inflation economies are worse than stationary for so much investment migrating back to the prosaic commercial ideas of the past.

Conversely, during periods of relative currency stability and strength (the '80s and '90s stand out here), investment flows to the ideas and income streams of the future. Brookes referred to this as investment in the metaphysical, or the "economy of the mind." Considering the technology explosion that occurred in the '80s and '90s, what happened was not surprising in the least.  Strong, stable money equals investment in the future.

As for the left who so highly detest financial play things such as derivatives and hedge funds:

To lament hedge funds is to bemoan symptoms as opposed to causes. While hedge funds would have to be invented if they didn't already exist, it's essential to point out that the floating dollar and its inevitable distortion of the money prices of everything made hedge funds ever more necessary. Though hedge funds employ myriad investing styles, one of the most prominent involves taking investment positions based on unrealistic prices.

To all the Chris Matthews out there who bemoan the unproductiveness of Wall Street derivatives and risk aversion instruments, fiat currency is to blame.

As I mentioned above, their is a global race to the bottom in terms of currency devaluation.  Nouriel Roubini agrees in his new column today:

Currency depreciation is not a feasible option for all advanced economies: they all need a weaker currency and better trade balance to restore growth, but they all cannot have it at the same time. So relying on exchange rates to influence trade balances is a zero-sum game. Currency wars are thus on the horizon, with Japan and Switzerland engaging in early battles to weaken their exchange rates. Others will soon follow.

Roubini tends to always be on point when it comes to what central bankers are planning.  Check out this dire prediction for the U.S.:

Fiscal policy currently is a drag on economic growth in both the eurozone and the UK. Even in the US, state and local governments, and now the federal government, are cutting expenditure and reducing transfer payments. Soon enough, they will be raising taxes.

Warren Buffet is out with an interesting New York Times column today trying to make the case that the U.S. federal government should raise taxes on the super rich:

While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.

Well isn't that just so altruistic of him!  Here Mr. Buffet is offering the government to lay its grubby hands on more of his hard-earned income!  Like all things the left praises, there is more to the story as Timothy Carney points out:

Buffett Profits from Taxes He Supports
Buffett regularly lobbies for higher estate taxes. He also has repeatedly bought up family businesses forced to sell because the heirs’ death-tax bill exceeded the business’s liquid assets. He owns life insurance companies that rely on the death tax in order to sell their estate-planning businesses.
Buffett Profits from Government Spending
Buffett made about a billion dollars off of the Wall Street bailout by investing in Goldman Sachs on the assumption Uncle Sam would bail it out. He also is planning investments in ethanol giant ADM and government-contracting leviathan General Dynamics.
If your businesses’ revenue comes from the U.S. Treasury, of course you want more wealth.

Pat Buchanan has a few choice words for Buffet as well: Put your money where your mouth is!

Why wouldn't the CEO of Berkshire Hathaway want taxes raised to fund an institution that can regulate all its competitive start ups out of business?  Buffet is no moron when it comes to earning money.

To round off the pro-government/taxation train today, Paul Krugman has come out with the best government spending scheme yet, pull a alien attack hoax forcing the public to accept the government spending trillions of dollars on an alien defense system!  Genius!

Yes Dr. Krugman, let's think about WWII.  The government spent billions on tanks, bombs, and guns.  Clearly a great deal of wealth was created.  After all, it all counted as increased production on the aggregate at the end right?!  Krugman's idiocy never fails to amaze like always.  As Milton Friedman once said, why pay workers to dig ditches with shovels when we can increase employment by having them use spoons!  Jobs for everyone!

I will end with another wonderful example of those angels Krugman trusts to run the country:

WASHINGTON—The 12 lawmakers appointed to a new congressional supercommittee charged with tackling the nation's fiscal problems have received millions in contributions from special interests with a direct stake in potential cuts to federal programs, an Associated Press analysis of federal campaign data has found.

The newly appointed members -- six Democrats and six Republicans -- have received more than $3 million total during the past five years in donations from political committees with ties to defense contractors, health care providers and labor unions. That money went to their re-election campaigns, according to AP's review.

As Mish suggests, why not fire Congress and have lobbyists write laws.  They already do anyway.

Update- I saw this yesterday and figure its worthy of posting on.  Via Alexander Gloy of Lighthouse Investment Management, we have how Bernanke magically makes trillions of debt disappear:
Look very carefully at "total interest" for Treasury Bills in July 08 to July 11

Here it is in graph form, watch the green circle:

Tada!!

The issuer constantly rolls over maturing debt, paying no interest. This is money-printing (and deficit spending) nirvana.

So basically the number of outstanding Treasury Bills increased while the interest rate payment went down:

The biggest category (Treasury Notes) saw an increase of 139% in the amount outstanding; yet interest payments increased only 36% as the average coupon dropped.

Free lunches don't exist and we are still seeing the consequences of such actions.

Gary North vs. Walter Block on the Value of a PhD in Economics, Ron Paul Ignored This Morning, and Banksters Make Rioters Look Like Fools

Check out this intriguing debate between the great Gary North and the fantastic Walter Block at Mises University on whether getting a PhD in economics is still a valuable endeavor:

As I have professed many times on this blog, I am a huge Gary North fan and think that he is by far the best Austrian writer on political economy in the country.  With that being said, it was a tough choice to make on who won the debate.  Though I do love Walter Block, especially his "take as much money from the state as possible" theories, in the end he lost for style.  North is a phenomenal public speaker and made the moral case against continuing to get an education in the government dominated-education cartel known as higher education.  Though North did acknowledge that getting a PhD may be a good idea for some people, he makes it clear that it is a tough journey for many people and needs careful consideration from anybody thinking of pursuing such a degree.  Though Block is right in that many students can get a PhD in Austrian economics from a number of professors who are sympathetic to the school of thought, at this point there seems to be way more students than professors, which in itself is a good sign of a growing trend.

My bias with North though resides mainly in that I am following the path he advocates, this blog and my writings are self evident of that.  I can only hope to be successful.

Yesterday, in regards to Ron Paul's almost victory in Iowa, I wrote this as a prediction of how the media would react:

• Paul wins straw polls all the time, no big deal here


• Iowa doesn't represent America, no big deal here


• Paul, despite almost coming in first, is still too fringe for the American public despite a growing hatred for war and Wall Street, no big deal here


• Bachmann still came in first, no big deal here

Funny, Roger Simon of Politico proves my point exactly by calling out his own industry:

Simon is right, Paul barely got any coverage on the Sunday shows this morning.  From comment threads I have read elsewhere, it seems that many called into C-Span this morning and bitched about the media's predictable response.  Needless to say, there is an editorial brewing inside me right now.

H/T Jonathan Catalan, I will end with this fantastic editorial cartoon:

Hmmm, so why is one demonized by the public and the other is advocated for every Monday and Friday on the New York Times editorial page by Paul Krugman?

Ron Paul Places Second at Ames, New Mises Article, Marc Faber on What the Fed Should Do, and Donald Rumsfeld to Be Sued?

Back from the week long conference/ending program gathering in D.C. and the markets have been incredibly volatile to say the least.  Though I was able to check news in the morning and at night, I couldn't believe my yes watching all the money manipulation going on across the globe.  We got all the goodies: continuing close to 0% interest rats from the Fed, the Australian housing bubble burst, and short sell banning.

Despite all the mass hysteria, there is a silver lining: Ron Paul just placed second at the Ames, Iowa straw poll!  Though queen neo-con Bachmann placed first, she only beat Paul by 150 votes!  Look for these reactions from the mainstream media:

• Paul wins straw polls all the time, no big deal here


• Iowa doesn't represent America, no big deal here


• Paul, despite almost coming in first, is still too fringe for the American public despite a growing hatred for war and Wall Street, no big deal here


• Bachmann still came in first, no big deal here

The Sunday shows should be hilarious as they try and explain why Paul continues to get so much support.

On Thursday, I had an article on the Mises Institute describing a flea market near my house.

While this week was crazy to say the least in terms of macro economic trends, Marc Faber has some wonderful commentary on the path our wonderful overlords at the Fed should take:

"The best they (the Fed) could do for markets is too collectively resign."

I couldn't have said it better myself.

There was still some good news this week, it turns out justice may still get served:

Two American men will be allowed to sue former Defence Secretary Donald Rumsfeld over claims that they were unfairly tortured by U.S. troops in Iraq.

While I highly doubt this will amount to anything in the long run, it's always nice to see that war crimes are still acknowledged to have occurred.  Rumsfeld will probably get some kind of immunity in the end.

So while Ron Paul was victorious today, this genius contraption at his tent surely helped out:

New Jobs Numbers: Recession Vs. Manipulated Boom, Marc Faber on QE3, and The Judge Gives the Austrian School Some Much Deserved Mainstream Attention

The new jobs report is being met with all sorts of speculation.  Is the slight drop in unemployment a good thing?  Does it not reflect all the data?  Are we at the beginning of another manipulative boom?  Or are we still about to bust?

Robert Wenzel is claiming victory:

It didn't take this morning's unemployment numbers for me to understand that we are not going into a double dip recession, that the source of current problems is in Europe and that the bond market will be in trouble, but today's job numbers are helping a few see the light.

From the Wall Street Journal:

–Wages rose 0.4%, double the consensus, 0.2%. This is a relief. We were always deeply suspicious of the June numbers because the seasonals were so savage, and we expected both a rebound in July and an upward revision to June. The July seasonal factor was almost identical to last year. – Ian Shepherdson, High Frequency Economics, Ltd.

–The payroll gain was the strongest in three months and reasonably broad based and there were upward revisions in payroll growth to the prior two months. There is better news on manufacturing in the gain in hours worked and our proxy for wage and salary income rose by 0.5%, which is good news for consumers. This report is very important for investors because the equity market had finally caved in with a 12% drop from the highs and fear…had replaced complacency. We were looking for a better entry point on equities and now we may have it. For bonds this is bad news as investors may look to put more risk on and as the gain in payrolls likely squashes the hopes of some for QE3. –RDQ Economics

–All in all, today’s numbers may quell recession anxiety at the margin – in our judgment, the real source of recession risk is more about European debt contagion than US domestic fundamentals (which, for now, are consistent with sluggish growth, not recession). –Jay Feldman, Credit Suisse

Mish has a different point of view and looks at the drop in the labor participation rate:

Here is an overview of today's numbers.

• US Payrolls +117,000
• US Unemployment Rate -.1 to 9.1%
• Participation Rate -.2 to 63.9% accounting for drop in unemployment rate
• Actual number of Employed (by Household Survey) fell by 38,000
• Unemployment rose by 156,000
• Those dropping out of the labor force rose by 374,000
• Civilian population rose by 182,000, Labor Force declined by 193,000
• Average Weekly Workweek was unchanged at 34.3 hours
• Average Private Hourly Earnings Increased by 10 Cents
• Government employment decreased by 37,000 - a genuine bright-spot

Many of those millions who dropped out of the workforce would start looking if they thought jobs were available. Indeed, in a 2-year old recovery, the labor force should be rising sharply as those who stopped looking for jobs, once again started looking. Instead, the labor force is not expanding at all.

Were it not for people dropping out of the labor force for the past two years, the unemployment rate would be well over 11%.

So which is it, are we in a manipulated boom or on the verge of more contraction?  Truthfully, I have no idea.  I am very new at this and the monetary times we are living in are very unprecedented.  What happens from here on out will show how a system of competing fiat currencies on a global level really works.  Can one country's central bank inflate to drive economic growth when there is chaos in other major industrialized countries?  We are definitely going to find out.

Marc Faber has weighed in on yesterday's stock/equity bloodbath on Bloomberg:

"next week will be important to see if Bernanke is a true money printer or an amateur, and if he is a true money printer he will start printing soon."

Faber is right, if Bernanke turns the printing press on again, it will prove that he genuinely thinks that printing greenbacks drives economic growth.  His whole reputation could very well be set in stone next week, I am already buying silver again.

I will end with Judge Napolitano's great summary of the Austrian school he gave on his show last night:

I will be in D.C. for a week starting tonight, so posting will be minimal, if done at all.

Obama Turns 50 and the Stock Market Plunges, Spain/Italy Bond Auctions Cancelled, and Australian Property Bubble Bursting

Happy birthday Mr. President!  Looks like the stock market had a big gift for you today!  Via HuffPost:

NEW YORK -- Stocks plunged Thursday in the worst one-day drop in more than two years, as investors absorbed fears that the American economy could enter a new recession.
The Dow Jones Industrial Average dropped 4.3 percent during the day, and the Standard & Poor's 500 Index lost 4.8 percent, as investors dumped risky assets and clambered for safety.
A week's worth of declines in the stock market erupted into an outright plunge as a stream of bad news kept coming: The American economy is barely growing; the federal government is preparing to slash spending; and a growing crisis in Europe increasingly threatens to send shock waves through the system.

And of course this was the Obama economic team in the White House today:

Anybody who has been paying attention knew this correction was coming soon.  You can bet your Treasury bonds that Bernanke is watching CNBC closely and is getting ready to pull the switch for QE3.  Looks like Bank of New York Mellon Corp. is making lemonade with all those flight to lemon security they are receiving, WSJ:

Bank of New York Mellon Corp. is preparing to charge some large depositors to hold their cash, in the latest sign of the worries roiling global markets.

The big U.S. custodial bank said this week in a note to clients that it will begin slapping a fee next week on customers that have vastly increased their deposit balances over the past month.
The bank cited the heavy dollar deposits it has received over recent weeks, as investors and corporations retreat from financial markets amid Europe's debt crisis and the recent debate over U.S. government borrowing.

As Robert Wenzel pointed out, this is simply a storage fee.  You can't blame Mellon Corp., the money could leave their coffers any second when things calm down.  Looks like the dollar survived along with the franc:

It seems like a lot of this was driven by fear of ECB intervention in Italy/Spain bond auctions, but no worries there, the market stepped up and put the kibosh on any future auction of both:

Via Dow Jones we have learned that Spain, not Italy, has decided to pull its August 18 auction and will instead launch its 5 year auction on September 1. Once again, Zero Hedge being just a little prescient with our 7 am commentary that we "look for Spain to follow Italy in a self-imposed bond market exile." And in far worse news, we now get a schism within the European banking authority itself after Bloomberg reported that the Bundesbank's Weidmann is said to be opposed the resumption of ECB bond buying,

Now this is unbelievable:

According to a Reuters report, the Italian Treasury has a "larger cash pile than generally perceived according to sources."

Sure enough, the subsequent Reuters headline says that the "Italian Treasury's cash pile is enough to last most of 2011."

Translation: Italy is using some funny accounting to avoid any more bond auctions for fear of skyrocketing yields.  Like Trichet says, you gotta lie when the financials get hairy.

So as the world economy continues to tumble, Australia is having its own crisis to deal with:

The building and construction industry seems to be bearing the brunt of the brittle Australian economy, with more than 85 companies either entering administration, liquidation or being hit by a winding up notice over the past month in Victoria and New South Wales alone.

Can you hear that?  Can you hear that PPPPPPOOOOOOPPPPP sound?  Another property bubble goes bust, another lesson unlearned.  Looks like ignorance of asset bubbles is still a worldwide phenomena a few years after 2008.

I will end with an interactive graph that highlights the problem of the worldwide economy perfectly: too much debt:

Click the pic for the interactive part, like always.

Quanitative Easing Begins Again in Europe, May Be Coming to a United States Near You, The Case for Gold, and Bernanke Gets Trashed?

It's official, it looks like Italy is about to be bailed out:

Former Bank of England policy maker Willem Buiter said the European Central Bank will revive its bond-buying program to safeguard this week’s auction of Italian bonds.
“The ECB will intervene on whatever scale is necessary to allow Italy to conduct its auction on Thursday,” Buiter, now chief economist at Citigroup Inc., told reporters in London today. “If the ECB doesn’t come in, the Italian bond auction is likely to fail.”

Translation: "The market doesn't trust Italy anymore, it's unwilling to take the risk and invest, the European Central Bank must step in to save Italy's ass."  Simple as that, but then again simple truths have never been a central banker's strong point.  How much longer are Germans gonna put up with this?

Now that the ECB printing press seems to be warming up again, Switzerland doesn't want to miss out on the party, via WSJ:

The collateral damage from the U.S. and European debt crises shifted the front lines of the currency wars to Switzerland on Wednesday.

In a surprise effort to fend off a flood of money entering the country from investors seeking a safe haven, the Swiss National Bank cut interest rates to nearly zero and pledged to pump billions of newly minted francs into its markets.

Calling its currency "massively overvalued," the central bank said it "will take further measures against the strength of the Swiss franc if necessary."

What kind of Keynesian moron would advocate for stemming the inflow of capital into a country?  Yes, God forbid the citizens of Switzerland have increased purchasing power that may come at the expense of exporters.  We must protect the exporters and the banks who specialize in borrowing short and lending long!

America can't be left out of the QE fun now can it?  Don't worry, it looks like former director of the Fed's monetary chair committee, Don Kohn, is prepared for QE3, via an interview with WSJ:

In an "exclusive" interview with the Fed's last tree monetary affairs committee, Donald Kohn, Vince Reinhart and Brian Matigan, Hilsenrath observes that according to these masters of the universe the chance of another recession is 20-40%, which we are confident is a given at 100%, but more importantly, he quotes Don Kohn who "said the Fed still has some options to support the economy, but "they're kind of limited." He said he expects the central bank, which holds a policy meeting Aug. 9, to wait and see whether the recovery is really losing steam before taking any action. If that's the case--and inflation is coming down--then he would give "very serious consideration" to a new round of bond purchases, he said."

If the excess reserves keep slipping in the money supply like they recently have, there will be no need to worry about deflation and QE3.

With all the talk of more money printing, the fundamentals for a rise in the price of precious metals look strong.  Goldcore agrees an provides plenty of rational and graphs to prove gold is not at all in a bubble:

For more than 3 years - since gold rose above its nominal high of $850/oz in February 2008 - there has been much talk about gold being a bubble.
Nouriel Roubini, professor of economics at New York University's Stern School of Business, is one of the more prominent financial and economic experts who said gold was a bubble and many other experts internationally echoed his sentiments.
On December 10th, 2009, with gold at $1,100 per ounce, Roubini, said, "all the gold bugs who say gold is going to go to $1,500, $2,000, they're just speaking nonsense". Roubini went on to say ,"I don't believe in gold."
Gold has now risen 50% since then and Roubini has been silent on the gold price.

The precious metals of gold and silver are driven by a wide variety of factors, including money supply, debt levels, currencies, CDS spreads, interest rates, inflation and fabrication demand from downstream sectors such as jewelry, electronics, and solar applications.
Investment demand has been one of the primary drivers more recently as investors have used precious metals as a store of value in the face of dollar and currency depreciation as well as a general hedge against inflation.
Investment demand includes significant and growing demand from store of wealth buyers in Asia, investment and diversification demand from hedge funds, pension funds and central banks and monetary demand from central banks.
This demand is due to concerns about the global economy, growing inflation risks and the real risks posed by currency debasement being seen globally.
Gold remains the preserve of the smart money, many of whom predicted the current financial and economic travails. 
Risk aversion and concerns about wealth preservation due to currency depreciation remain the primary demand drivers.

U.S. M2 Growth Expands in June, Correlates High With Gold

The U.S. M2 money supply accelerated in June to a 6.0% yoy pace, the highest reading in 22 months. The U.S. consumer price index (urban consumers) remained at a 3.6% yoy pace in June, in line with May's results. The correlation between the total U.S. M2 and gold has exceeded 0.90 since November 2004.

China M2 Money Supply: M2 Growth is Decelerating, Yet Still Rising

Gold Moves Higher with Chinese Inflation

China’s M2 money supply has been rising by 20%, Switzerland’s by 25%, Russia’s by 30%, and the world’s by 8%-9%. Japan’s M2 is expected to move higher after recent events. In order to fight economic and debt issues, paper currency has been printed at historically high levels.

Rising Debt Levels Drive Gold and Silver Higher

Here is a very entertaining CNBC interview with the great Marc Faber who has the same sentiments of gold though thinks there may some optimistic exuberance in the market and may lead to a small correction very soon:

Gotta love his suggestion on firing half the government workforce, including the President.  I would also throw Congress into that bunch.


Speaking of entertaining, check out this absolutely hilarious Onion article:

Drunken Ben Bernanke Tells Everyone At Neighborhood Bar How Screwed U.S. Economy Really Is

SEWARD, NE—Claiming he wasn't afraid to let everyone in attendance know about "the real mess we're in," Federal Reserve chairman Ben Bernanke reportedly got drunk Tuesday and told everyone at Elwood's Corner Tavern about how absolutely fucked the U.S. economy actually is.
Bernanke, who sources confirmed was "totally sloshed," arrived at the drinking establishment at approximately 5:30 p.m., ensconced himself upon a bar stool, and consumed several bottles of Miller High Life and a half-dozen shots of whiskey while loudly proclaiming to any patron who would listen that the economic outlook was "pretty goddamned awful if you want the God's honest truth."
"Look, they don't want anyone except for the Washington, D.C. bigwigs to know how bad shit really is," said Bernanke, slurring his words as he spoke. "Mounting debt exacerbated—and not relieved—by unchecked consumption, spiraling interest rates, and the grim realities of an inevitable worldwide energy crisis are projected to leave our entire economy in the shitter for, like, a generation, man, I'm telling you."

The whole article is great and uncannily resembles what is really happening in the U.S. economy.  It's hard to believe it even came from the Onion.

I will end with a pretty good interview of Judge Napolitano explaining why the atrocious new "Super Congress" is unconstitutional:

Update- Looks like we have an all out currency war on our hands folks.  First was the Swiss National Bank, then threat of ECB money printing, now Japan:

And from Bloomberg:

• Japan Intervened in Yen, Nikkei Says
• Japan Intervened to Sell Yen, Finance Minister Noda Says
• Yen Falls as Much as 1.8% to 78.43 Per Dollar After Intervention
• Japan’s Intervention Was Unilateral, Finance Minister Noda Says
• MOF sold under Y500 billion in intervention: 2 dealers
• Noda Says He Hopes Bank of Japan Will Take Appropriate Actions

Bloomberg sums the whole situation up:

Just eight months ago, Brazilian Finance Minister Guido Mantega declared a “truce” in competitive currency devaluations. Now, Japanese and Swiss moves to weaken the yen and the franc show reviving tension in foreign-exchange markets as the deteriorating U.S. economy weighs on the dollar.
Japan sold yen today, causing the currency to weaken as much as 3.8 percent against the dollar after rising 5 percent last month. “Ongoing one-sided moves” would hurt the recovery from a March earthquake, Finance Minister Yoshihiko Noda said. Yesterday, the Swiss National Bank cut interest rates to rein in the franc after a gain of about 36 percent in the past 12 months.

Turkey’s lira fell 1.1 percent to 1.7129 per dollar at 12:08 p.m. in Istanbul today after the central bank cut a key interest rate.

South Korea’s government is reviewing “all possibilities” on curbing capital inflows, Finance Minister Bahk Jae Wan told reporters in Seoul today, adding that he’s “closely monitoring” the situation. The won fell 0.1 percent to 1,061.70 per dollar at the 3 p.m. close in Seoul after touching a three- year high on July 27.
The Philippines is prepared to impose controls to cap volatility after the peso rose to a three-year high this week, central bank Governor Amando Tetangco said in an e-mail late yesterday. The bank “will not go against the fundamental currency trend but will not hesitate to use tools, including imposing prudential limits on certain transactions of banks,” he said.

As Margaret Thatcher once said, socialism doesn't work because you eventually run out of other people's money.  Well currency devaluation doesn't work when every country you are trying to export to does the exact same to their currency.   Everyone is left holding on to pieces of paper that buy less and less.  Grandma on a fixed income struggles to buy catfood while her grandson, big banker Jimmy, bathes in a bathtub full of dollars/Euro/Francs/Yen/insert major industrial country's currency.  It's called the race to the bottom and the U.S. is trying desperately to be number one yet again.

Bill Gross on Debt Ceiling Deal, Attention Shifts to Euro Zone, and a Glimmer of Hope on Horizon

Bill Gross is weighing in on the pathetic debt deal, which predictably passed the Senate today, in a PIMCO newsletter today:

• ​Nothing in the Congressional compromise reached over the weekend makes a significant dent in our $1.5 trillion deficit.
• In addition to an existing nearly $10 trillion of outstanding Treasury debt, the U.S. has a near unfathomable $66 trillion of future liabilities at “net present cost.”
• Aside from outright default, there are numerous ways a government can reduce its future liabilities. They include balancing the budget, unexpected inflation, currency depreciation and financial repression.

Gross of course has a huge interest in keeping U.S. bond values afloat.  While outright default is the right answer, you can bet your bottom greenback that our wonderful leaders in Washington will opt for inflation and currency depreciation.  The whole balancing the budget thing is a scam, every federal budget is technically balanced, borrowing just makes up the difference.  The sooner the Tea Party drops the issue, the sooner they get back to reality.

Now a big part of the debt ceiling deal is the creation of the atrociously dubbed "Super Congress."  Yes, that's right, despite the fact that Congress has the lowest approval rate probably ever, let's make a stronger and more efficient one.  Good thing K Street is on the job and ready to infiltrate.  Via Politico:

K Street wasted little time putting clients on notice about the next phase of the debt ceiling debate with a simple message: Nobody is safe from the super committee.
Lobby shops say a much-broader-than-expected range of budget cuts and tax provisions could be in play, especially compared with the relatively small group of industries that were afraid of getting a haircut during the earlier debt ceiling negotiations led by Vice President Joe Biden.

Several lobbyists said they expect companies and industry groups to put a full-court press on Capitol Hill engaging grass roots, advertising and old-fashioned, shoe-leather lobbying to try to minimize the severity of the cuts.

How much influence K Street can have on the process is still unclear.

Looks like being chosen as one of the twelve members of the Super Congress is going to be a very competitive process.  Who doesn't like being wined and dined just to save a measly $30 billion tax credit?  Bars and restaurants around Capital Hill better prepare and order extra martini mix.  Look for it to be staffed with a bunch of moderates like Lindsey Graham who will agree to a bunch of cuts which will never come to fruition.

With the debt ceiling once again raised, all sights are set on Europe as Spain and Italy 10 year bond yields are exploding:

 Via Bloomberg:

The yield on 10-year Italian bonds rose 13 basis points to 6.14 percent at 4:31 p.m. in London. It earlier surged to 6.25 percent, the most since November 1997. The 4.75 percent security maturity in September 2021 fell 0.895, or 8.95 euros per 1,000- euro ($1,422) face amount, to 90.34. That pushed the difference in yield, or spread, over bunds, to as much as 384 basis points, the most since before the euro was introduced in 1999.
Italian bond futures fell, sending the price difference over bund futures to a record. The September Italian futures contract fell 1 percent to 98.21 after reaching a record 96.75, making the difference over its German equivalent 33.52.

Let's not forget about Greece now.  While the fiscal can was kicked down the road just a little more, it looks like the Greek citizens are finally seeing the writing on the wall.  Via Guardian:

In one of the biggest banks in the centre of Athens a clerk is explaining how his savers have been thronging to pull out their cash.
Wary of giving his name, he glances around the marble-floored, wood-panelled foyer before pulling out a slim A4-sized folder. It is about the size of a small safety-deposit box – and those, ever since the financial crisis hit Greece 18 months ago, have become the most sought-after financial products in the country. Worried about whether the banks will stay in business, Greeks have been taking their life savings out of accounts and sticking them in metal slits in basement vaults.
The boxes are so popular that the bank has doubled the rent on them in the past year – and still every day between five and 10 customers request one. This bank ran out of spares months ago. The clerk leans over: "I've been working in a bank for 31 years, and I've never seen a panic like this."
Official figures back him up. In May alone, almost €5bn (£4.4bn) was pulled out of Greek deposits, as part of what analysts describe as a "silent bank run". This version is also disorderly and jittery, just not as obvious. Customers do not form long queues outside branches, they simply squirrel out as much as they can. Some of that money will have been used to pay debts or supplement incomes, of course, but bankers put the sheer volume of withdrawals down to a general fear about the outlook for Greece, one that runs all the way from the humble rainy-day saver to the really big money.

"Every time the markets move, I get phone calls," says an Athens-based fund manager. "They're from investors asking: 'How can I get my money out of the country?' "
One senior investment banker is more blunt: "People are scared that the government doesn't know what the fuck it's doing." He tells a story about an acquaintance who took out €30,000, wrapped it in a bag and stashed it in his garage. "The bag had previously had some food inside," he says. "So it attracted rats, who ate the notes."

Too bad the government knows exactly what the fuck its doing.  It's saving the banks at the expense of taxpayers.  Same story, same place, nothing changes.
Except for the price of gold!

Good thing the Bernank doesn't think gold is money, that way every other Central Bank can keep loading up.  Via Zerohedge:

Further confirmation in the continuing stealth accumulation of bullion by central banks came overnight with confirmation that South Korea's central bank bought 25 tonnes of gold  over the past two months. The gold is worth $1.24 billion and resulted in a 17 fold increase in their gold reserves.
Thailand’s gold reserves rose by 15.5% in the two months and rose to about 4.07 million ounces in June, from about 3.523 million ounces in May, according to figures on the Bank of Thailand’s website accessed by Bloomberg this morning.
South Korea is the world’s seventh-biggest foreign-exchange reserve holder and 64% of its reserves are in U.S. dollars. The bank said that it also holds euros and other assets and the move was about achieving diversification.

Hmmm, if Paul Krugman's hypothesis is true and its Glenn Beck and all those dastardly gold sellers on TV are really behind the rise in the price of gold, they must be having some huge international influence.  I didn't know Beck was broadcasted out in Korea and Thailand.

While all the recent economic data has been pretty pessimistic, here is a piece of news that will have Keynesians screaming bloody murder for QEIII:

WASHINGTON (AP) -- Americans cut their spending in June for the first time in nearly two years after seeing their incomes grow by the smallest amount in nine months. The latest data offered a troubling sign for an economy that is adding few jobs and barely growing.
Consumer spending dropped 0.2 percent in June, the Commerce Department said Tuesday. It was the first decline since September 2009.

Incomes rose 0.1 percent, the smallest gain since September. Many people are also pocketing more of their paychecks. The personal savings rate rose to 5.4 percent of after-tax incomes, the highest level since August 2010.

While Keynesians will tear their hair out at this news, this is actually a great sign.  Savings, not consumption, are would lead to productive investment.  In a world unaffected by central banking, this type of behavior would bring down interest rates.  Too bad Bernanke crazed monetary tools have the system so convoluted with money slipping in from all directions, a change in time preference by consumers may not be enough to offset another manipulated business cycle.