Bear Market


Australia House Prices Drop for a Third Straight Quarter on Higher Rates

October 31, 2011 by · Leave a Comment 

“Australian house prices declined in the three months through September, the third straight quarterly drop, as the developed world’s highest borrowing costs curbed demand.”

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Fannie Mae, Freddie Mac executives get big housing bonuses

October 31, 2011 by · Leave a Comment 

“The Obama administration’s efforts to fix the housing crisis may have fallen well short of helping millions of distressed mortgage holders, but they have led to seven-figure paydays for some top executives at troubled mortgage giants Fannie Mae and Freddie Mac.”

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Bernanke Housing Revival May Hinge on Wider Refinancing Access

October 31, 2011 by · Leave a Comment 

“Fed policy makers, who start a two-day meeting today, are considering buying mortgage-backed securities to push down borrowing costs and help homeowners refinance their debt. ”

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Revamped mortgage program: Will homeowners be able to refinance?

October 31, 2011 by · Leave a Comment 

“…,the devil is in the details. The four biggest mortgage companies — Chase, Wells Fargo, Bank of America and CitiMortgage — have agreed to participate, but that participation is voluntary and each of the banks has the right to make changes to the program. That could make it difficult for borrowers to understand what the program at their bank is and why it is different from what they’ve been hearing from other news sources.”

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U.K. House Prices Increased for a Second Month in October, Nationwide Says

October 31, 2011 by · Leave a Comment 

“U.K. house prices rose for a second month in October, according to Nationwide Building Society, which said the market is still “treading water” and values may slip again over the coming year.”

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Weekly Forex Market Forecast (October 31st – November 4th 2011)

October 31, 2011 by · Leave a Comment 

By Michael Trinkle, ForexTraders

Key Fundamental Forex Events and Forecasts for the Coming Week

The following table lists the key economic data and other events that are due out during the week of October 31st – November 4th, with release times displayed for the GMT time zone.

The list also includes the current market consensus forecast for each event and indicates what sort of deviation might affect the forex market valuation of the indicated currency positively.

Sunday, October 30th

  • 10:45pm NZD Building Consents (last 12.5%, > good for NZD)

Monday, October 31st

  • 1:30pm CAD GDP (0.2%, > good for CAD)
  • 10:45pm NZD Labor Cost Index (0.9%, > good for NZD)

Tuesday, November 1st

  • 2:00am CNY Manufacturing PMI (51.9)
  • 4:30am AUD Cash Rate (4.75%, > good for AUD)
  • 4:30am AUD RBA Rate Statement (hawkish = good for AUD)
  • 8:00am GBP Nationwide HPI (0.1%, > good for GBP)
  • 1st-4th GBP Halifax HPI (0.1%, > good for GBP)
  • 9:15am CHF Retail Sales (2.3%, > good for CHF)
  • 10:30am GBP Manufacturing PMI (50.0, > good for GBP)
  • 10:30am GBP Prelim GDP (0.4%, > good for GBP)
  • 3:00pm USD ISM Manufacturing PMI (52.3, > good for USD)

Wednesday, November 2nd

  • 1:30am AUD Building Approvals (-4.5%, > good for AUD)
  • 10:30am GBP Construction PMI (50.2, > good for GBP)
  • 1:15pm USD ADP Non-Farm Employment Change (103K, > good for USD)
  • 5:30pm USD Federal Funds Rate Decision (<0.25%, > good for USD)
  • 5:30pm USD FOMC Statement (hawkish = good for USD)
  • 7:15pm USD FOMC Press Conference (hawkish = good for USD)
  • 10:45pm NZD Employment Change (0.6%, > good for NZD)
  • 10:45pm NZD Unemployment Rate (6.4%, < good for NZD)

Thursday, November 3rd

  • 1:30am AUD Retail Sales (0.5%, > good for AUD)
  • 10:30am GBP Services PMI (51.9, > good for GBP)
  • 1:30pm USD Weekly Initial Jobless Claims (402K, < good for USD)
  • 1:45pm EUR Minimum Bid Rate (1.50%, > good for EUR)
  • 2:30pm EUR ECB Press Conference (hawkish = good for EUR)
  • 3:00pm USD ISM Non-Manufacturing PMI (53.9, > good for USD)

Friday, November 4th

  • 1:30am AUD RBA Monetary Policy Statement (hawkish = good for USD)
  • 12:00pm CAD Employment Change (20.3K, > good for CAD)
  • 12:00pm CAD Unemployment Rate (7.2%, < good for CAD)
  • 1:30pm CAD Building Permits (2.7%, > good for CAD)
  • 1:30pm USD Non-Farm Employment Change (98K, > good for USD)
  • 1:30pm USD Unemployment Rate (9.1%, < good for USD)
  • 3:00pm CAD Ivey PMI (56.2, > good for CAD)

Technical Forecast and Levels to Watch for the Majors This Week

EURUSD: Lower

Resistance:
Initial: 1.4246, 1.4258 and 1.4279.
Above: 1.4327, 1.4499/1.4503, 1.4548/74, 1.4695 and 1.4939.

Support:
Initial: 1.4133, 1.3973, 1.3798, 1.3720/43, 1.3652/97,1.3565 and 1.3520/24.
Below:
1.3450, 1.3360, 1.3333, 1.3241/44, 1.3145, 1.3055, 1.3000 and 1.2968.

USDJPY: Mildly Higher

Resistance:
Initial: 75.93, 76.00, 76.31, 76.47/52, 77.19/48, 77.71, 77.85, 78.02, 78.66, 79.05, 79.40 and 80.00.
Above: 80.22, 80.82, 81.34, 81.76, 82.01/22, 82.77, 83.09 and 83.77.

Support:
Initial: 75.70 and 75.65.
Below: 75.00 and 70.00 likely.

GBPUSD: Lower

Resistance:
Initial: 1.6130, 1.6140, 1.6151, 1.6204/06, 1.6252/59 and 1.6332/47.
Above:
1.6434/73, 1.6500/98 and 1.6616.

Support:
Initial: 1.6117, 1.6070, 1.6040, 1.6000, 1.5977, 1.5912/19, 1.5883/89, 1.5839/67, 1.5630/85 and 1.5525/31
Below:
1.5483, 1.5422, 1.5373, 1.5339/55, 1.5326, 1.5293, 1.5270, 1.5123 and 1.5000.

AUDUSD: Lower

Resistance:
Initial: 1.0718/26, 1.0730, 1.0751, 1.0763, 1.0784 and 1.0909.
Above:
1.1000, 1.1015, 1.1064 and 1.1079.

Support:
Initial: 1.0654, 1.0498, 1.0370, 1.0351, 1.0320, 1.0229, 1.0116, 1.0100, 1.0012 and 1.0000.
Below:
0.9983, 0.9925, 0.9863, 0.9732, 0.9689, 0.9667, 0.9651, 0.9620/27, 0.9536/41 and 0.9500.

USDCAD: Higher

Resistance:
Initial: 0.9934, 0.9969, 1.0030, 1.0132/42, 1.0233, 1.0262/71, 1.0337, 1.0417, 1.0481/90, 1.0500 and 1.0506.
Above:
1.0646/56, 1.0669, 1.0742, 1.0756, 1.0785, 1.0853, 1.0868, 1.1000 and 1.1101/23.

Support:
Initial: 0.9891, 0.9828/77, 0.9763/96, 0.9734/39, 0.9724, 0.9686, 0.96450, 0.9567, 0.9526 and 0.9496.
Below:
0.9448/56, 0.9422, 0.9405/09, 0.9056 and 0.9000.

NZDUSD: Lower

Resistance:
Initial: 0.8240, 0.8269/78, 0.8327/39, 0.8365/86, 0.8423 and 0.8469/72.
Above:
0.8500, 0.8534/75, 0.8676, 0.8764, 0.8793 and 0.8841.

Support:
Initial: 0.8150/90, 0.8126/40, 0.8109/19, 0.8066/93, 0.7955/94, 0.7888, 0.7855/59, 0.7795, 0.7741, 0.7605/72, 0.7549, 0.7523, 0.7504 and 0.7500.
Below:
0.7453/67, 0.7426, 0.7404, 0.7342, 0.7321, 0.7189, 0.7115, 0.7000 and 0.6945/62.

More articles from ForexTraders….

A Simple Three-Item Agenda for "Occupy Wall Street/We Are 99%"

October 31, 2011 by · Leave a Comment 

By Charles Hugh Smith, OFTWOMINDS
There are really only three ways to cripple Wall Street’s democracy-killing concentration of wealth and power: take our money out of Wall Street and the TBTF banks, eliminate private money from elections and abolish Wall Street’s dealer, the Federal Reserve.



There are only three things–and only these three–that will cripple Wall Street’s democracy-killing concentration of wealth and power:


1. Transfer the 99%’s money out of Wall Street and the Too Big To Fail Banks


2. Remove campaign contributions from our democracy in a way that the corporate legalist lackeys in the Supreme Court cannot overturn, i.e. entirely publicly financed elections


3. Abolish Wall Street’s dealer, pusher and protector, the Federal Reserve.

My reasoning is very simple:

Everything else people want to see happen cannot happen if:

1) Wall Street and the SDI (systemically dangerous institutions) a.k.a. too big to fail banks, control most Americans’ financial assets and debts

2) The Federal Reserve exists to enable and protect the SDI’s wealth and power via Primary Dealers, the discount window and other pusher/dealer mechanisms

3) Wall Street and the other SDIs can use the billions of dollars they skim from our accounts, IRAs, 401Ks and pensions to buy political influence and protection from regulation and competition.


Therefore these are the necessary foundations of any real change.

As long as Wall Street and the other SDIs control much of the nation’s financial markets, assets and debts, and the Federal Reserve exists to protect and enable their predation and parasitic skimming, they will have the means to reap billions in profits which can then be funneled into our cash-corrupted political system of for-sale toadies and apparatchiks.


The only real leverage we have is our money and our compliance. Leaving our money in Wall Street and the Too Big to fail banks enables their dominance. Leaving our money in checking accounts, money market funds, savings accounts and brokerage accounts, and then using credit and debit cards issued by the SDIs, is to remain deeply complicit in their dominance.

This concept is now entering the cultural dialog, for example this recent entry on Zero Hedge: Want To Defeat The Banks? Stop Participating In The System!


Frequent contributor Harun I. summed the argument up even more forcefully:

I applaud this movement only if people are coming to the recognition that, collectively, we as a nation have been wrong and now need to move in a different direction. We must now engage in discussing how best to do so.

However, I remain skeptical. Why are the TBTF banks still operating? From fraud to extortion to money laundering for drug cartels, the list of crimes against humanity is quite clear and long. Exactly what does it take before people will stop doing business with demonstrably corrupt entities?

And now there is a General Strike scheduled. I am all for it. But understand that our government will borrow the shortfall and nothing meaningful other than an increase in public debt will occur.


However, if you want to see an instantaneous and dramatic effect, every person close every account they have with all the TBTF banks and their subsidiaries on the same day.

Immediately or almost immediately they would have to be taken into receivership, their assets marked to market and sold off. The End.

Why destroy the TBTF banks? Most of them are Primary Dealers. The Fed then comes under pressure as it becomes the only lender of resort.

Then, once we have gotten their attention we tackle monetary reform, lobbying, and term limit in Congress and the Supreme Court.

It is time for government to “fear the people”. Rest assured that if government does not fear the people, nothing will change.

As for the Supreme Court’s legalist worship of the Corporate State: I believe this court will be remembered by history as the court which veered close enough to Corporate-State fascism to give it a big wet kiss. Corporate “rights” of personhood? No problem, you got it! The “right” to fund unlimited campaign contributions? No problem, you got it!


“Fascism should more properly be called corporatism because it is the merger of state and corporate power.” Benito Mussolini


We might profitably ask how the Founding Fathers would have responded to calls that the U.S. Constitution should contain a clause granting the East India Company the same rights of personhood as U.S. citizens, and then further granting it the unlimited right to buy political favors as a function of “free speech.”

One wonders how any of the Revolutionary War veterans among the Founding Fathers might have responded to such toadying claptrap. Yet this is precisely what the corporate toadies in the flowing black robes claim is “defended” by the U.S. Constitution.

A close reading of the Constitution reveals no amendments or clauses granting private corporations personhood, or granting them the right to inject unlimited sums of money to sway elections. If we turn to the Federalist Papers, we find fear of a “tyranny of the minority”–and what is a private corporation but an extreme minority bent on purchasing a limited but oppressive, exploitative and parasitical tyranny?

The legalist lackeys on the Supreme Court have hidden far too long behind the reputation of the Court–a reputation punctured by history, we might note–as a forum of disinterested legal debate. Rather, the court is nothing but another collection of imperfect human beings who are easily swayed by the tenor of the times and the ideological agendas of the wealthy and powerful. (“These are not the campaign reforms you’re looking for. Move along.”)

Given that we have a court that worships Corporate-State fascism slicked over with a thin veneer of democracy for public relations purposes–every single attempt to limit corporate campaign contributions has been struck down by the court–then our only choice as a people is to ban all private money contributions and institute a system of 100% publicly financed elections. Yes, it’s imperfect, and yes, it’s messy and costly, but nowhere near as corrupting and costly to liberty as the Corporate-State fascism we now endure.

Libertarians may be aghast at this option, but we have been reduced by the legalist lackeys in the Supreme Court to this choice: either we continue to be ruled by the corrupting corporate-State nexis of unlimited corporate/private Elites funding of elections, or we go with public financing. Thanks to the Supreme Court, there is no other choice.


As a lagniappe thought: one of the primary concerns of many “OWS/we are the 99” supporters is rising income disparity. That is a legitimate concern in any nation claiming to be a democracy with a free-market economy. Yet a close examination of the roots of income disparity and rising poverty leads straight to the Federal Reserve.

Winners And Losers: The New Economy (Zero Hedge)

What Mr. Gross and Mr. Frank and many others don’t see is that it is the creation of fiat money that destroys wealth and misdirects the investment of capital into less productive assets. That is, monetary inflation destroys capital (wealth). The reason why the production of goods and services do not bear higher yields than financial assets is that the production of goods and services suffers from a lack of real capital. Remember that real capital comes only from the saved profits of production and from the savings of workers from wages earned in production.

You obviously cannot print wealth, but if you try that fiat money distorts the entire economy by directing investment to things which appear to appreciate but what is really happening is that the dollar is depreciating. As a result, fiat money and real capital are invested in financial assets because they appear to have greater yields than returns from the production of goods. Prices rise (price inflation) and it creates the inevitable boom which always busts. The fall out is that we are stuck with things people don’t want (in the present re/depression it is housing). And we fall for it every time.

Allow me to simplify the argument:

1. The Federal Reserve has financialized the economy as an intrinsic expression of its reason for being.

2. Financialization necessarily creates systemically rising income disparity.

I think that’s all we need to understand to grasp the utmost importance of abolishing the Federal Reserve, a private banking monopoly created and protected by our Congress. Limiting Wall Street and the TBTF banks is structurally impossible as long as the Federal Reserve exists.

If this recession strikes you as different from previous downturns, you might be interested in my new book An Unconventional Guide to Investing in Troubled Times (print edition) or Kindle ebook format. You can read the ebook on any computer, smart phone, iPad, etc.Click here for links to Kindle apps and Chapter One. The solution in one word: Localism.

My Big Island Girl (song) Buy fromCD Baby or amazon.com (99-cent MP3 download)

Readers forum: DailyJava.net.

My new book is available in both print and ebook formats: An Unconventional Guide to Investing in Troubled Times (print edition) or Kindle ebook format. You can read the ebook now on any computer, smart phone, iPad, etc. Click here for links to Kindle apps and Chapter One.

Order Survival+: Structuring Prosperity for Yourself and the Nation (free bits) (Mobi ebook) (Kindle) or Survival+ The Primer (Kindle) or Weblogs & New Media: Marketing in Crisis (free bits) (Kindle) or from your local bookseller.

Of Two Minds Kindle edition: Of Two Minds blog-Kindle



Thank you, Carl R. ($5/mo), for your extremely generous subscription to this site — I am greatly honored by your support and readership. Thank you, Travis G. ($10/mo), for your marvelously generous subscription to this site — I am greatly honored by your support and readership.
Go to my main site at www.oftwominds.com/blog.html
for the full posts and archives.

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One Way to Understand the EU’s Inevitable Crash Landing: the Autopilot Analogy

October 31, 2011 by · Leave a Comment 

By Charles Hugh Smith, OFTWOMINDS
The leaders of the EU don’t actually know how to fly; they only know how to watch the financial sector’s autopilot do its “magic.” Too bad the autopilot shorted out last May.



Recent anecdotal evidence out of Asia suggests that the flight training received by some civilian airline pilots is based entirely on the aircraft’s autopilot functions.Recall that an autopilot is a mechanical, electrical, or hydraulic system used to guide a vehicle without assistance from a human being. This deficiency in their training has been revealed in a most disconcerting fashion: when the aircraft’s autopilot malfunctions, thepilots do not know how to actually fly the airplane.

In other words, pilots are not actually trained to fly aircraft, i.e. to know how the aircraft responds in real time to actual human intervention/control; they’re trained to monitor and manage the autopilot system which does the actual flying.


This is a precise analogy for the European Union’s leadership: they don’t know how the financial system actually works, they only know how to follow the banking system’s autopilot. Now that the financial system’s autopilot has been fried, they are clueless and increasingly panicky: what does this lever do? Why is the stick so sluggish? We’re losing power… there must be an auxiliary power switch, like in Star Trek… Good God, doesn’t anyone know how to actually fly this thing?


Sadly, the answer is no. The EU leadership, just like that of the Federal Reserve and the U.S. government, only know how to blindly follow the system’s autopilot program: increase leverage and debt, keep interest rates low so everyone (and every nation) with a pulse can increase their debt load, and let high-frequency trading (HFT) programs goose the stock market ever higher.


Nobody knows what to do once the autopilot fails. The EU’s “pilots” are hoping that their oft-repeated “determination” to save their spinning-out-of-control economy will magically grant them the knowledge and skills to fly their craft through violent crosswinds and unprecedented storms. It won’t; PR, spin and “meetings” can’t teach anyone how to fly.

Here in the U.S., Fed chairman Ben Bernanke has studied the flying manual of 1929-era aircraft, and he is absolutely confident that this book learning will enable him to fly the overloaded, losing thrust 747 U.S. economy on manual. Needless to say, his confidence is tragi-comically misplaced; all he really knows how to do is blindly follow the financial system’s autopilot: increase leverage and debt, keep interest rates low, goose the markets with intervention, money-printing and HFT, and repeat his “determination” to fly this plane like it’s never been flown before, through typhoons and wind shear and whatever Nature throws at it, because, by gum, determination and the shorted-out autopilot will somehow keep the aircraft from buying the farm.

Unfortunately, determination has nothing to do with the end result of willful ignorance, incompetence and supremely misplaced confidence.

Which aircraft do you want to be on? The one with pilots who keep babbling about their “determination” to learn to fly in hastily convened cockpit meetings, or the one with pilots who actually know how to fly? The citizens of the EU, the U.S. and yes, China and Japan, too, will soon enough discover that determination doesn’t give you an understanding of financial gravity or the experiential skills to fly through unprecedentedly challenging weather.

If this recession strikes you as different from previous downturns, you might be interested in my new book An Unconventional Guide to Investing in Troubled Times (print edition) or Kindle ebook format. You can read the ebook on any computer, smart phone, iPad, etc.Click here for links to Kindle apps and Chapter One. The solution in one word: Localism.

My Big Island Girl (song) Buy fromCD Baby or amazon.com (99-cent MP3 download)

Readers forum: DailyJava.net.

My new book is available in both print and ebook formats: An Unconventional Guide to Investing in Troubled Times (print edition) or Kindle ebook format. You can read the ebook now on any computer, smart phone, iPad, etc. Click here for links to Kindle apps and Chapter One.

Order Survival+: Structuring Prosperity for Yourself and the Nation (free bits) (Mobi ebook) (Kindle) or Survival+ The Primer (Kindle) or Weblogs & New Media: Marketing in Crisis (free bits) (Kindle) or from your local bookseller.

Of Two Minds Kindle edition: Of Two Minds blog-Kindle




Thank you, David T. ($50), for your monstrously generous contribution to this site — I am greatly honored by your support and readership. Thank you, Theodore C. ($25), for your extremely generous contribution to this site — I am greatly honored by your support and readership.

Go to my main site at www.oftwominds.com/blog.html
for the full posts and archives.

More articles from Charles Hugh Smith….

Qantas – a grounded investment?

October 31, 2011 by · Leave a Comment 

The Daily Reckoning

What a weekend! Qantas was grounded. Now it’s un-grounded. Airline union strike action is certainly putting workplace laws through their paces. And everyone had something to complain about!

We don’t have much to say about it except that it roughly fits with our theory that the world is contracting. When you take away cheap credit and cheap energy from the global system, you get contraction instead of expansion. Part of that contraction is quite literally, fewer physical links between countries.

Besides which, airlines like Qantas are tough businesses to run. You have high fixed capital costs (airplanes), volatile fuel costs, airport costs, maintenance costs, and then different employment contracts with unions. Second to extractive industries, it’s probably one of the worst businesses to try and run, much less invest in.

Maybe if Qantas and its airline unions can’t make a deal, they can just sell the whole airline to China for a bailout.

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Is China the bailout saviour in the European debt crisis?

October 31, 2011 by · Leave a Comment 

The Daily Reckoning

It will be the greatest garage sale in European history. This week, for two days only, China will have unlimited access to a huge inventory of trophy assets in Europe. The Eiffel Tower! The Colosseum! The Parthenon! Those assets are marked to move. And everything must go! Two days only!

But will China be the bailout saviour in the European debt crisis?

That seems to be Europe’s plan. Make the Chinese pay! China has $3.2 trillion in foreign exchange reserves. It has to do something with that money, doesn’t it?

Europe is hoping China becomes an investor in its bank bailout fund. A few hours after the Eurozone members announced their big plan last week, Klaus Regling, the head of the European Financial Stability Facility (EFSF), got straight on a plane (presumably not a grounded Qantas flight) for Beijing. What kind of offer did he make?

Well, the EFSF is not structured like a bank. It must borrow the money it intends to lend. It will do that by selling bonds to investors. If it wants the Chinese to buy those bonds, the bonds may have to be priced in yuan (to protect the Chinese from currency losses) and the bonds may need to be insured against losses (since owning government bonds in Europe is no longer risk free).

In the role of supplicant, Regling made remarks at China’s Tsinghua University in which he said Europe would be pretty flexible (as in on bended knee) in order to get the money it needs from China. On the issue of bonds denominated in yuan he said…

“We have so far only issued euro bonds but we are authorised to use any currency we want if it seems efficient…It also depends on the Chinese authorities, whether they would approve that. I think it is probably more difficult. But I could imagine that over the years it might happen.”

Regling also described a feature of the new bailout fund. He said, “The EFSF will take a certain tranche that will be a junior tranche, which means if something goes wrong, the first loss will be carried by the EFSF. It could be around 20pc.”

Insurance against a 20% loss on their bond investments may not be enough to attract the Chinese, even if the Europeans are willing to be publicly servile. After all, the non-default default that the EU has just declared on Greek bonds will leave investors with a “voluntary” loss of 50%. Who’s to say losses won’t be greater on EFSF bonds?

The bonds to be issued by the EFSF are backed by the full faith and credit of the major European countries. Standard and Poor’s currently gives France an AAA rating. But with a public-debt-to-GDP ratio of 80% and climbing, French government debt could be downgraded. If it is, the EFSF could face a downgrade too. And then the 20% guarantee would be largely worthless.

The Chinese know this. They know that by allowing Greece to default but not calling it a default, the Europeans have made global credit more expensive. Why? Investors who bought credit default swaps as insurance against default in government debt now know that that insurance is worthless. If the government coerces bondholders to accept a “voluntary” loss, it doesn’t trigger a “credit event” in which the CDS kicks in.

This suggests to us that the Europeans are going to have to offer the Chinese something a lot more compelling to get the money they’re after. Like a free lifetime pass to Euro Disney. Or all the wine in Italy. Or all the olives in Greece. Or all the gold in Germany. When Chinese President Hu Jintao arrives in Cannes for the two-day G-20 summit later this week, it may be a European garage sale like no other!

In the meantime, if Europe is a junior partner in the New World Financial Order, where does that leave Australia? Well, for starters, it puts the Reserve Bank of Australia in a pinch for its price fixing decision tomorrow. If global interest rates are headed higher thanks to the Europeans nullifying the use of credit default swaps on government debt, the RBA can’t very well cut interest rates can it?

Dan Denning

for The Daily Reckoning Australia

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