Dialectics of History

[Spiralman]

The Incredibly Shrinking Market Liquidity, Or The Post-Easter Black Swan Of Black Swans

http://zerohedge.blogspot.com/2009/04/i ... idity.html

[
The big boys are deleveraging and Goldman (Paulsen was former CEO, Geithner is buddies with Thain) is using program trading to generate the recent rally, which is a Pump and Dump scheme to sucker retail investors in and then bail out leaving them watching their investments evaporate.
The probability is high for this to occur in the next week or two; all the bear rallies so far have averaged 30-45 days; this one started March 9.

The world might blame program trading, which is what happened in 1987 too, but we all should know better now.
This is a global overproduction crisis, and all of the last decade of financial shenanigans have just been to disguise and postpone the underlying collapse in profitability and aggregate demand in the world, and optimize the deleveraging escape for whoever is best connected or has good intuition.
]

In order to maintain market efficiency, the ecosystem has to be balanced: liquidity disruptions at any one level could and will lead to unexpected market aberrations, such as exorbitant bid/ask margins, inability to unwind large block positions, and last but not least, explosive volatility: in essence a recreation of the market conditions approximating the days of August 2007, the days post the Lehman collapse, the first November market low, the irrational exuberance of the post New Year rally, and the 666 market lows.

The above tracking charts indicate that something is very off with the "slow", "moderate" and "fast" liquidity providers, indicating that liquidity deleveraging is approaching (if not already is at) critical levels, as the vast majority of quants are either sitting on the sidelines, or are merely playing hot potato with each other (more on this also in a second). What this means is that marginal market participants, such as mutual and pension funds, and retail investors who are really just beneficiaries of the liquidity efficiency provided them by the higher-ups in the liquidity chain, are about to get a very rude awakening.

Also, it needs to be pointed out that the very top tier of the ecosystem is shrouded in secrecy: conclusions about its state can only be implied based on observable metrics from the HSKAX and HFRXEMN. It is safe to say that any conclusion drawn based upon observing these two indices are likely not too far off the mark.

Skeptics at this point will claim that it is impossible that quant and program trading has such as vast share of trading. The facts, however, indicate that not only is program trading a material component of daily volumes, it is in fact growing at an alarming pace. The following most recent weekly data from the New York Stock Exchange puts things into perspective:

Key to note here is that Goldman's program trading principal to agency+customer facilitation ratio is a staggering 5x, which is multiples higher than both the second most active program trader and the average ratio of the NYSE, both at or below 1x. The implication is that Goldman Sachs, due to its preeminent position not only as one of the world's largest broker/dealers (pardon, Bank Holding Companies), but also as being on the top of the high-frequency trading/liquidity provision "food chain", trades much more often for its own (principal) benefit, likely in tandem with the other top dogs on the list: RenTec, Highbridge (JP Morgan), and GETCO. In this light, the program trading spike over the past week could be perceived as much more sinister. For conspiracy lovers, long searching for any circumstantial evidence to catch the mysterious "plunge protection team" in action, you should look no further than this.
.......
As more and more quants focus on trading exclusively with themselves, and the slow and vanilla money piggy backs to low-vol market swings, the aberrations become self-fulfilling. What retail investors fail to acknowledge is that the quants close out a majority of their ultra-short term positions at the end of each trading day, meaning that the vanilla money is stuck as a hot potato bagholder to what can only be classified as an unprecedented ponzi scheme. As the overall market volume is substantially lower now than it has been in the recent past, this strategy has in fact been working and will likely continue to do so... until it fails and we witness a repeat of the August 2007 quant failure events... at which point the market, just like Madoff, will become the emperor revealing its utter lack of clothing.

So what happens in a world where the very core of the capital markets system is gradually deleveraging to a point where maintaining a liquid and orderly market becomes impossible: large swings on low volume, massive bid-offer spreads, huge trading costs, inability to clear and numerous failed trades. When the quant deleveraging finally catches up with the market, the consequences will likely be unprecedented, with dramatic dislocations leading the market both higher and lower on record volatility.

[Spiralman]

http://online.wsj.com/article/SB123957686061311925.html

IEA Cuts Oil Demand Forecast to Lowest in Five Years
http://www.bloomberg.com/apps/news?pid= ... fer=europe

[
OPEC has already reduced daily production targets by ~5%.
1982 recession dropped oil demand by ~12%
]

January 09
Saudi oil ministry’s advisor thinks demand could drop by 45%
http://www.arabianbusiness.com/543062-s ... all-by-45-

[
This didn’t get any publicity in the western media at the time.
I think it’s right on target.
I have predicted for awhile a 25% - 50% drop due to the Depression.
I believe that global oil demand will never again reach the levels it reached in Summer 08.
By the time a recovery can begin, ie bottom is reached – 2012 – there will be a completely new energy paradigm driven by cheap solar and affordable hybirds, and the various energy streamlining efforts going on in the G20 nations ensures an additional energy drop of 30% per GDP unit.

Peak Oil and Climate Change will fade away as the concerns of serious people are focused on much more pressing matters like mass unemployment, debt servitude, civil unrest and world war.

The principal environmental issue will be access to fresh water, not because of Climate Change or bottled water or flush toilets, but because of primitive outdoor agriculture irrigation techniques literally soaking up >70% of the planet’s freshwater will have reached their peak levels, when drip irrigation and hydroponics could cut agricultural freshwater usage by 90%.

We will see as an indicator of the necessity for ending outdoor agriculture the mass poisoning of people in Pakistan, India and Bangladesh as their tube wells have had to go ever deeper, and now are approaching the bedrock limestone which is where the arsenic is usually found.

]

[Spiralman]

http://globaleconomicanalysis.blogspot. ... redit.html

Mish has lots of good advice and explanations for what is being angled for with these offers.

[The Grey Badger]

A lot of us have already mentally filed those in the same file as "make lots of money from home!" and "become a millionaire in real estate!" Pity people are taken in by these scamsters, but somebody must be. The triumph of hope over experience?

[Spiralman]

Stratfor-China Spinning the Economic Slowdown & G20 Summit Missed Target & Adios US: now China leads the world, says Chavez

G20 Summit Missed the Real Target By Henry C.K. Liu
http://henryckliu.com/page185.html

Leaders of Group of 20 attending the second Summit on Financial Markets and the World Economy in London on April 2, 2009, echoing the first in Washington DC in November 2008, continued the tradition of superficial posturing for political theater on global television, while missing the real target which is the need not so much as to revive dysfunctional trade that has collapsed from its own internal contradictions, but to redefine the predatory terms of international trade created by dollar hegemony.

British Prime Minister Gordon Brown, host of the G20 London summit, declared it as having created a "new world order". While unipolarity appears to be in the process of being replaced by emerging multipolarity, the world is still a long way from developing a new order. If anything, the G20 London summit was a desperate last-gasp attempt by the G7 to restore a failed old world order.

Need for Restructuring Dysfunctional Terms of Trade

To save the world from a prolonged depression, international trade needs to be restructured from its current destructive role of preempting domestic development towards a new constructive role of augmenting it. That the now nearly two-year-old crisis in financial markets has been created by excessive debt denominated in a fiat dollar whose issuer has for decades failed to live by prudent rules of fiscal and monetary discipline has been acknowledged by the new president of the United States only in passing during the summit, while the solution to a debt-infested financial crisis is mistakenly deemed to be simply shifting massive private sector debt into public sector debt by spending future taxpayer money to save zombie financial institutions from bankruptcy. This approach of saving the decrepit institutions of free market capitalism rather than saving the severely injured global economy will only exacerbate and prolong the current financial crisis into a decade-long global economic depression.

For all economies except that of the US whose fiat currency has the unfair and unearned advantage of being the dominant reserve currency for international trade, excessive national debt denominated in foreign fiat currency, either private or public, threatens the economic and political sovereignty of independent nations. When international trade is denominated in fiat dollars, the US essentially imposes a global tax on all trade around the world, whether or not the US is a direct participant in the transaction and whether or not the transaction takes place within US jurisdiction. Foreign investment denominated in dollars, direct or indirect, naturally goes only to projects than can earn dollars, and not to where the target nation needs most for domestic development. Foreign investment then serves mainly the foreign investor, and only peripherally the target nation. This is why both foreign trade and foreign investment at levels beyond augmenting domestic development are undesirable and why nations should seek alternative methods of economic development.

Breaking Free from Dollar Hegemony
.......

Is Governor Zhou a closet Bernanke-ite?
http://mpettis.com/2009/04/is-governor- ... nanke-ite/

The world loves dollars because the US seems to love deficits

In fact I would go further. Because of the dollar’s reserve status, only the US could have possibly run the deficits necessary to absorb the huge surpluses that Asian trade policies were generating. Without the dollar’s status as a reserve currency, the Asian development model that stresses expanding production while constraining consumption – which among other things results in trade surpluses and net investment abroad (which of course is the same thing) – would have either required another reserve currency, or it would have failed.

Could there have been another reserve currency – and could it be that the dollar’s “exorbitant privilege” is something that Washington has enforced? Yes and no. The US economy comprises about one-quarter of the world’s economy and one-third of the rich-country economies. In principle it would have been very easy for any country to accumulate reserves of other rich countries – nearly all of whose currencies are easily convertible – so that there is no reason why the dollar portion of all developing-country central bank reserves might not have exceeded roughly one-third of the total, instead of the two-thirds or more that it currently occupies. Another third could be euros, and the rest a combination of the currencies of Japan, the UK, Switzerland, Canada, Australia, South Korea, and so on.

But it can’t just rest there. When a central bank chooses which currency to buy, unlike when you or I make our own portfolio decision, it is also determining the direction of net trade flows. Those other countries would have had to match the investment surplus (net inflows on the capital account) with an equally large current account deficit. If China had followed this balanced policy of reserve accumulation, in other words, the only thing that could possibly have stopped them, and a very big impediment it would have been, was the political or economic willingness and ability of those countries to run the corresponding trade deficits with China.

That, of course, is the problem. Given their much more limited economic flexibility and their less ebullient financial systems, those other countries probably would have never been able to sustain the necessary levels of trade deficit, and they would have almost certainly moved aggressively against China to limit the development of unfavorable trade balances. China, in other words, chose to hold US dollars not because the US government has somehow enforced reserve status on the US dollar and denied it to other currencies (Washington could never have prevented China from buying euros or yen or anything else), but simply because no other country is able to run deficits of the necessary magnitude.

The argument, then, that the dollar’s status as the reserve currency and brings an exorbitant privilege is simply the other side of Ben Bernanke’s savings-glut coin. Without the dollar’s reserve status, the global savings glut would have never occurred, or rather it would have never resolved itself in the way it did, and Asian development models aimed at engineering trade surpluses would have had to fail.
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Adios US: now China leads the world, says Chavez
http://www.brisbanetimes.com.au/world/a ... -a26d.html

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"No one can be ignorant that the centre of gravity of the world has moved to Beijing," Mr Chavez told China's president and Communist Party leader Hu Jintao on Wednesday during his sixth visit to the capital.

"During the financial crisis, China's actions have been highly positive for the world. Currently, China is the biggest motor driving the world amidst this crisis of international capitalism."

Mr Chavez's comments developed a theme he had begun earlier in the week.

On Tuesday night he told reporters: "The unipolar world has collapsed. The power of the US empire has collapsed. Every day, the new poles of world power are becoming stronger. Beijing, Tokyo, Tehran … it's moving towards the East and towards the South."

Mr Chavez's comments have hit a nerve after last week's G20 economic summit focused world attention on the waning global clout of the United States and the waxing power of China.

But global power status also brings expectations
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[Premature.]

China’s Exports Fall for Fifth Month on Global Slump
http://www.bloomberg.com/apps/news?pid= ... refer=home

[
Integrating Michael Pettis’ observations that the basis for the USD having global hegemony is rooted in American the greatest “economic flexibility” and “financial system ebullience,” one has to ask whether either China or Germany is moving to increase their economies’ flexibility and financial system’s ebullience.

I believe that China is moving on both of those fronts, but coming from very far behind.
Germany on the other hand doesn’t seem to improving its economy’s internal flexibility; and Europe’s flexibility is under attack broadly.
]

[Spiralman]

Keynes' Savings Paradox, Fisher's Debt Deflation and the Banking Crisis
http://www.eurointelligence.com/article ... 3ec.0.html

[Spiralman]

Taliban Exploit Class Rifts in Pakistan & India¹s Farmers in debt commit mass suicide & Maoists & The Peasant War in Germany (16th Century)

[This is a very long post with lots of links, maps, graphs and an attachment.
I hope you will be referring back to this for awhile.]

Taliban Exploit Class Rifts in Pakistan
http://www.nytimes.com/2009/04/17/world ... wanted=all



[
Religious fanaticism meets Maoist peasant warfare.
This happened in Europe (Germany and Czechoslovakia) in the early stages of the Protestant Reformation.
Taliban factions probably include folks who are the equivalent of Thomas Muenzer and Martin Luther (not ML King, yet he was named after this famous 16th Century religious fighter for social justice.

One of the key issues of the Protestant Reformation was debt and usury.
Maybe you recall the Shakespearean play the Merchant of Venice written in a later stage of th Protestant Reformation, where a certain moneylender named Shylock was prominently featured?
http://en.wikipedia.org/wiki/The_Merchant_of_Venice

One of the key economic demands of Islamist Revolution is the establishment of interest-free “Islamic” banking, ie. no debts.


Indian Farmers in debt commit mass suicide
http://www.metro.us/us/article/2009/04/ ... /index.xml
A near-legion of Indian farmers committed mass suicide this week as mounting debts and crop failures left them hopeless, the Independent reports. More than 1,500 farmers ended their lives in the agricultural state of Chattisgarh — which has been severely affected by dropping water levels. As many as 10,000 Indian farmers have taken their lives over the past 10 years.



The NYT article states that:

.......
Unlike India after independence in 1947, Pakistan maintained a narrow landed upper class that kept its vast holdings while its workers remained subservient, the officials and analysts said. Successive Pakistani governments have since failed to provide land reform and even the most basic forms of education and health care. Avenues to advancement for the vast majority of rural poor do not exist.
.......

Yet there is a longstanding peasant war going on in India, led by the Naxal movement.
India’s Maoists: The Present Situation & Our Tasks
http://southasiarev.wordpress.com/2009/ ... our-tasks/

Frederick Engels
The Peasant War in Germany
http://www.marxists.org/archive/marx/wo ... /index.htm

The Peasant War in Germany was the first history book to assert that the real motivating force behind the Reformation and 16th-century peasant war was socio-economic (class conflict) rather than "merely" religious.

Because this Pakistani “Taliban” movement is both religious (Suuni Islam) and socio-economic (peasant revolutionary), one of the questions is how easily transferable or convertible will the movement be to surrounding areas that either have similar or different languages or religions, but share commonalities of landlord exploitation.

The Protestant Reformation reverberated across language and religion throughout Europe.





It’s also worth noting this attached recent Stratfor article – Tajikistan, a Cry for Help - about potential international war and/or civil war in Tajikistan/Uzbekistan/Kazakhstan/Kyrgyzstan, which sounds like it could draw Iran into the conflict.

And that really brings us full circle, because it was truly the Iranian Revolution, regardless of how it eventually evolved, which led off this momentous period of Central Asian religious reformation tied to class struggle.
The Last Great Revolution: Turmoil and Transformation in Iran
http://www.amazon.com/Last-Great-Revolu ... 0375706305
The Shia Revival: How Conflicts within Islam Will Shape the Future
http://www.amazon.com/Shia-Revival-Conf ... ef=ed_oe_p

Oy!
But did I remind you:
That oil and gas is involved?
Of course you knew that was a big deal for Iran!
But that several of the Stans are the key suppliers (or transit routes) of the gas that Russia desperately needs to export to Europe? And that the Stans’ regimes are counting on that revenue too?
That the crashing price of oil due to collapsing worldwide Debt Deflation Demand Destruction?
That the Saudi Oil Minister in January warned that global oil demand could fall by 45%?
http://www.arabianbusiness.com/543062-s ... all-by-45-

For a recent parallel (since not everyone like’s my broken record about the Depression), let’s look at a very interesting graph from when the Soviet Union abolished itself.

Or how about this almost 50% drop in Poland’s Coal Consumption (black line), evidently, they still could export some of their excess production.



Anyways, a whole lot less demand for oil means a whole lot more pissed off poor people and a whole lot weaker set of governments who have a whole lot bigger reason to have a war with someone.

While neither the Pakistani nor Indian peasant wars nor the potential civil unrest in Tajikistan are about oil, they are accelerated by the collapsing demand for other commodity prices, eg cotton, due to the Debt Deflation Demand Destruction, which is making everyone buy a lot fewer t-shirts and jeans.
]

Tajikistan_ A Cry for Help | STRATFOR.pdf]Tajikistan_ A Cry for Help | STRATFOR.pdf

[Spiralman]

Margaritaville, South Park's take on the economic crisis & and a very funny Hyundai car ad

http://www.thecomedynetwork.ca/shows/sh ... x?sid=3284

[
Canadians, because you are the oppressed Puerto Ricans of the North (with allegedly safe banks), and have no rights to view American created-media at your own leisure, and have to watch your wealthier neighbors’ tv from across the fence....... You can’t view this on the South Park site or hulu.com or etc.

You have to scroll down in the frame below the video window to South Park (1303) Clip 1 of 4, etc.
]

HyundaiAd.wmv

[Spiralman]

Navies to guard undersea internet cable from Somali pirates & the Internet Access Global Ghetto Tax

http://www.reuters.com/article/africaCrisis/idUSLG73912

[
It is fascinating that these lightly-armed, skinny young Somali pirates on tiny, highly maneuverable boats are able to achieve so much destabilization of the world in some sort of modern rendition of the English sinking the Spanish Armada in 1588.

But the story of the East African undersea cables is a big one.

http://www.independent.co.ug/index.php/ ... eft-behind

.....
When fully operational by next June, the cable will provide high capacity international fibre optic bandwidth along Tanzania’s East Coast connecting the country to South Africa, Mozambique, Madagascar, Kenya, Djibouti, India and Europe. Seacom optic fibre comes when the cost for satellite systems is at $3,000 per megabyte per second (mbps) while under the optic fibre, the cost per (mbps) will come to US $100.

[
Let’s back up a bit and look at what the current data access situation in Africa is compared to North America, which is very far from being the best in the world (that honor belongs to Japan, Korea, Sweden, Finland, Singapore, and many other countries.)

In Vancouver, Canada people pay about $50/month for 5 to 10Mbps.
Average income there is approximately US$4,000 per month.

Now let’s compare Uganda today to that:
$3,000/1 Mbps / month
Where average urban educated employed person’s income is: US$250/month

So for 60X more real money they get 5X – 10X less bandwidth, ie 300 X to 600X more expensive in money terms.
But they also earn 16X less.

So currently, data access in Uganda (and there are other African countries worse off) is 5,000-10,000 times less affordable than for North Americans.

With the exciting new development of potentially FOUR new undersea cables reaching East Africa, if this article is to be believed, and the other internet operators don’t jack up the price higher, they will enjoy a THIRTY-fold price reduction, so it will cost only $100/month/1Mbps.

Ugandans and other East Africans will be very grateful that sometime in 2009 or 2010 that internet access will only be 160 – 320 times less affordable than for North Americans.

This project cost $600 Million, which is trivial compared to North American, European, and Asian bailouts and stimuli.

I estimate it would cost only another few billion dollars to extend wireless mesh networks throughout all of rural Africa.

And if $200 computers were provided to all the households that needed them in the world, let’s say 1B households, would cost $200B. Still less than any of the bailouts.

If projects like this were funded out of the bailout and fiscal stimuli instead, then Internet in Africa (Latin America and Asia too) could be just as affordable as for the rich world, and there would be an even greater growth of global aggregate demand for goods and services made in rich countries.
]

[Spiralman]

HopeOver, HopeLash, HopeBreak: A Lexicon of Disappointment - Naomi Klein & The Audacity of Despair

http://www.huffingtonpost.com/naomi-kle ... 88180.html

[
Evidently my hopes were well placed, since I wanted Obama to be elected for precisely this educational opportunity for progressives, and am amazed at how quickly the Obamanian response to the crisis has compelled HopeBreak and HopeLash to develop among the believers in the left.

I was a little disappointed she didn’t mention the continuation of Extraordinary Rendition, Warrantless Wiretaps, and imprisonment for media filesharing; those are standard civil liberty issues for the boho left like Naomi Klein.

Of course, I never would expect an inter-nationalist like Klein to embrace a Transnational Stimulus or moving to establish a World Wide Wage or convening a Global Constituent Assembly to draft a Global Constitution for a Global Democracy, so she can’t even begin to imagine how HopeBroken that I think real leftists would have been, if they had mistaken Obama’s transnational, biracial background as something more than a symbolic rebranding of the empire.

I am reminded of a very well titled article from waaay back in August,
The Audacity of Despair
http://www.counterpunch.org/martin08052008.html

]