RPT GMTP 2013 12 Peek

POLITICAL PARALYSIS & FAILURE
A Global Governance Failure
GLOBAL MACRO - Regional Update
GLOBAL MACRO TIPPING POINTS - DECEMBER 2013
11/26/2013
1 December 2013 Edition

Copyright 2012 Gordon T. Long All Rights Reserved
Restricted & Confidential

general@GordonTLong.com
POLITICAL PARALYSIS & FAILURE

A Global Governance Failure.
GLOBAL MACRO TIPPING POINTS - DECEMBER 2013
TIPPING POINTS ...................................................................................................................... 17
GLOBAL MACRO: RISK ASSESSMENT .................................................................................................................................................... 17
SITUATIONAL ANALYSIS .................................................................................................................................................... 17
POSITIONAL FRAMEWORK: "WE ARE HERE!" ....................................................................................................................................................... 17
Mapping the Collapse of European Democracy ....................................................................................................................................................... 23
GLOBAL TRENDS THE SIX FRAMING MEGATRENDS ....................................................................................................................................... 24
GLOBAL THEMES TEN STRUCTURALTHEMES FOR STRATEGY ................................................................................................................... 26
DEBT SATURATION - A COLLAPSING PONZI SCHEME ...................................................................................................................................... 28
THE RISK CONTINUUM ................................................................................................................................................................................................ 30
FALL 2013 EVENT RISK DOMINATES ................................................................................................................................................................. 32
MACRO MONITORING INSTITUTIONS ............................................................................................................................... 39

IMF, WORLD ECONOMIC OUTLOOK - JULY 2013 .................................................................................................................................................. 39
IMF, FINANCIAL STABILITY REPORT - APRIL 2013 ............................................................................................................................................... 45
WEF (WORLD ECONOMIC FORUM -JANUARY 2013) ............................................................................................................................................ 50
The 17 Biggest Risks To Our Hyper-Connected World .............................................................................................................................................. 50
RISK SIGNALS ............................................................................................................................................................................................... 65

GEO-POLITICAL RISK ......................................................................................................................................................... 65
SYRIA ............................................................................................................................................................................................................................... 65
SYRIA - This has the Earmarks of the Kennedy Ear "Cuban Missile" Crisis ........................................................................................................... 65
SYRIA - Syrian War You Are Not Being Told About ................................................................................................................................................... 66
SYRIA - 25 Quotes ......................................................................................................................................................................................................... 67
SYRIA - What Coalition? ................................................................................................................................................................................................ 70
SYRIA - US Supporting Fully an "Al Qaeda Operation" ............................................................................................................................................. 72
SYRIA - Decision Already Taken to Bomb Syria ......................................................................................................................................................... 74
SYRIA - Market Patterns Before and Immediately After Conflict Begins.................................................................................................................. 83
FINANCIAL & ECONOMIC RISK .......................................................................................................................................... 85

EMERGING MARKETS ................................................................................................................................................................................................. 85
EMERGING MARKETS - Crisis Temporarily Halted .................................................................................................................................................. 85
EMERGING MARKETS - The Plight of four Asian countries - China, India, Indonesia and Japan. ..................................................................... 86
EMERGING MARKETS - Increasing Liquidity Problem In Selected Markets ......................................................................................................... 90
EMERGING MARKETS - EU Major Contributor to EM Current Account Deficit Growth...................................................................................... 101
EMERGING MARKETS - Insufficient BRICS Reserve Levels Prompt Russian-Chinese Support...................................................................... 103
EMERGING MARKETS - Global Bond Yields React To Taper Together ............................................................................................................ 104
EMERGING MARKETS - Negative Current Accounts + Weak(ening) International Investment Positioning .................................................... 105
EMERGING MARKETS - BRAZIL .............................................................................................................................................................................. 106
EMERGING MARKETS - INDIA .................................................................................................................................................................................. 108
EMERGING MARKETS - SOUTH AFRICA ............................................................................................................................................................... 110
EMERGING MARKETS - TURKEY ............................................................................................................................................................................ 112
EMERGING MARKETS - "TAPER" Shock Waves Across Asia .............................................................................................................................. 113
EMERGING MARKETS - India Rupee Collapse Showing Signs of Exhaustion ................................................................................................... 121
EMERGING MARKETS - Asian Credit Contraction Problems ................................................................................................................................ 122
EMERGING MARKETS - Why Asian Markets Are Collapsing ................................................................................................................................ 124
EMERGING MARKETS - Surging Interest Rates ..................................................................................................................................................... 128
EMERGING MARKETS - Currencies Getting Clobbered ........................................................................................................................................ 129
EMERGING MARKETS - Crisis Worsens .................................................................................................................................................................. 130
EMERGING MARKETS - Korean Peninsula a Black Swan Possibility .................................................................................................................. 132
GLOBAL TAX GRAB - G20 Focusing on Finding Much Needed Tax Revenue .................................................................................................... 135
RISK - COLLAPSING PETRODOLLAR FOUNDATION .......................................................................................................................................... 139
RISK - GLOBAL DEBT 313% of GDP ........................................................................................................................................................................ 142
RISK - 202M GLOBALLY UNEMPLOYED................................................................................................................................................................. 143
RISK - SIGNS APLENTY, BUT NO ONE PANICKING - YET! ................................................................................................................................ 144
RISK - CANARIES SINGING AGAIN ......................................................................................................................................................................... 146
RISK - COMPLACENCY & REPRESSED FEAR ...................................................................................................................................................... 147
RISK - TIED TO EU IN 2012 ....................................................................................................................................................................................... 148
December 2013 Edition

2

RISK - GLOBAL DERIVATIVE COLLATERAL .......................................................................................................................................................... 149

RISK - GLOBAL RISK MATRIX................................................................................................................................................................................... 151
RISK - GLOBAL MACRO HEADWINDS / TAILWINDS ............................................................................................................................................ 151
RISK - FOOD A GROWING GLOBAL INFLATION & SOCIAL UNREST RISK .................................................................................................... 153
RISK - INCREASINGLY DYSFUNCTIONAL CAPITALS MARKETS ..................................................................................................................... 158
RISK - RISING GEO-POLITICAL EVENT RISK........................................................................................................................................................ 160
GLOBAL MACRO: RISK LEVELS .............................................................................................................................................................. 163

AGGREGATED GLOBAL FINANCIAL RISK INDEX............................................................................................................ 163
BANKING RISK - LIBOR-OIS SPREAD (Updated) .................................................................................................................................................. 164
BANKING RISK - TED SPREAD (Updated) .............................................................................................................................................................. 164
CREDIT RISK - GLOBAL CREDIT DEFAULT SWAPS (Updated) ........................................................................................................................ 165
CREDIT RISK - EU CREDIT DEFAULT SWAPS (Updated) ................................................................................................................................... 165
CONSUMER RISK - HOUSING - RATE OF CHANGE (Updated) .......................................................................................................................... 166
ECONOMIC RISK - ECRI LEADING INDEX (Updated) ........................................................................................................................................... 167
INFLATION RISK - MONEY SUPPLY GROWTH - M3 (Updated) .......................................................................................................................... 168
INFLATION RISK - MONEY VELOCITY (Updated) .................................................................................................................................................. 168
MONETARY RISK - BANK LIABILITIES (Updated) ................................................................................................................................................. 169
COST OF MONEY RISK - INTEREST RATES (Updated)...................................................................................................................................... 169
AGGREGATED RISK LEVEL .............................................................................................................................................. 171

TIPPING POINTS: CHANGES .................................................................................................................................................................... 172
TIPPING POINT MAPPING: 2013 YEAR BEGINNING UPDATE ........................................................................................ 172
TIPPING POINTS: TOP 5 FOCUS - SEPTEMBER 2013 ........................................................................................................................ 181
I - RISK REVERSAL............................................................................................................................................................ 181
II - JAPAN DEBT DEFLATION ............................................................................................................................................ 183
III-BOND BUBBLE .............................................................................................................................................................. 185
IV - EU BANKING CRISIS ................................................................................................................................................... 186
V - SOVEREIGN DEBT ....................................................................................................................................................... 187
VI - CHINA HARD LANDING ............................................................................................................................................... 189
GLOBAL MACRO ................................................................................................................... 193

GLOBAL MACRO: ECONOMIC OUTLOOK ............................................................................................................................................. 195
GLOBAL OUTLOOK Research We Followed ................................................................................................................... 195
GLOBAL OUTLOOK - Research of Particular Note ............................................................................................................. 198
GLOBAL OUTLOOK - An Extremely Fragile Stability .......................................................................................................... 198
GLOBAL OUTLOOK - EM Crisis will make the 1997 Asian Crisis Seem like an Early Warning ........................................... 199
GLOBAL OUTLOOK - Global Deleveraging Accelerating and Developing Nations Feeling the Pain.................................... 202
GLOBAL OUTLOOK - Problems Erupting Everywhere (Signs of Implosion) ........................................................................ 204
GLOBAL OUTLOOK - Credit Fueled Globalization in Retreat .............................................................................................. 207
GLOBAL OUTLOOK - Rogoff's Sovereign Debt Default Levels ........................................................................................... 210
GLOBAL OUTLOOK - Fiscal Adjustments Required............................................................................................................ 213
GLOBAL OUTLOOK - Imbalances Continue to Increase Along With Financial Fragility ....................................................... 213
GLOBAL OUTLOOK - A 67 Million Jobs Gap ...................................................................................................................... 216
GLOBAL OUTLOOK - Center of Global Manufacturing Confirmed to be Shifting Away from developed Countries .............. 219
GLOBAL OUTLOOK - Mercantilist China the Clear Winner Globally, Mercantilist Germany Regionally ............................... 220
ECONOMIC CUTS .............................................................................................................................................................. 222
IMF To Slash Economic Growth Forecast... Again - Still Full of Hockey sticks .................................................................................................... 222
OECD CUTS ECONOMIC OUTLOOK ....................................................................................................................................................................... 227
IMF CUTS ECONOMIC OUTLOOK ............................................................................................................................................................................ 230
ECONOMIC WARNINGS .................................................................................................................................................... 241

IMF WARNS - May 2013 .............................................................................................................................................................................................. 241
BIS WARNS - June 2013 ............................................................................................................................................................................................. 247
WORLD BANK WARNS - June 2013 ......................................................................................................................................................................... 254
GLOBAL MACRO: INDICATORS (CHARTS) ........................................................................................................................................... 258

GLOBAL GROWTH............................................................................................................................................................. 258
GLOBAL GROWTH - GDP Forecasts Continue to Be Taken Down ...................................................................................................................... 258
GLOBAL GROWTH - Uneconomic Energy Problematic .......................................................................................................................................... 258
GLOBAL GROWTH - Clearly Slowing ........................................................................................................................................................................ 261
GLOBAL GROWTH - Trend is clearly Down ............................................................................................................................................................. 262
GLOBAL GROWTH - Global Growth Cycle ............................................................................................................................................................... 263
GLOBAL GROWTH - Global GDP Contribution ........................................................................................................................................................ 264
GLOBAL GROWTH - Clear Signs of Degree of Slowing Since January ................................................................................................................ 265

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GLOBAL GROWTH - Clearly Slowing and near Contraction without BRICS ........................................................................................................ 266
GLOBAL GROWTH - PMI Barely Above Stagnation ................................................................................................................................................ 268
GLOBAL GROWTH - Chinese Slowing moves to CONTRACTION ....................................................................................................................... 271
GLOBAL GROWTH - Slowing Global Economies .................................................................................................................................................... 272
GLOBAL GROWTH - Global GDP Growth Trending Down by Region and Cumulatively ................................................................................... 273
GLOBAL GROWTH - Global PMI ............................................................................................................................................................................... 273
GLOBAL GROWTH - Global Recession .................................................................................................................................................................... 276
GLOBAL GROWTH - Slowing Global Growth - Air Cargo Shipments ................................................................................................................... 277
GOBAL UNEMPLOYMENT ................................................................................................................................................. 278

GLOBAL UNEMPLOYMENT - A Problem ................................................................................................................................................................. 278
GLOBAL UNEMPLOYMENT - The Beginnings of the Welfare Myth Unwind ........................................................................................................ 279
GLOBAL UNEMPLOYMENT - The Unsustainable Welfare Myth ........................................................................................................................... 281
GLOBAL UNEMPLOYMENT - Global Financial Sector Job Cuts ........................................................................................................................... 283
GLOBAL UNEMPLOYMENT - Global Unemployment Rising -Now 202 Million ................................................................................................... 285
GLOBAL TRENDS .............................................................................................................................................................. 287

GLOBAL TRENDS - Profound Changes in Global Youth As Japan Leads the Way ............................................................................................ 287
GLOBAL TRENDS Brands & Commodities Tell the Global Story ....................................................................................................................... 290
GLOBAL SENTIMENT ........................................................................................................................................................ 302

GLOBAL SENTIMENT - Global Business Confidence Sliding Rapidly .................................................................................................................. 302
GLOBAL SENTIMENT - Complacent ......................................................................................................................................................................... 304
GLOBAL SENTIMENT - Nielsen's Global Consumer Confidence, Concerns & Spending Intentions ............................................................... 305
GLOBAL INFLATION .......................................................................................................................................................... 316

GLOBAL INFLATION - Food Prices, Driver of Social Unrest .................................................................................................................................. 316
GLOBAL INFLATION - Food Price Manipulation in Thailand .................................................................................................................................. 317
GLOBAL CREDIT ............................................................................................................................................................... 318

CREDIT CYCLE - HY Leading the Way ..................................................................................................................................................................... 318
CREDIT CYCLE - Reversal Ahead ............................................................................................................................................................................. 321
GLOBAL MACRO: MONETARY POLICY & CENTRAL BANKING ........................................................................................................ 324

TROUBLING DEVELOPMENTS ......................................................................................................................................... 324
TROUBLING DEVELOPMENTS
Venezuela: Shortages & Hyperinflation .......................................................................................................... 324

2007 Redux: Total public and private debt levels are 30pc higher in the advanced economies ............. 325
Polish Pension Confiscation: Coming to a Theater near You ...................................................................... 328
Global Tax Overhaul ......................................................................................................................................... 330
GLOBAL ABE-NOMICS The Road Ahead ........................................................................................................................ 331

GLOBAL ABE-NOMICS Monetary Expansion Extremely Difficult to Stop Once Started .................................................................................. 331
GLOBAL ABE-NOMICS Monetary Policy Below the Event Horizon .................................................................................................................... 333
The "OMF" Trial Balloon Raised ................................................................................................................................................................................. 335
OPMF - A Reversing Wealth Effect May Force OPMF & Global Abenomics ........................................................................................................ 336
OPMF - Financial Times: Martin Wolf - "The Case For Helicopter Money" ........................................................................................................... 337
OPMF - Financial Times: Martin Wolf - "The Case To Reset Basis of Monetary Policy" ..................................................................................... 340
OPMF - Financial Times: Gavyn Davies On Why Helicopters Are Dangerous ..................................................................................................... 341
OPMF - A Conundrum for the World's Central Bankers ........................................................................................................................................... 344
GLOBAL CENTRAL BANKING ........................................................................................................................................... 346

RESEARCH WE FOLLOWED Global Banking Risk ............................................................................................................................................. 346
RESEARCH OF PARTICULAR INTEREST .............................................................................................................................................................. 347
CENTRAL BANKS - Drop Tightening Talk as Easy Money Goes On .................................................................................................................... 347
CENTRAL BANKS - Balance Sheet Growth ............................................................................................................................................................. 350
CENTRAL BANKS - Austerity Now Officially Dead Public Policy ........................................................................................................................... 351
CENTRAL BANKS - They are the Market .................................................................................................................................................................. 351
CENTRAL BANKS - The longer QE persists, the greater the magnitude of the left-tail event & a Minsky Trap ............................................. 354
CENTRAL BANKS - We May Have Reached a Risk-Off Leverage Pivot .............................................................................................................. 355
CENTRAL BANKS - The Macro Landscape .............................................................................................................................................................. 357
CENTRAL BANKS - A Serious Shortage of Quality Collateral - A $10T US Problem Over 10 Years ................................................................ 358
CENTRAL BANKS - Global Balance Sheet Expansion ............................................................................................................................................ 360
CENTRAL BANKS - Where Do these Deflators Come From? ................................................................................................................................ 364
CENTRAL BANKS - First Remove Gold Standard, Now Remove Debt ................................................................................................................. 365
BOE - UK ............................................................................................................................................................................ 369

UK - Mark Carney and "Flexible Inflation Targeting" ................................................................................................................................................ 369
FED - US............................................................................................................................................................................. 370

US MONETARY - The Fed is Stuck in a QE Trap .................................................................................................................................................... 370
US MONETARY - 2nd Worst Decade In US Growth in Over 220 Years (And Getting Worse) ........................................................................... 372

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US MONETARY - Mathematically, The Fed Can Only Fail ..................................................................................................................................... 374

US MONETARY - QE Standing Between Inflated Equity Markets and A Recession ........................................................................................... 380
US MONETARY - QE Programs versus S&P 500 Movements ............................................................................................................................... 381
US MONETARY - BAML Warns If The US Economy Does Not Significantly Accelerate Now, It Never Will .................................................... 383
US MONETARY - Debt Increases $1 Trillion in One Year ..................................................................................................................................... 385
US MONETARY - Congress Asks Bernanke for Full Risk Analysis On Fed's Soaring Balance Sheet .............................................................. 387
BOJ - JAPAN ...................................................................................................................................................................... 392

JAPAN - No Way Out But to Expand the Monetary Base ........................................................................................................................................ 392
JAPAN - BOJ to "Own" 100% Of GDP In 5 Years .................................................................................................................................................... 393
JAPAN - Adjusted trade deficit the worst in Bloomberg's 20 year history .............................................................................................................. 396
JAPAN - Some Policies Have Clearly Hit the Limit ................................................................................................................................................... 398
JAPAN - Foreshadows Next Global Crisis ................................................................................................................................................................. 399
JAPAN - Japan's Prime Minister Shinzo Abe prepares to print money for the whole world ................................................................................ 404
JAPAN - Shinzo Abes Monetary-Policy Delusions ................................................................................................................................................... 405
JAPAN - BOJ Governor Job Suddenly Available in Historical "Abenomics U-Turn" ............................................................................................. 408
JAPAN - Japanese Economic Policy Goes The Full Ponzi ...................................................................................................................................... 409
ECB - EU ............................................................................................................................................................................ 411

EU MONETARY - EU Equities Responding to Current Account Differential ......................................................................................................... 411
EU MONETARY - Patterns: While Everyone Was Worrying About the US and Washington .... ........................................................................ 412
EU MONETARY - ECB Monetary transmission mechanisms in Europe are completely broken ........................................................................ 414
EU MONETARY - EU Lending Volumes Collapse .................................................................................................................................................... 416
EU MONETARY - Eurozone Funding Shortfall Rises To Over $4 Trillion.............................................................................................................. 417
EU MONETARY - DRIVER$ ........................................................................................................................................................................................ 418
EU MONETARY - Japan Will Effectively Monetize European Debt ........................................................................................................................ 419
EU MONETARY - TARGET-2 Imbalances - "The Debt Crisis Is Eating Its Way Ever Further Into Europe's Core" ......................................... 419
EU MONETARY - Draghi Will Soon Be Forced to Start Printing - Again! .............................................................................................................. 421
GEO-ECONOMIC CONCERNS & TENSIONS ......................................................................................................................................... 426

EMERGING MARKETS - Unfolding 2014 Crisis ................................................................................................................ 426
RESEARCH WE FOLLOWED ..................................................................................................................................................................................... 426
EMERGING MARKETS - Crisis Only Temporarily Averted ..................................................................................................................................... 429
EMERGING MARKETS - Fragile Five: The new focus of currency wars ............................................................................................................... 429
EMERGING MARKETS - Crisis Redux? .................................................................................................................................................................... 430
EMERGING MARKETS - Losing Their Punch .......................................................................................................................................................... 435
EMERGING MARKETS - Risk-On! ............................................................................................................................................................................. 437
EMERGING MARKETS - Asia, BRIC, Emerging Markets Crater IBM Earnings ................................................................................................... 438
EMERGING MARKETS - Crisis Temporarily Halted ................................................................................................................................................ 440
EMERGING MARKETS - Increasing Liquidity Problems In Selected Markets ..................................................................................................... 441
EMERGING MARKETS - The plight of four Asian countries - China, India, Indonesia and Japan. .................................................................... 447
EMERGING MARKETS - The Impact of "TAPER" ................................................................................................................................................... 452
PETRODOLLAR US-Saudi Oil Alliance Strained .............................................................................................................. 456

GEO-POLITICAL - The Growing Rift With Saudi Arabia Threatens To Severely Damage The Petrodollar ...................................................... 456
GLOBAL BOND SCARE Un-Taper Reverses Fear........................................................................................................... 460

BOND SCARE - Volatility and Instability Increase Risk ........................................................................................................................................... 460
BOND SCARE - Inflation Expectations Contributing to Volatility ............................................................................................................................ 462
BOND SCARE - The Financial Times Headlines Tell An Interesting Story ........................................................................................................... 463
BOND SCARE - A LONG Supply and Demand Problem BUT Heavy SHORT Demand ..................................................................................... 464
BOND SCARE - Long Term Support Trendline Achieved........................................................................................................................................ 465
BOND SCARE - Retail Investors Running for the Exit ............................................................................................................................................. 466
CHINA LIQUIDITY - Global Tightening Scare ...................................................................................................................... 468

CHINA LIQUIDITY - Housing Bubble Restricting PBOC Actions ............................................................................................................................ 468
CHINA LIQUIDITY - PBOC Squeezing Banks towards Reducing Speculative Risk............................................................................................. 472
CHINA LIQUIDITY - Overnight Repo at 25% ............................................................................................................................................................ 473
CHINA LIQUIDITY - Red Flags ................................................................................................................................................................................... 474
CHINA LIQUIDITY - Credit Fueled Growth ................................................................................................................................................................ 476
CHINA LIQUIDITY - Shadow Banking System Showing Signs of Implosion ......................................................................................................... 481
CHINA LIQUIDITY - PBOC Wants to Hold the Line on Explosive Credit Expansion through A Liquidity Squeeze .......................................... 484
CHINA LIQUIDITY - Potentially De-Stabilizing Cash Crunch .................................................................................................................................. 486
CHINA LIQUIDITY - Chinese Liquidity Pump Unplugged ........................................................................................................................................ 487
CURRENCY WARS BACK ON Rate Wars Reversed With Un-Taper ............................................................................... 489
CURRENCY WARS - A Major Shift ............................................................................................................................................................................ 489

5

BATTLEFIELD - Combatants & Belligerents ............................................................................................................................................................. 493

BATTLEFIIELD - The Race to Debase ....................................................................................................................................................................... 494
JAPAN - The Destabilizing Agent ............................................................................................................................................................................... 496
EUROPE - Euro Exposed ............................................................................................................................................................................................ 496
ARGENTINA - Here we Go Again!.............................................................................................................................................................................. 498
VENEZUELLA - Bad Situation ..................................................................................................................................................................................... 499
BRAZIL - No One Wants to Listen .............................................................................................................................................................................. 499
SWITZERLAND - No Choice ....................................................................................................................................................................................... 499
SINGAPORE - Hot Money ........................................................................................................................................................................................... 500
UK- Pound Joins War ................................................................................................................................................................................................... 501
CYBER WARS Growing Threat & the Security-Surveillance Complex .............................................................................. 502
SECURITY-SURVEILLANCE COMPLEX - NSA Whistleblower Example: Booz Hamilton ................................................................................. 505
SECURITY SURVEILLANCE COMPLEX - Growing Without Public Control or Supervision!.............................................................................. 507
SYRIA & IRAN Complete Middle East Domination ........................................................................................................... 508

SYRIA - This has the Earmarks of the Kennedy Ear "Cuban Missile" Crisis ......................................................................................................... 510
SYRIA - Syrian War You Are Not Being Told About ................................................................................................................................................. 511
SYRIA - 25 Quotes ....................................................................................................................................................................................................... 512
SYRIA - What Coalition? .............................................................................................................................................................................................. 515
SYRIA - US Supporting Fully an "Al Qaeda Operation" ........................................................................................................................................... 517
SYRIA - Decision Already Taken to Bomb Syria ....................................................................................................................................................... 520
SYRIA - Market Patterns Before and Immediately After Conflict Begins................................................................................................................ 529
MIDDLE EAST - Watch Out for a "False Flag" or "Covert" Activity Event .............................................................................................................. 531
MIDDLE EAST - Who Is Threatening Who Here? .................................................................................................................................................... 532
REGIONAL ............................................................................................................................... 534

EUROSIS - A Terminal Disease ........................................................................................................................................ 534
RESEARCH WE FOLLOWED THIS MONTH ........................................................................................................................................................... 534
RESEARCH OF PARTICULAR IMPORTANCE ........................................................................................................................................................ 535
RESEARCH - EFSF Downgraded to AA+.................................................................................................................................................................. 535
RESEARCH - EU Stabilization Programs Are Presently Very Fragile .................................................................................................................... 536
RESEARCH - Spreads Widened in Peripherals and Significantly in Portugal and Greece ................................................................................. 539
PROGNOSIS: Why the European Situation Will Get Worse ................................................................................................................................... 541
PROGNOSIS: Increasing Structural Imbalances ...................................................................................................................................................... 544
PROGNOSIS: $22T Unaccounted - A Hidden World of Contingent Liabilities, Government Backing & Guarantees. ................................... 546
PROGNOSIS: Monetary Malpractice - ECB's LTRO Not a Solution but ................................................................................................................ 550
PROGNOSIS: Monetary Malpractice - ECB's SMP Effort Futile ............................................................................................................................. 553
PROGNOSIS: Monetary Malpractice - ECB Accepts BBB Collateral ..................................................................................................................... 555
PROGNOSIS: EU Banking Overbanked, Undercapitalized and Now Insolvent .................................................................................................... 556
PROGNOSIS: Monetary Malpractice - TARGET2 "Contingent Liabilities"............................................................................................................. 557
PROGNOSIS: Bailouts - Unsustainable & Unfundable ............................................................................................................................................ 563
MEDICAL CHARTS - Situation Critical ................................................................................................................................ 565

CHARTS - EU Area Weakness ................................................................................................................................................................................... 565
CHARTS - EU Area GDP ............................................................................................................................................................................................. 566
CHARTS - EU Area PMI .............................................................................................................................................................................................. 567
CHARTS - EU Area PMI .............................................................................................................................................................................................. 568
CHARTS - EU Real Rates ........................................................................................................................................................................................... 569
CHARTS - EU -NON Euro Members GDP RELIANCE ............................................................................................................................................ 570
CHARTS - EU GLOBAL GDP GROWTH CONTRIBUTION .................................................................................................................................... 571
CHARTS - EU PMI ........................................................................................................................................................................................................ 571
CHARTS - EU CPI ........................................................................................................................................................................................................ 573
CHARTS - Regional Risk-Reward .............................................................................................................................................................................. 574
CHARTS - Europe's "Core" Problem is France ......................................................................................................................................................... 575
CHARTS - Germany's Preoccupation with Inflation is More Than It Would Seem ............................................................................................... 578
CHARTS - Evidence OF Global Slowing Now Indisputable ..................................................................................................................................... 579
CHARTS - EU Credit Downgrades, France and UK On Tap .................................................................................................................................. 581
CHARTS - Perceived Reduction in Risk, A Temporary Aberration ......................................................................................................................... 583
CHARTS - Dangerous Delusional Divergences ........................................................................................................................................................ 585
CHARTS - IMF Projections for Euro Area and GIIPS ............................................................................................................................................... 586
CHARTS - Air Cargo Shipments Confirm Slowing Global Growth .......................................................................................................................... 587
CHARTS - Eurozone Misery Indices Never Been Higher ........................................................................................................................................ 588
CHARTS - Euro Currency ............................................................................................................................................................................................ 590

6

ITALY Longest Recession on Record ............................................................................................................................... 595

RESEARCH - Italys Budget Failures, Weak Growth Outlook Call Debt Sustainability Into Question ................................................................ 596
CHARTS OF PARTICULAR IMPORTANCE ............................................................................................................................................................. 600
CHARTS - ITALY - Forced Rate Cuts ........................................................................................................................................................................ 600
SITUATIONAL ASSESSEMENT ................................................................................................................................................................................. 601
ITALIAN ELECTION - What You Need to Know ....................................................................................................................................................... 601
ITALIAN ELECTION - Europe Capitulates On Austerity- Never Had The Stomach For It ................................................................................... 602
ITALIAN ELECTION - Message Given By the People.............................................................................................................................................. 604
ITALIAN ELECTION - Bad Debt Continue to Soar ................................................................................................................................................... 608
ITALIAN ELECTION - Italians React Badly to Austerity, Elections Hardly a Surprise! ......................................................................................... 610
ITALIAN ELECTION - EUROPEAN FEEDBACK - #1 .............................................................................................................................................. 611
ITALIAN ELECTION - EUROPEAN FEEDBACK - #2 .............................................................................................................................................. 613
ITALIAN ELECTION - Regional Financial Cracks in Sicily ...................................................................................................................................... 616
FRANCE - Hollande Losing Political Capital Fast Hapless President ................................................................................ 618
RESEARCH - Steady Breakdown Underway ............................................................................................................................................................ 619
RESEARCH - France Loses its Coveted and NEEDED AAA Rating ..................................................................................................................... 623
CHARTS - FRANCE - GDP ......................................................................................................................................................................................... 625
CHARTS - FRANCE - UNEMPLOYMENT ................................................................................................................................................................. 626
CHARTS - FRANCE - BUDGET DEFICIT ................................................................................................................................................................. 627
CHARTS - FRANCE - TAX v GDP.............................................................................................................................................................................. 628
CHARTS - FRANCE - BUSINESS CONFIDENCE ................................................................................................................................................... 629
SITUATIONAL ASSESSMENT ................................................................................................................................................................................... 630
FRANCE - What You Need to Know .......................................................................................................................................................................... 630
FRANCE - Key Indicators ............................................................................................................................................................................................ 631
FRANCE: Sharpest Drop in Private Sector Output in Four Years........................................................................................................................... 634
FRANCE - Quits on Austerity - Never a Doubt This Would Happen ....................................................................................................................... 637
FRANCE - Socialism is Expensive.............................................................................................................................................................................. 638
FRANCE - Has Turned back to Socialism ................................................................................................................................................................. 640
FRANCE - Losing Its Way through Political Illusions and Lies ................................................................................................................................ 641
FRANCE - Uncompetitive ............................................................................................................................................................................................ 642
FRANCE - Titan Tire Calls Out French Labor ........................................................................................................................................................... 644
FRANCE - France Responds to Titan Tire................................................................................................................................................................. 646
FRANCE - What Happens In France When Companies Fire People ..................................................................................................................... 648
FRANCE - Hollande's Economically Insane campaign Promise ............................................................................................................................. 649
GERMANY Merkel Short of Majority but Maintains Power ................................................................................................ 650

RESEARCH - German Election - Merkel Begins Hunt for Coalition Partners ....................................................................................................... 651
RESEARCH - Europe's Shadow Economy: As Big As Germany ............................................................................................................................ 653
CHARTS - GERMANY - Inflation ................................................................................................................................................................................ 656
CHARTS - GERMANY - IFO Investor Confidence .................................................................................................................................................... 656
CHARTS - GERMANY - ZEW Expectations .............................................................................................................................................................. 657
GERMANY - Anti Euro AfD Party May Cost Merkel in Critical September Election ............................................................................................. 660
GERMANY - The Euro Crisis Escalation over Cyprus May Politically Cripple Merkel .......................................................................................... 661
GERMANY - Call for End of "Coercive Euro Association" ....................................................................................................................................... 663
IBERIAN PENINSULA Non-Performing Loans Everywhere .............................................................................................. 665

RESEARCH - Presidential Warning Spikes Yields To 8 Months Highs ................................................................................................................. 666
RESEARCH - Clear Signs of Desperation In Spain from a Growing Collateral Contagion .................................................................................. 668
RESEARCH - The Spanish Government's 'Bad Bank' Scam .................................................................................................................................. 669

7


CHARTS - PORTUGAL - Deficit Problem .................................................................................................................................................................. 671
IBERIA - Credit Downgrades - At Precipice of "Non Investment Grade"................................................................................................................ 672
IBERIA - Regional Bailout Bailouts a Massive Problem ........................................................................................................................................... 673
IBERIA - NPL Going Ballistic ....................................................................................................................................................................................... 674
IBERIA - Spanish Funding Problem............................................................................................................................................................................ 675
IBERIA - The Giant Spanish Housing Bubble, Now Beginning to Implode ............................................................................................................ 679
IBERIA - Mal-Investment Coming Home to Roost .................................................................................................................................................... 681
IBERIA - Bank Deposits Were Leaving, Now they Are Fleeing ............................................................................................................................... 682
IBERIA - Now a Capital Investment Problem ............................................................................................................................................................ 683
IBERIA - Banks on Artificial "Ponzi Bond" Life Support ............................................................................................................................................ 684
UK Carney Tales the Helm of BOE with Forward Guidance& Stern Warnings .................................................................. 691
RESEARCH - UK workers' wage squeeze is longest since the 1870s ................................................................................................................... 692
CHARTS - UK Population Growth ........................................................................................................................................................................... 693
CHARTS - UK - Crushed Disposable Income ........................................................................................................................................................... 693
CHARTS - UK - BOE Balance Sheet Growth ............................................................................................................................................................ 694
CHARTS - UK - Lending .............................................................................................................................................................................................. 694
CHARTS - UK - Unemployment .................................................................................................................................................................................. 695
CHARTS - UK - GDP - Pre and Post Recession Levels .......................................................................................................................................... 696
CHARTS - UK - GDP .................................................................................................................................................................................................... 696
CHARTS - UK - BOE Rates ......................................................................................................................................................................................... 697
UK - What you need to Know ...................................................................................................................................................................................... 698
UK - Joins Currency War - Down 8% YTD ............................................................................................................................................................. 699
UK - Specter of Stagflation Haunts UK ....................................................................................................................................................................... 700
UK - Public Policy turns Against Austerity and PM Cameron .................................................................................................................................. 701
UK - Doomsday Debt Machine .................................................................................................................................................................................... 702
UK - QE Extension Coming ......................................................................................................................................................................................... 705
UK - Small Business Credit Squeeze Now Acute - Loan Rejections Rising ......................................................................................................... 707
UK - Technically in a Depression ................................................................................................................................................................................ 708
CYRPUS - Latest EU Banking Crisis ................................................................................................................................... 711

CYRPUS - What you Need To Know .......................................................................................................................................................................... 711
CYRPUS - Basic Situational Charts ............................................................................................................................................................................ 713
CYPRUS - Crumbling Property Rights ....................................................................................................................................................................... 715
CYPRUS - Plan D Supersedes Plan C and B as Time running Out ....................................................................................................................... 719
CYPRUS - Forgetting About Contract Law, Private Property Rights and Due Process ....................................................................................... 722
CYPRUS - Russian Tax Haven ................................................................................................................................................................................... 723
CYPRUS - Plan B as Bad As Plan A .......................................................................................................................................................................... 724
CYPRUS - Breaks Public Trust and Incites the Politics of Germany Dictating Terms .......................................................................................... 725
CYPRUS - Does Anyone Care How a Capitalist System (versus a Crony Capitalist System) is Supposed to Work? ..................................... 731
CYPRUS - Criminal "Confidence Game" Payouts to Everyone at the Tax Payers Expense ............................................................................... 732
CYPRUS - Cyprus Pushes EU Banking Crisis Back Near the Edge ..................................................................................................................... 734
ASIA - SERIOUS CRACKS BELOW THE SURFACE .......................................................................................................................................... 735

CHINA - Credit Tightening Panic Averted - Temporarily? .................................................................................................... 735
RESEARCH WE FOLLOWED THIS QUARTER ....................................................................................................................................................... 735
CHARTS - CHINA - Chinese Credit Market .............................................................................................................................................................. 740
CHARTS - CHINA - PMI ............................................................................................................................................................................................... 741
CHARTS - CHINA - PMI-2 .......................................................................................................................................................................................... 742
CHARTS - CHINA - GDP ............................................................................................................................................................................................. 743
CHARTS - CHINA - INDUSTRIAL OUTPUT ............................................................................................................................................................. 744
CHARTS - CHINA - Urban Fixed Asset Investment ................................................................................................................................................. 745
CHARTS - CHINA - RETAIL SALES .......................................................................................................................................................................... 746
RESEARCH - China's Stunning $15 Trillion In New Liquidity.................................................................................................................................. 747
RESEARCH - Dr. Copper Ready to Top and Head Lower ...................................................................................................................................... 750

8

RESEARCH - China's $1 Trillion GDP Lie ................................................................................................................................................................. 751

RESEARCH - What the Deceleration Could Portend ............................................................................................................................................... 753
RESEARCH - Credit Bubble: 240% Of GDP And Soaring ....................................................................................................................................... 756
RESEARCH - Forget Taper risk: China is a bigger threat ...................................................................................................................................... 759
RESEARCH - Sustainability Requires a Slowdown in Investment .......................................................................................................................... 761
RESEARCH - China Likely to Continue Interest Rate Liberalization ...................................................................................................................... 763
RESEARCH - China #1 in Broad Array of Key Areas ............................................................................................................................................... 766
RESEARCH - Global Business Confidence Sliding Rapidly .................................................................................................................................... 767
RESEARCH - Investors Worried and Losing Confidence ........................................................................................................................................ 770
RESEARCH - China Stampeding into Gold ............................................................................................................................................................... 771
RESEARCH - China "Will introduce some measures to arrest the slowdown of growth in the next couple of quarters" ................................. 773
RESEARCH - Slower Growth In the Cards & Endorsed by New Chinese Leadership......................................................................................... 774
RESEARCH - Is a PBOC Controlled Speculation Bust Possible or Will It Get Out of Control ............................................................................ 775
RESEARCH - PBOC Liquidity Squeeze ..................................................................................................................................................................... 776
RESEARCH - Chinese Housing Bubble Restricting PBOC Actions ....................................................................................................................... 778
RESEARCH - PBOC Squeezing Banks towards Reducing Speculative Risk ....................................................................................................... 780
RESEARCH - Chinese Overnight Repo at 25% ........................................................................................................................................................ 782
RESEARCH - Red Flags .............................................................................................................................................................................................. 783
RESEARCH - Credit Fueled Growth in China ........................................................................................................................................................... 785
RESEARCH - PBOC Wants to Hold the Line on Explosive Credit Expansion through A Liquidity Squeeze .................................................... 790
RESEARCH - A Potentially De-Stabilizing Cash Crunch ......................................................................................................................................... 792
SITUATIONAL ANALYSIS Positioning Reference................................................................................................................................................. 793
CHINA SHADOW BANKING - Shadow Banking System Showing Signs of Implosion ........................................................................................ 795
CHINA SHADOW BANKING - Shadow Banking and Credit Growth ...................................................................................................................... 798
CHINA SHADOW BANKING - The US Sub-Prime / CDO All Over Again ............................................................................................................. 801
CHINA SHADOW BANKING - Report ........................................................................................................................................................................ 805
CHINA SHADOW BANKING - Situation ..................................................................................................................................................................... 806
CHINA RESERVES - Distorted Foreign Reserve Levels ......................................................................................................................................... 807
CHINA RESERVES - Declining Reserve Accumulation ........................................................................................................................................... 809
CHINA RESERVES - Has Caught the Gold Bug big time! ....................................................................................................................................... 811
CHINA CURRENCY WARS - Hot Money into China ................................................................................................................................................ 813
CHINA - Withdraws Liquidity ....................................................................................................................................................................................... 814
CHINA - Socit General Sees a Likely Soft Landing! ............................................................................................................................................. 816
CHINA - True Debt is Orders of Magnitude More than Officially Being Reported ................................................................................................. 824
CHINA - Evidence OF Slowing Now Indisputable ..................................................................................................................................................... 827
CHINA - PMI Improvement .......................................................................................................................................................................................... 828
CHINA - Political Transition & Ongoing Emergence as a Super Power ................................................................................................................. 831
CHINA - An Implicit Social Contract ............................................................................................................................................................................ 833
CHINA - Manipulated Statistics due to Upcoming Decade Long Regime Change ............................................................................................... 835
CHINA - Increasing Leverage is China's Way of Monetary Easing ........................................................................................................................ 836
CHINA - Possible Interest-Rate Liberalization ........................................................................................................................................................... 837
CHINA - Global Impact of China's Slowdown ............................................................................................................................................................ 838
CHINA - Shanghai Composite at 2008 Low Levels .................................................................................................................................................. 840
CHINA - Shanghai Composite Warnings Signs ......................................................................................................................................................... 841
CHINA - Credit to GDP ................................................................................................................................................................................................. 843
CHINA - A Slow Recovery Through 2013 .................................................................................................................................................................. 844
CHINA - Manufacturing PMI in Contraction Territory ................................................................................................................................................ 846
JAPAN: The New Currency War Front ................................................................................................................................ 849

RESEARCH - No Way Out But to Expand the Monetary Base ............................................................................................................................... 851
RESEARCH - BOJ to "Own" 100% Of GDP In 5 Years ........................................................................................................................................... 852
RESEARCH - Adjusted trade deficit the worst in Bloomberg's 20 year history ..................................................................................................... 855
RESEARCH - How Japan's National Debt Grew ...................................................................................................................................................... 856
RESEARCH - ABE-nomics About Lowering Real Interest Rates ............................................................................................................................ 857
RESEARCH - Japanese Bonds Have Lost Their Ability to Price Risk .................................................................................................................... 858
RESEARCH - Q2 GDP Misses By A Huge Margin ................................................................................................................................................... 861
RESEARCH - Japanese Structural Problems a "Canary" for Western Developed Economies........................................................................... 862
RESEARCH - Shinzo Abe Hasn't the Stomach for the Heavy Lifting Needed to Accompany ABE-nomics. ..................................................... 865
RESEARCH - A Credit Squeeze Leads Deflationary Leg Down ............................................................................................................................. 867
RESEARCH - Some Japanese Policies Have Clearly Hit the Limit ........................................................................................................................ 868
RESEARCH - The ABE (Asset Bubble Evaluator) Index ......................................................................................................................................... 870
CHARTS - JAPAN - GDP, IP and Exports ................................................................................................................................................................. 871
CHARTS - JAPAN - GDP Resurgence ....................................................................................................................................................................... 872
CHARTS - JAPAN - BOJ Balance Sheet ................................................................................................................................................................... 874

9

JAPAN - What You Need to Know .............................................................................................................................................................................. 877

JAPAN - Regional Risk-Reward .................................................................................................................................................................................. 879
JAPAN - Now the Frontrunner of Outright Monetization. ......................................................................................................................................... 880
JAPAN - Yen Devaluation ............................................................................................................................................................................................ 881
JAPAN - New Bank of Japan Policy - 2% Inflation in 2 Years ................................................................................................................................. 882
JAPAN - Appoints BOJ Governor Firmly Committed to Printing Money................................................................................................................. 884
JAPAN - Third Straight Quarter of Recession ........................................................................................................................................................... 885
JAPAN - Full Out War on Deflation ............................................................................................................................................................................. 885
JAPAN - First Test of the new found dominance of the Central Banks ............................................................................................................... 887
JAPAN - BOJ Was Next Up. No Surprise .................................................................................................................................................................. 889
JAPAN - Negative Current Account Balance and -3.5% Recession ....................................................................................................................... 891
JAPAN - A 50% Over-Valued Yen Has Undermined Self Confidence & Drive...................................................................................................... 894
JAPAN - Proves QE's Low Cost of Capital Does Structural Damage to Economy ............................................................................................... 896
JAPAN - BOJ Being Pressured to "Rip-Up Government Debt"1 ............................................................................................................................. 898
JAPAN - Easy Money Has Hurt Corporate Profitability in the Longer Term .......................................................................................................... 904
JAPAN - The Biggest Debtor with the Biggest Problem! .......................................................................................................................................... 907
JAPAN - A Magnitude Larger Problem than Europe................................................................................................................................................. 911
JAPAN - QE 9 A Complete Failure - Actually "Tightens" versus It's Intended Easing .......................................................................................... 917
JAPAN - Japanese Yen Continuously Under Attack ............................................................................................................................................... 921
JAPAN - Vast foreign US$ Coming Home for "Claim" .............................................................................................................................................. 922
JAPAN - PMI Breakdown ............................................................................................................................................................................................ 923
JAPAN - Exports Continue To Tumble ....................................................................................................................................................................... 925
JAPAN - Intervention Fails Again - It's a Whole new Ball Game ............................................................................................................................. 926
JAPAN - First Signs of Massive Debt Monetization After Next Election ................................................................................................................. 929
JAPAN - Japan to the ESM's Rescue ........................................................................................................................................................................ 929
EMERGING MARKETS ECHO BOOM AHEAD .......................................................................................................................................... 931

EMERGING MARKETS - Forced Changes & Advancements in the Normal "Plundering" Strategy ................................................................... 936
EMERGING MARKETS - Crisis Temporarily Halted ................................................................................................................................................ 937
EMERGING MARKETS - The plight of four Asian countries - China, India, Indonesia and Japan. .................................................................... 938
EMERGING MARKETS - Negative Current Accounts + Weak(ening) International Investment Positioning .................................................... 943
EMERGING MARKETS - "TAPER" Shock Waves Across Asia .............................................................................................................................. 943
EMERGING MARKETS - Global Bond Yields React Together ............................................................................................................................... 945
EMERGING MARKETS - A Bumpy Ride for Emerging Markets ............................................................................................................................. 946
EMERGING MARKETS - Stunning Withdrawals ...................................................................................................................................................... 952
EMERGING MARKETS - Bond Outflows Accelerating ............................................................................................................................................ 953
EMERGING MARKETS - This will make the 1997 Asian Crisis Seem Like an Early Warning ........................................................................... 955
EMERGING MARKETS - Developing Nations Feeling the Pain of Global Deleveraging Acceleration .............................................................. 957
EMERGING MARKETS - The Impact of "TAPER" ................................................................................................................................................... 959
CHARTS - Reserves versus World ............................................................................................................................................................................. 963
CHARTS - Current Account Balances versus GDP .................................................................................................................................................. 964
CHARTS - Emerging Markets Index versus MSCI World Index .............................................................................................................................. 965
CHARTS - SINGAPORE - Inflation ............................................................................................................................................................................. 966
CHARTS - SINGAPORE - Exports ............................................................................................................................................................................. 967
CHARTS - SOUTH KOREA ......................................................................................................................................................................................... 968
CHARTS - TURKEY - Spreads ................................................................................................................................................................................... 969
EMERGING MARKETS - What you Need to Know .................................................................................................................................................. 970
EMERGING MARKETS - Comparative Ease of Doing Business ............................................................................................................................ 972
EMERGING MARKETS - Importance of Employment, Equality and Per Capital Income .................................................................................... 973
ASIA ................................................................................................................................................................................................................................ 976
ASIA: CHARTS - SINGAPORE ................................................................................................................................................................................... 976
ASIA: CHARTS - INDONESIA ..................................................................................................................................................................................... 977
ASIA: CHARTS - AUSTRALIA .................................................................................................................................................................................... 978
ASIA - Regional Risk-Reward...................................................................................................................................................................................... 979
ASIA - Credit Contraction Problems ........................................................................................................................................................................... 980
ASIA - Corporate Debt Levels Reflect Unintended Consequences of Mispricing & Mal-Investment .................................................................. 982
ASIA - Synchronized Markets ...................................................................................................................................................................................... 984
ASIA - Caution Advised Regarding Positive South Korea Export Turnaround ...................................................................................................... 986
ASIA - Export Growth Looks Similar to Pre-2008...................................................................................................................................................... 987
ASIA - Global Slowing Quickly a Worsening Situation Across Asia ........................................................................................................................ 991
ASIA - Risks All on the Downside for Asia ................................................................................................................................................................. 992
ASIA - Demographic Headwinds ................................................................................................................................................................................. 995
ASIA - Pronounced Flight to Singapore Safety ......................................................................................................................................................... 996

10

BRICS ............................................................................................................................................................................................................................. 998

BRICS - EU Major Contributor to EM Current Account Deficit Growth ................................................................................................................... 998
BRICS - Insufficient Levels Prompt Russian-Chinese Support ............................................................................................................................... 999
BRICS - A Development Bank-Forex Reserve Pool-African Integration .............................................................................................................. 1001
BRICS - 40% of World Population and 25% of World GDP ................................................................................................................................... 1002
BRICS - $3 to $13B GDP in Ten Years .................................................................................................................................................................... 1005
BRICS- A World Wide Distrust of Financial Markets Building ............................................................................................................................... 1008
BRAZIL ......................................................................................................................................................................................................................... 1010
BRAZIL - Inflation will remain high thanks to a "growth mismatch"....................................................................................................................... 1010
BRAZIL - Sharpest Decline in 2013 Growth Forecast ............................................................................................................................................ 1012
RUSSIA - Central bank will hike rates if inflation and oil prices continue to rise. ................................................................................................ 1015
INDIA - Inflation ........................................................................................................................................................................................................... 1016
INDIA - WPI ................................................................................................................................................................................................................. 1017
INDIA - Will be fine as long as it continues to reduce its deficit............................................................................................................................. 1018
INDIA - Panic in India ................................................................................................................................................................................................. 1019
INDIA - India Rupee Collapse Showing Signs of Exhaustion ................................................................................................................................ 1021
INDIA - Watch Out For RE-Emergence of Food Price Inflation ............................................................................................................................. 1022
SOUTH AFRICA .......................................................................................................................................................................................................... 1023
LATIN AMERICA ......................................................................................................................................................................................................... 1025
VENEZUELA Signs of a Crack-up Boom and Dictatorship ................................................................................................................................ 1026
VENEZUELA - Shortages & Hyperinflation .............................................................................................................................................................. 1026
MIDDLE EAST ............................................................................................................................................................................................................. 1028
TURKEY ....................................................................................................................................................................................................................... 1028
US ECONOMY ....................................................................................................................... 1029

THE GLOBAL MACRO OVERLAY ........................................................................................................................................................... 1031
MACRO - US Macro Data Divergence ............................................................................................................................... 1031
MACRO - US Macro Surprise Index .................................................................................................................................. 1033
MACRO - Serious Structural US Problems Impeding Global Competitive .......................................................................... 1036
MACRO - First Half In Charts ............................................................................................................................................ 1038
US INVESTMENT CYCLE......................................................................................................................................................................... 1047
GORD'S BIG PICTURE ECONOMIC CYCLE .................................................................................................................... 1047
ECONOMIC INDICATORS................................................................................................................................................ 1048
MONTHLY INDICATORS OF NOTE ........................................................................................................................................................................ 1048
RESEARCH - The US Economy Continues to Tank Under Obama ..................................................................................................................... 1048
REFERENCE CHARTS ............................................................................................................................................................................................. 1051
THE CURRENT BUSINESS CYCLE - SITUATIONAL ANALYSIS ..................................................................................... 1055

BUSINESS CYCLE - JOBS > CONFIDENCE > CONSUMPTION > GROWTH CYCLE ..................................................... 1055
BUSINESS CYCLE - JOBS ............................................................................................................................................... 1057
CHARTS & TABLES ................................................................................................................................................................................................... 1060
CHARTS - Underemployment Gap ........................................................................................................................................................................... 1060
CHARTS - Employment to Population and Labor Slack......................................................................................................................................... 1061
CHARTS - Participation Rate .................................................................................................................................................................................... 1061
CHARTS - Part Time Employment............................................................................................................................................................................ 1062
REFERENCE - Prior Posts ........................................................................................................................................................................................ 1069
BRIDGING : Jobs to Confidence & Sentiment ........................................................................................................................................................ 1069
JOBS: Participation Rate at 1979 Carter Levels ..................................................................................................................................................... 1073
BUSINESS CYCLE - CONSUMER & BUSINESS SENTIMENT ........................................................................................ 1075

CHARTS & TABLES ................................................................................................................................................................................................... 1077
CHARTS - NFIB Small Business Sentiment ............................................................................................................................................................ 1077
CHARTS - Orange Book ............................................................................................................................................................................................ 1078
RESEARCH OF NOTE............................................................................................................................................................................................... 1078
RESEARCH - Financial Stress Index Sends Market Clue ..................................................................................................................................... 1078
RESEARCH - Consumer Confidence and the Mortgage Spike "Peak Signal" .................................................................................................... 1079
RESEARCH - Contrarian Breadth Rule.................................................................................................................................................................... 1080
SENTIMENT: Consumer, Investor & Trader ........................................................................................................................................................... 1083
Consumer Confidence - Conference Board ............................................................................................................................................................. 1083
Consumer Confidence - Up but Sending Concern Signals ................................................................................................................................ 1087
Consumer Sentiment - Michigan ............................................................................................................................................................................... 1090

11

Consumer Comfort ...................................................................................................................................................................................................... 1091

Investors Intelligence .................................................................................................................................................................................................. 1092
American Association of Independent Investors ..................................................................................................................................................... 1092
National Association of Active Investment Managers (NAAIM) ............................................................................................................................. 1093
Small Business Optimism .......................................................................................................................................................................................... 1094
BUSINESS CYCLE CONSUMPTION ............................................................................................................................. 1095

CHARTS & TABLES ................................................................................................................................................................................................... 1098
CHARTS - Real Disposable Personal Income ....................................................................................................................................................... 1098
CHARTS - Real Consumption Expenditure ............................................................................................................................................................ 1098
CHARTS - Consumer Credit Deleveraging ............................................................................................................................................................. 1099
CHARTS - Core Retail Growth ................................................................................................................................................................................. 1100
RESEARCH OF NOTE............................................................................................................................................................................................... 1100
RESEARCH - The Destruction Of America's Middle Class ................................................................................................................................... 1100
RESEARCH - Dramatic Slowing in Restaurant Business ...................................................................................................................................... 1101
RESEARCH - Signs of Serious Troubles ................................................................................................................................................................. 1102
RESEARCH - Falling Real Disposable Income means Falling Consumption...................................................................................................... 1105
BUSINESS CYCLE - GROWTH ........................................................................................................................................ 1107

CHARTS & TABLES ................................................................................................................................................................................................... 1110
CHARTS - Manufacturing .......................................................................................................................................................................................... 1110
CHARTS - Exports ...................................................................................................................................................................................................... 1110
CHARTS - Durable Goods ......................................................................................................................................................................................... 1111
CHARTS - NFIB Small Business CAPEX ................................................................................................................................................................ 1111
CHARTS - US Manufacturing Conditions Deteriorating ......................................................................................................................................... 1112
RESEARCH OF NOTE............................................................................................................................................................................................... 1112
RESEARCH - Shrinking CAPEX, Expanding Buybacks and Dividends ............................................................................................................... 1112
GROWTH: US Economic Recovery Has Peaked ................................................................................................................................................... 1116
ECONOMIC CYCLE, INVESTMENT CYCLE, SECTOR ROTATION ................................................................................. 1121

US RECESSION A LOOMING US RECESSION ....................................................................................................................................... 1125
RECESSION - Why a Looming Recession May Be Near ...................................................................................................................................... 1125
RECESSION - Minimally in the Back Stretch of the Recovery .............................................................................................................................. 1130
RECESSION - Reduced Household Income at the Core of the Growth of the Federal Reserve Balance Sheet .......................................... 1136
RECESSION - Household Income and Signs of A Collapsing Middle Class ...................................................................................................... 1138
RECESSION - More Cyclical Signs of a US Recession ......................................................................................................................................... 1138
RECESSION - A Lack of Demand ............................................................................................................................................................................ 1139
RECESSION - Money Going to Cash But Equity Inflows Still Suggest Corrective Correlation ......................................................................... 1141
RECESSION - More and More Signals Flashing .................................................................................................................................................... 1144
RECESSION - Term Structures Suggest Signs of a US Recession Ahead ........................................................................................................ 1146
DETROIT - A FAILURE OF PUBLIC POLICY TO RESPOND TO STRUCTURAL CHANGE................................................................................ 1148

DETROIT - By the Numbers ...................................................................................................................................................................................... 1150
DETROIT - The News Reporting............................................................................................................................................................................... 1151
DETROIT - A Structural Problem that Failed to be Politically Addressed ............................................................................................................ 1153
RETIREMENT CRISIS NOW BEGINNING TO TAKE HOLD ...................................................................................................................... 1154

ENTITLEMENTS - Underfunded and Unsustainable .............................................................................................................................................. 1154
RETIREMENTS ................................................................................................................................................................ 1157

RETIREMENT 35 Facts to Scare a Baby Boomer............................................................................................................................................... 1157
RETIREMENT: $205K Account Limits ..................................................................................................................................................................... 1159
RETIREMENT: $3M Retirement Cap Unanswered ................................................................................................................................................ 1161
HEALTHCARE OBAMACARE........................................................................................................................................ 1163

HEALTHCARE - What Does Heart Surgery Really Cost, And Why Is It 70 Times More Expensive In The US? ........................................... 1163
HEALTHCARE - UPS Drops 15,000 Spouses From Health Plan, Blames Obamacare .................................................................................... 1164
STATISITICS - MORE FIXES TO GDP AND CPI......................................................................................................................................... 1166

FALSIFICATION - Government Data Knowingly Inaccurate According to Former BLS Head............................................. 1166
ENTITLEMENTS - Stealth Reform through "Chained CPI" Changes ................................................................................. 1168
CHAINED CPI - Both A Cut and Tax ........................................................................................................................................................................ 1168
CHAINED CPI - Reason It Hits So Hard .................................................................................................................................................................. 1170
GDP - Growth Through Manipulation................................................................................................................................. 1174

GDP - BEA Will Change The GDP Calculation To Boost Economy By 3% In July ............................................................................................. 1176
GDP - US GDP Makeover .......................................................................................................................................................................................... 1179
US PUBLIC POLICY - SOME NOTABLE POLICY PROBLEMS........................................................................................................... 1184

POLICY - Pointing US Towards Government Dependence ................................................................................................................................... 1187
POLICY - Yet Another Game of Deception .............................................................................................................................................................. 1191
POLICY - Obamacare A Flawed Public Policy Implementation ............................................................................................................................ 1195

12

POLICY - Financial Repression and Manipulated Illusions.................................................................................................................................... 1198

POLICY - US Economic Decline is Obvious to Anyone Caring to Look ............................................................................................................... 1203
POLICY - Policy Uncertainty and Confidence in Monetary Policy Direction is exposed .................................................................................... 1206
POLICY - "What is Good for GM is Good for America" is no longer correct ........................................................................................................ 1208
POLICY - Where is the Logic In US Public Policy ................................................................................................................................................... 1209
POLICY- What is the Real Driving Force Behind the New Immigration Law? ..................................................................................................... 1212
POLICY - Crony Capitalism and How America Lost its Way! ................................................................................................................................ 1215
MONETARY POLICY - TAPER & THE NEW FED CHAIR............................................................................................................................ 1219

TAPER .............................................................................................................................................................................. 1222
TAPER - The Fed Cannot Possibly "Exit" Without The Market Crumbling .......................................................................................................... 1224
TAPER - It Matters and the Fed Has Few Options As Quality Collateral Disappears. ....................................................................................... 1225
TAPER - Why Fed Bond Buying Can't Go on Indefinitely and Why TAPER........................................................................................................ 1227
TAPER - Political "Push-Back" by the Fed ............................................................................................................................................................... 1228
TAPER - Ending QE Will Pressure Fiscal Policy ..................................................................................................................................................... 1230
TAPER - Delay Risks Bond Market Volatility as Private Availability Steadily Shrinks ........................................................................................ 1234
TAPER - Clearly A Bluff or Muddled Policy ............................................................................................................................................................. 1237
TAPER - Why is the Fed Talking TAPER? .............................................................................................................................................................. 1239
TAPER - The Fed is Unlikely to Taper ..................................................................................................................................................................... 1242
TAPER - Fed Trapped in a Box ................................................................................................................................................................................. 1244
BOND SCARE .................................................................................................................................................................. 1245

BOND SCARE - The Bearish Bond Trend Has Resumed ..................................................................................................................................... 1245
BOND SCARE - Bonds (TLT) Break Important Support ........................................................................................................................................ 1247
A NEW FED CHAIRMAN .................................................................................................................................................. 1248

RESEARCH OF NOTE ..................................................................................................................................................... 1250
RESEARCH - Reduction at the Core of the Growth of the Federal Reserve Balance Sheet ............................................................................ 1250
RESEARCH - Fed's Excess Reserves are 51% Foreign Banks, 49% Domestic ................................................................................................ 1253
RESEARCH - A Game of Calculated Deception is Evolving to Something Worse ............................................................................................. 1255
RESEARCH - A Loan Distribution Credit Bubble .................................................................................................................................................... 1256
RESEARCH- QE To be Replaced with Guidance, Thresholds and Promises .................................................................................................... 1257
RESEARCH - Bernanke in a Box and Talking Out of Both Sides of Your Mouth ............................................................................................... 1259
RESEARCH - Duration Extraction: The Hidden Fed Game ................................................................................................................................... 1260
RESEARCH - The Fed's Stated Guidance Sign-Posts .......................................................................................................................................... 1262
RESEARCH - An Artificial Market ............................................................................................................................................................................. 1264
RESEARCH - Bank Reserves A Ticking Bomb, But Who Will Be Caught in the Blast? .................................................................................... 1264
RESEARCH - QE : An Intentionally Broken Mechanism Due to 2008 Policy Payable Interest on Bank Reserves ........................................ 1268
RESEARCH - QE Ineffective In Increasing GDP .................................................................................................................................................... 1269
REFERENCE - Prior Posts................................................................................................................................................ 1270

MONETARY: Helicopter Money of Central Bank Bond Purchases are Forever ................................................................................................. 1270
MONETARY: Central Bank Balance Sheet Expansion and the Theoretical Path to SPX of 1950 ................................................................... 1272
MONETARY: Central Bank Balance Sheet Expansion versus CPI ...................................................................................................................... 1274
MONETARY: The Fed Model No Longer Prices Risk ............................................................................................................................................ 1274
CHARTS: Fed Deliberately ignoring data on both growth and inflation ................................................................................................................ 1281
CHARTS: US Economic Activity ............................................................................................................................................................................... 1282
CHARTS: Effects of QE on S&P 500 ........................................................................................................................................................................ 1284
CHARTS: Monetary Velocity versus Monetary Base .............................................................................................................................................. 1285
CHARTS: Days Between 'Unsterilized' Actions ....................................................................................................................................................... 1286
CHARTS: FOMC Economic Projections .................................................................................................................................................................. 1286
CHARTS: Taylor Rule & Evans Rule Estimates of Fed Funds Rates .................................................................................................................. 1287
CHARTS: Market Pricing In A Longer On-Hold Fed ............................................................................................................................................... 1287
CHARTS: Fed Balance Sheet Assets & Liabilities .................................................................................................................................................. 1288
CHARTS: Fed Policy Turns 180 Degrees ................................................................................................................................................................ 1288
CHARTS: US Banking Industry Concentration ........................................................................................................................................................ 1289
CHARTS: Total Credit Market Debt as % GDP ....................................................................................................................................................... 1290
CHARTS: Debt-to-GDP Ratio Above What Caused Great Depression ............................................................................................................... 1291
CHARTS: Yield Chase Completely Distorted .......................................................................................................................................................... 1291
CHARTS: Velocity of Money ...................................................................................................................................................................................... 1294
CHARTS: Real Negative Rates ................................................................................................................................................................................. 1297
CHARTS: Short Interest Rates a Fed Problem ....................................................................................................................................................... 1299
FISCAL POLICY - IT'S THAT TIME OF YEAR AGAIN!! ......................................................................................................................... 1301

CHARTS & TABLES ......................................................................................................................................................... 1304
CHARTS - Government Receipts & Outlay Growth Improves Significantly ......................................................................................................... 1305
CHARTS - Federal Budget Surplus / Deficit ............................................................................................................................................................ 1305
CHARTS - Real Federal Government Purchases ................................................................................................................................................... 1306
CHARTS - US Trade Balance Improvement............................................................................................................................................................ 1306
RESEARCH OF NOTE............................................................................................................................................................................................... 1307

13

RESEARCH - Congress Divided as Federal Government Shutdown Looms ...................................................................................................... 1307

RESEARCH - Avoiding Taxes ................................................................................................................................................................................... 1309
RESEARCH - A Confluence Of Risky Economic Events ....................................................................................................................................... 1310
RESEARCH - Everyone Hates Sequestration, But Few Can Agree On What to Cut ......................................................................................... 1311
RESEARCH - $70T Off-Balance Sheet Federal Liabilities .................................................................................................................................... 1313
REFERENCE - Previous Posts ................................................................................................................................................................................. 1316
CHARTS: Growth & Jobs ........................................................................................................................................................................................... 1316
CHARTS: Taxes & Spending ..................................................................................................................................................................................... 1319
CHARTS: Politics & Policy ......................................................................................................................................................................................... 1322
CHARTS: The Stakes ................................................................................................................................................................................................. 1323
CHARTS: Payroll Tax Holiday ................................................................................................................................................................................... 1326
CHARTS: Tax Rate Comparisons ............................................................................................................................................................................. 1327
CHARTS: Risk Perceptions ....................................................................................................................................................................................... 1328
CHARTS: 2013 Quarterly Impact .............................................................................................................................................................................. 1329
CHARTS: Budget Deficit ............................................................................................................................................................................................ 1330
CHARTS: Sovereign Debt .......................................................................................................................................................................................... 1333
CHARTS: State & Local Government Drag ............................................................................................................................................................. 1334
CHARTS: Government Dependence ........................................................................................................................................................................ 1337
CHARTS: Coming Demographic Shock ................................................................................................................................................................... 1338
CHARTS - Fiscal Cliff Outcome ................................................................................................................................................................................ 1342
BUDGET - What You Need to Know ................................................................................................................................. 1344

BUDGET: As Represented and Spun for the Public ............................................................................................................................................... 1344
BUDGET: A Budget That Institutionalizes Big Government .................................................................................................................................. 1346
BUDGET: The Secrets in The Budget ...................................................................................................................................................................... 1350
KEY DRIVERS - CATALYSTS OF CHANGE .......................................................................................................................................... 1353

EMPLOYMENT ................................................................................................................................................................. 1357
CHARTS & TABLES ................................................................................................................................................................................................... 1357
CHARTS - Nonfarm Payrolls Y-O-Y DECLINE ....................................................................................................................................................... 1357
CHARTS - Hiring Stalled at 200K Per Month (Approximates ONLY the New People Entering Workforce) ................................................... 1357
CHARTS - The Under-Employment Gap ................................................................................................................................................................. 1358
CHARTS Staycations A Sign of the FEAR of Job Loss & Competition for Jobs .............................................................................................. 1358
RESEARCH OF NOTE............................................................................................................................................................................................... 1360
RESEARCH - Low-Wage Jobs Bias Continues to Hamper U.S. Recovery ......................................................................................................... 1360
RESEARCH - A REAL Family Wage versus Part Time & HES ............................................................................................................................. 1362
RESEARCH - It is as Much About the Quality, as the Quantity of Jobs ............................................................................................................... 1369
1- CAPITAL SPENDING ............................................................................................................................................................................................ 1371
2- SMALL BUSINESS OPTIMISM ............................................................................................................................................................................ 1374
3- DEMOGRAPHIC SHIFT ........................................................................................................................................................................................ 1378
REAL DISPOSABLE INCOME .......................................................................................................................................... 1389

CHARTS & TABLES ................................................................................................................................................................................................... 1389
CHARTS - Household Incomes a Sign of a Collapsing Middle Class .................................................................................................................. 1389
CHARTS - Food Stamps Now 14% of US Grocery Store Sales ........................................................................................................................... 1389
RESEARCH OF NOTE............................................................................................................................................................................................... 1390
RESEARCH - Standards of Living and Artificial Expectations ............................................................................................................................... 1390
RESEARCH - A Lack of Demand in US Economy .................................................................................................................................................. 1393
RESEARCH - Full Time Jobs or Food Stamps & Disability? ................................................................................................................................. 1394
STANDARD OF LIVING - Salary Compression ...................................................................................................................................................... 1396
DISPOSABLE INCOME - 66M (20%) Below $28.8/Year Subsistence Level ...................................................................................................... 1397
FOOD STAMPS - 46,405,204 Individuals, 22,257,647 Households below Poverty Line ................................................................................... 1399
DISPOSABLE INCOME - Bad Even in Nominal Terms ......................................................................................................................................... 1400
US RESIDENTIAL REAL ESTATE .................................................................................................................................... 1403

CHARTS & TABLES ................................................................................................................................................................................................... 1403
CHARTS: Household Formations ............................................................................................................................................................................. 1403
CHARTS - Housing Starts .......................................................................................................................................................................................... 1403
CHARTS - Composition of Housing Sales ............................................................................................................................................................... 1404
CHARTS: New Home Sales ...................................................................................................................................................................................... 1404
CHARTS: Existing Residential Supply ..................................................................................................................................................................... 1405
CHARTS - Housing Starts .......................................................................................................................................................................................... 1406
RESEARCH OF NOTE............................................................................................................................................................................................... 1407
RESEARCH - Household Formation Drives Residential Real Estate ................................................................................................................... 1407
OVERVIEW.................................................................................................................................................................................................................. 1409
CURRENT SITUATIONAL ANALYSIS ..................................................................................................................................................................... 1414
CURRENT HOME OWNERSHIP TRENDS ............................................................................................................................................................. 1414
NATIONAL STATISTICS: PRICE ............................................................................................................................................................................. 1418

14

NATIONAL STATISTICS: EXISITNG HOME SALES ............................................................................................................................................. 1420

NATIONAL STATISTICS: NEW HOME SALES ...................................................................................................................................................... 1422
RESEARCH OF NOTE............................................................................................................................................................................................... 1423
US COMMERCIAL REAL ESTATE ................................................................................................................................... 1430

OVERVIEW.................................................................................................................................................................................................................. 1430
NATIONAL STATISTICS: COMMERCIAL REAL ESTATE.................................................................................................................................... 1431
RESEARCH OF NOTE............................................................................................................................................................................................... 1432
CAPITAL SHRUGGED .............................................................................................................................................................................. 1437
Full Out
Debasement
Planned with
"ABE-NOMICS"

15


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POLITICAL PARALYSIS & FAILURE

A Global Governance Failure

GLOBAL MACRO - Regional Update

GLOBAL MACRO TIPPING POINTS - DECEMBER 2013

1 December 2013 Edition

Restricted & Confidential

POLITICAL PARALYSIS & FAILURE

MACRO MONITORING INSTITUTIONS ............................................................................................................................... 39

RISK SIGNALS ............................................................................................................................................................................................... 65

FINANCIAL & ECONOMIC RISK .......................................................................................................................................... 85

December 2013 Edition

Copyright 2012 Gordon T. Long All Rights Reserved

Restricted & Confidential

RISK - GLOBAL DERIVATIVE COLLATERAL .......................................................................................................................................................... 149

GLOBAL MACRO: RISK LEVELS .............................................................................................................................................................. 163

AGGREGATED RISK LEVEL .............................................................................................................................................. 171

GLOBAL MACRO ................................................................................................................... 193

ECONOMIC WARNINGS .................................................................................................................................................... 241

GLOBAL MACRO: INDICATORS (CHARTS) ........................................................................................................................................... 258

December 2013 Edition

Copyright 2012 Gordon T. Long All Rights Reserved

Restricted & Confidential

GOBAL UNEMPLOYMENT ................................................................................................................................................. 278

GLOBAL TRENDS .............................................................................................................................................................. 287

GLOBAL SENTIMENT ........................................................................................................................................................ 302

GLOBAL INFLATION .......................................................................................................................................................... 316

GLOBAL CREDIT ............................................................................................................................................................... 318

GLOBAL MACRO: MONETARY POLICY & CENTRAL BANKING ........................................................................................................ 324

Venezuela: Shortages & Hyperinflation .......................................................................................................... 324

GLOBAL ABE-NOMICS The Road Ahead ........................................................................................................................ 331

GLOBAL CENTRAL BANKING ........................................................................................................................................... 346

BOE - UK ............................................................................................................................................................................ 369

FED - US............................................................................................................................................................................. 370

December 2013 Edition

Copyright 2012 Gordon T. Long All Rights Reserved

Restricted & Confidential

US MONETARY - Mathematically, The Fed Can Only Fail ..................................................................................................................................... 374

BOJ - JAPAN ...................................................................................................................................................................... 392

ECB - EU ............................................................................................................................................................................ 411

GEO-ECONOMIC CONCERNS & TENSIONS ......................................................................................................................................... 426

PETRODOLLAR US-Saudi Oil Alliance Strained .............................................................................................................. 456

GLOBAL BOND SCARE Un-Taper Reverses Fear........................................................................................................... 460

CHINA LIQUIDITY - Global Tightening Scare ...................................................................................................................... 468

December 2013 Edition

Copyright 2012 Gordon T. Long All Rights Reserved

Restricted & Confidential

BATTLEFIELD - Combatants & Belligerents ............................................................................................................................................................. 493

SYRIA & IRAN Complete Middle East Domination ........................................................................................................... 508

REGIONAL ............................................................................................................................... 534

MEDICAL CHARTS - Situation Critical ................................................................................................................................ 565

December 2013 Edition

Copyright 2012 Gordon T. Long All Rights Reserved

Restricted & Confidential

ITALY Longest Recession on Record ............................................................................................................................... 595

GERMANY Merkel Short of Majority but Maintains Power ................................................................................................ 650

IBERIAN PENINSULA Non-Performing Loans Everywhere .............................................................................................. 665

December 2013 Edition

Copyright 2012 Gordon T. Long All Rights Reserved

Restricted & Confidential

CHARTS OF PARTICULAR IMPORTANCE ............................................................................................................................................................. 671

CYRPUS - Latest EU Banking Crisis ................................................................................................................................... 711

ASIA - SERIOUS CRACKS BELOW THE SURFACE .......................................................................................................................................... 735

December 2013 Edition