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Friday, June 24, 2011

Absolute Devotion!

Or so Fisher of Dallas FRB claims:
“We are devoted absolutely to making sure that we don’t give rise to sustainable inflationary pressures that could be destructive,” Fisher said. “I very much look forward to an exit when it’s appropriate.”
The major indicator in the GDP Q1 "final" release was higher inflation. The implicit price deflator for gross domestic purchases was 3.9%. Let's just say that if the Fed had an inflation goal in mind, they reached it with admirable speed. The YoY on GDP total (quarter from quarter a year ago) was 1.7% already at the end of March. Despite Fisher's laudable devotion, he claims that the Fed will not stomp on this tender little sprig of increasing prices it has so carefully nurtured. He claims they are of one mind on this.

Looking at durable goods, there are some signs of an inventory build that hint at weakness over the summer. See Table 2 in the release. This really is not surprising given the Empire State and Philly Fed surveys, but it tends to confirm that the patterns shown in those releases are general.

If you look at Table 10 in the GDP release, you'll see that annualized real personal income ex government transfers was 9.4 trillion versus 2008's 9.64 trillion. Therein lies the sensitivity of this economy to rapid price increases!

In the meantime, Moody's rudely and crudely made some comment or another about reviewing Italian banks' exposures to a decline in the Italian government's credit rating. The result was kind of a dramatic fall in the stock prices of various Italian banks, which is hardly going to help their position. Oil is trading down today with some reason!

The Draghi/Smaghi drama is about over. Draghi is in - this announcement probably forced from Sarkozy today in an attempt to shore up perceptions about continuity and stability at the ECB. They needed Draghi, because it always has been about Italy rather than the small fry that Greece and Portugal represent. We're clearly nearing the end of the European hand. Everyone's trying to drag out the hand by betting whatever they can afford, but sooner or later everyone's going to have to put their cards on the table. According to French newspapers, Smaghi is out at the end of the year. ECB:
The European Central Bank reiterated Friday that all members of its executive board, including Italy's Lorenzo Bini Smaghi, are appointed for eight-year terms and decide on their futures independently of outside pressure.
The river looks to be running deep and fast, with forecasts of more water coming down. Italian two year yields at 3.28? The US two-year is rolling between 0.35 and 0.40%. Yikes!

There is a huge technical revision coming on GDP that will be published next month with the Q2 US advance GDP release. If it were not for that, Q2 GDP would be no higher than 1.4% annualized. As it is, we could get almost any number.

Developments in China are moving apace as well. I have the sensation that the 2008 crisis will reach its global culmination in 2012, but I don't know what it will be. The prior resolution was fake. This time it will have to be real.

Comments:
Declining asset values and higher cost of living
means a poor quality of life for most. Everything that
has been papered over with tax cuts and easy credit
ill rear it's ugly head. Enjoy your weekend !

Sporkfed
 
For what it is worth, I'm devoted to finding $6 billion in my couch cushions.
 
This is definitely an absolute devotion kind of day.

I'm now 100% devoted to Jamie Dimon.
 
Mama said: "I have the sensation that the 2008 crisis will reach its global culmination in 2012, but I don't know what it will be."

You seem to be in the same camp as Martin Armstrong, Charles Nenner, Harry Dent, Jeffrey Gundlach, to name a few.

When you are able to, please expand on your statement. I feel I must protect my family from what is coming in the very near future and I trust that a person like you will provide the guidance we need to survive.

My own thoughts right now are that one day soon we are going to experience a sudden, climatic, worldwide "Lehman" like collapse of soverign debt. What happens after that event, I have no idea.

Mama we need you!
 
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