Draghi Pressures ECB to Buy "Junk-Rated" Loan Bundles of Greece and Cyprus

On September 4, ECB President pulled out a financial bazooka including a pledge to build up the ECB's balance sheet by another €1 trillion.Draghi confirmed the asset purchases would "include the real estate, the RMBS, real estate ABS. It would also include a fairly wide range of ABS containing loans to the real economy," but only "the senior tranches, and the mezzanine tranches only if there is a guarantee."Now, just three weeks later, he wants to buy outright junk, presumably without guarantees.Please consider Mario Draghi pushes for ECB to accept Greek and Cypriot ‘junk’ loan bundles. Mario Draghi is to push the European Central Bank to buy bundles of Greek and Cypriot bank loans with “junk” ratings, in a move that is set to exacerbate tensions between Germany and the bank.The ECB’s executive...

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"Come Hell or High Water" Promise Morphs Into "Infinity and Beyond"

In 2010, vice-president Joe Biden publicly vowed the US would be “totally out” of Afghanistan “come hell or high water, by 2014.”In a few short months, 2014 will be gone. Are US troops out of Afghanistan? Nope. Iraq? Nope. Instead, we have troops in Syria.Political PromisesPolitical promises should never be believed.Today the US signed an extension allowing US forces to remain in Afghanistan until "at least" 2024.At Least Until 2024 The Guardian reports a new Afghanistan pact means America's Longest War Will Last Until at Least 2024. The longest war in American history will last at least another decade, according to the terms of a garrisoning...

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Reader Question on a Credit-Based Society: Can Interest Ever Be Repaid?

Reader Mike wonders how interest can ever be repaid in a credit-based economy. Hi Mish,I wonder if you would be able to comment on this from Bill Gross in For Wonks Only:"A credit-based financial economy (as opposed to pure cash) depends on an ever-expanding outstanding level of credit for its survival. Without additional credit, interest on previously issued liabilities cannot be paid absent the sale of existing assets, which in turn would lead to a vicious cycle of debt deflation, recession and ultimately depression.Put simply, if credit needs to expand at 4.5% per year, then the private and public sectors in combination must create approximately $2.5 trillion of additional debt per year to pay for outstanding interest."This seems to correlate to reality 100% but the implications are stunning....

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Schoolgirls Aged 14-16 Leave France, UK, Germany for Syria to Join ISIS Jihad

As many as 63 seriously misguided teenaged girls from France, 40 from Germany, and 50 in the UK have left their countries to join ISIS in Syria. The Guardian has a fascinating report on Schoolgirl jihadis: the female Islamists leaving home to join Isis fighters. Hundreds of young women and girls are leaving their homes in western countries to join Islamic fighters in the Middle East, causing increasing concern among counter-terrorism investigators.Girls as young as 14 or 15 are travelling mainly to Syria to marry jihadis, bear their children and join communities of fighters, with a small number taking up arms. Many are recruited via social media.Women...

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US Bombed Wrong Refineries in Syria; Iran Seeks to Stop Oil Price Slide; Sanctions Won't Impede Arctic Drilling

US Bombed Wrong Refineries in SyriaOil is in the news in many countries in many ways. Let's take a look starting with a couple of paragraphs buried in the Financial Times report Barack Obama Admits US Underestimated Isis. Allied aircraft on Sunday struck three makeshift oil refineries in an area controlled by Isis in an expansion of attacks intended to damage the militant Islamist group’s financial infrastructure.Oil has proved crucial to financing Isis’s operations, netting several million dollars a day. But the observatory said the refineries struck early on Sunday, in and around Raqqa, were owned by civilians and not Isis. A separate air strike on a plastics factory on the outskirts of Raqqa resulted in the death of a civilian, the group said.So, we blow up refineries owned and operated...

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Spain Manufacturers Warn of Another Slowdown; Consumption Recovery Ends, Retail Sales Contract, Price Deflation Sets In

The alleged recovery in Spain is already over. Retail sales are down month-over-month and year-over-year in July. August and September are both projected to be weak.Vial translation from El Economista, Manufacturers and Retailers Warn of Another Consumption Slowdown. After a slight recovery in the first months of the year, stagnation set in since June, according to almost all employers and associations of producers and distributors. The retail index INE already pointed to stagnation in June and a drop of 0.5% in July from a year earlier.Although the decline in July from the previous month is a somewhat lower 0.2%, the situation appears to be...

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Elephant in the Room Minsky Moment

The "elephant in the room" is debt. Try as they might, central bankers have not been able to spur credit, hiring, or much business expansion because of the elephant. Things are even worse in Europe.Via email, this is a guest post from Steen Jakobsen, chief economist of Saxo bank.Debt - The Elephant in the Room ‘Interest on debt grows without rain’ – Yiddish proverbThis proverb explains most of what goes on in policy circles these days. We are now watching Extend-and-Pretend, Episode VI: Promises for improvement amid ever growing debt levels.Short put, we’re still working with the same dog-eared script we were introduced to all of five years ago, when markets had stabilized in the wake of the financial crisis: maintain sufficiently low interest rates to service the debt burden. Pretend to have...

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Reflections on Catalonia, Crimea, Iraq, California, Nation Building

Catalonia Independence Vote to Proceed on Schedule Arthur Mas, president of Catalonia declared today that the vote for independence of that region will go as scheduled on November 9. Spain contends the vote is illegal and vows to stop it.El Economista reports Arthur Mas Calls for Vote on Independence of Catalonia. President of Catalonia, Artur Mas nationalist, officially called for a vote on the independence of this rich region of Spain for the November 9, challenging the Spanish government began the process to prevent it.In a ceremony at the gallery Gothic Palace of the Generalitat, the seat of regional government in Barcelona, ​​Artur Mas, supported by his executive and representatives of other nationalist parties, signed the decree of convocation of this non-binding referendum. "This...

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Sick Man of Europe is Europe; Blame the Socialists, Progressives, Greens, and the Euro Itself

Joel Kotkin writing for New Geography hits the nail smack on the head with his assessment Sick Man of Europe is Europe. Throughout the continent, public support for a united Europe fell sharply last year. Opposition to greater integration has emerged, with anti-EU parties gaining support in countries as diverse as the United Kingdom, Greece, Germany and France.The new reality is epitomized by France’s ascendant far-right political figure, Marine Le Pen, who is now leading in many polls to win the next presidential election.These attitudes suggest that the EU could be devolving from a nascent super-state to something that increasingly resembles the Holy Roman Empire, a fragmented landscape of small, unimportant states wrapped in a unitary, but ephemeral crepe. This challenges the view of some...

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Wasted Money: Delegation of Governors Make Surprise Trip to Afghanistan

Ways to waste money in Afghanistan are endless. Here's another case in point: Cuomo Makes Surprise Trip to Afghanistan. Gov. Andrew M. Cuomo of New York arrived in Afghanistan on Saturday as part of a delegation of governors and Defense Department officials to visit troops and receive briefings on counterterrorism and security issues, the governor’s office said.Also among the group were Gov. Bill Haslam of Tennessee, Gov. Jay Nixon of Missouri and Gov. Brian Sandoval of Nevada.This is the second trip abroad for Mr. Cuomo in recent weeks. He traveled to Israel in August in what his office called an effort to show support for the country in its conflict with Hamas.Are Missouri and Tennessee prime terrorist targets? Even if any of those states are terrorist targets, is there anything any of the...

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Taliban Storm Afghanistan, Beheadings Galore

Having spent well over $3 trillion dollars in Iraq and Afghanistan what do we have to show for it? Shias aligned with Iran rule BaghdadISIS took over parts of IraqISIS threatens to take over SyriaThe average Pakistani hates the US for drone policyTaliban threatens to take over AfghanistanTaliban Storm AfghanistanPlease consider Taliban Storm Afghan District Southwest of Capital, 100 KilledHundreds of Taliban fighters have stormed a strategic district in an Afghan province southwest of the capital and are on the verge of capturing it after killing dozens of people and beheading some in days of fighting, officials said on Friday.The Ghazni provincial government has lost contact with police in the province's western district of Ajrestan, said Asadullah Safi, deputy police chief of the area. An...

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PIMCO About to Fire Gross for "Erratic Behavior"; Janus Picks up Gross, Shares Jump 40%

Global macro news this is not, but here's an interesting story.Bond Guru and PIMCO co-founder Bill Gross Was Going to Be Fired for ‘Erratic Behavior,’ Says CNBC. Barron's reports Gross Leaves Pimco for Janus; Knew He Was Being Shown the Door. CNBC’s Andrew Ross Sorkin said on air, the fund world was experiencing “shock and surprise” at Gross’s move, which was highly unexpected to most.Dow Jones is running headlines that “Gross’s move pre-empted his dismissal,” citing an unnamed source.Sorkin’s colleagues Jim Cramer and David Faber joked on the channel about how Gross will be giving up the trillions of fixed income investments he controlled at...

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Grossly Distorted Procedures: Mish Proposal to Raise GDP Calculation

Here's the question of the day: Does GDP stand for Gross Domestic Product or Grossly Distorted Procedures?One of the reasons I ask is the latest push by countries to include prostitution and drugs sales in GDP calculations.Italy: Cocaine Sales to Boost Italian GDP in Boon for Budget.USA: The Fiscal Times reports How Hookers and Drug Dealers Could Boost US GDP.Spain: economists estimate that prostitution, illegal drugs, and adjustments will increase GDP since 2010 by 2.42%. That's cumulative, not additive. Methodological changes, such as counting weapons as an "investment" represents 1.55 percentage points of the change.France: Here's a shocker...

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Legal Basis for War in Syria? Amazing Three-Point Logic!

The hypocrisy of the US is on full display. We have imposed preposterous sanctions on Russia following its takeover of Crimea.Given that Crimea actually had a vote, and the vote was overwhelming, one can legitimately argue the Crimea takeover was democracy in action. Rigged or not, it's 100% certain the vote would have gone in favor of Russia.Votes? Constitutions? Who Gives a Damn?Who gives a damn about votes? Some claim the vote was illegal by Ukraine's constitution. But what good are constitutions anyway?The US doesn't give a damn about the US constitution let alone the constitution of any other nations (unless of course it serves our purpose).Legal Basis for Troops in Iraq?On September 5th, the Guardian commented on the legality of US troops in Iraq: Legal basis for Iraq troop deployment...

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