Daily Digest - Apr 8

• World Economy Falling Faster Than in 1929-1930 (I wouldn't miss these charts)
• NYSE Defaults On Small Gold Bars! (H/T DamTheMatrix)
• Report: Stress Test Results Delayed
• Top CEO Poll: Fire People As Fast As Possible
• Wasting a Good Crisis: Result - $200 Oil
• Max Kaiser's Latest - keeping his eye on the ball...(Videos)
• Good Bank(er) vs. Bad Bank(ers)
• Report: IMF to Warn of $4 Trillion in Losses
• I.O.U.S.A. DVD
• More Reasons to Worry About Inflation
• Cyber"Security" Legislation (H/T PineCarr)
• Decoupling Set to Increase (H/T PineCarr)
• Happiness Index: Nebraska Nabs Top Spot (H/T Christopher Peters) 

Economy 

World Economy Falling Faster Than in 1929-1930 (I wouldn't miss these charts) 

Barry Eichengreen, an expert on the Great Depression, and Kevin O'Rourke, take issue with the notion that the current downturn is less severe than the Great Depression. While the slump in the US is not as bad, that mis-states the global picture. 

Note that many economists expect the US to suffer less than the big exporters, namely China, Germany, Japan. The reason is that the economic adjustment required of surplus nations is greater than that of debtors. Similarly, in the Great Depression, the US, then a major exporter, was harder hit than the overconsuming importers such as Britain, who defaulted on their debts.

The one bit of cheer is that this time around, government action is more aggressive, but it remains to be seen whether it is sufficient. 

NYSE Defaults On Small Gold Bars! (H/T DamTheMatrix)

In summary, there is now so much demand for delivery of the mini-contracts that the exchange can no longer deliver 1 kg bars. When the wording was changed, a flurry of complaints resulted. Technically, in my opinion, if you bought a mini futures contract from an NYSE-Liffe clearing member, prior to December 31st, you could bind them to their legal contract with you, and force them to either deliver the 1 kg bar, or pay for you to obtain it on the open spot market. Based upon the original wording, NYSE-Liffe and its clearing members are legally obligated to deliver that 1 kg bar per contract, whether they want to or not, and regardless of the internal rules of the exchange. Whether anyone will force compliance, however, is an open question.

Absent legal action, clearing members are now being allowed to hand out little slips of paper, called "warehouse depository receipts" (WDR). These are being substituted for "vault receipts" (VR). The WDRs, in contrast to the VRs, merely promise the customer that he owns a 1/3 interest in a 100 ounce bar. The customer is not allowed to take delivery, unless he can accumulate 3 WDRs, which equals 1 VR.

And so it begins -- the NYSE has now defaulted (in the expected sleazy, weasely, lawyerly way) on a key gold futures contract.

Report: Stress Test Results Delayed

From Reuters: Source: Bank 'stress test' results delayed (ht Branden DD49)

The U.S. Treasury Department is planning to delay the release of any completed bank "stress test" results ...

The Treasury is still talking about how results of the regulatory stress tests on the 19 largest U.S. banks will be released, and may disclose them as summary results that are not institution-specific, the source said.
...
The source ... said officials do not want any test results released before the earnings season wraps up for most U.S. banks on April 24.
The original time frame was no later than the end of April, so this is still on schedule. We definitely need institution-specific results.

Top CEO Poll: Fire People As Fast As Possible

The Business Roundtable is a small group of CEOs, but it is an elite one. Its members are chief executive officers of leading U.S. companies with more than $5 trillion in annual revenues and nearly 10 million employees. Member companies comprise nearly a third of the total value of the U.S. stock markets.

The most recent survey of the group, which looks at their outlook for the next six months, does not yield very optimistic results, particularly in the arena of job cuts.

When asked "How do you expect your company's U.S. employment to change in the next six months?", 71% said that they would cut people. To the question" How do you expect your company's U.S. capital spending to change in the next six months?" 66% said that they plan to decrease what they will spend.

The news is a strong indication that the largest, most well-capitalized companies in the US are still planning plenty of layoff, and that means that the notion that the rate at which unemployment is growing is not likely to abate.

Wasting a Good Crisis: Result - $200 Oil

Max Kaiser's Latest - keeping his eye on the ball...(Videos)

Good Bank(er) vs. Bad Bank(ers) 

As long as humans do the lending and borrowing, banking crises will always be with us. We can only hope to limit the systemic damage of the mistakes that will inevitably be made during each cycle. Sure, some sensible new rules (e.g. less leverage) would help, as would the less comatose enforcement of existing ones. But bankers with solid values and sound judgment are even more important to the health of our banking system. Goodness knows the next generation needs to learn less about financial engineering and complex models and more about role models. Maybe Harvard and the other business schools will soon use Beal bank as one of their famous case studies for future MBAs. "How a bank can achieve an above market ROE with below market leverage" would be a snappy title. Wouldn't it be wonderful if it attracted students in droves? 

Report: IMF to Warn of $4 Trillion in Losses 

From The Times: Toxic debts could reach $4 trillion, IMF to warn 

Toxic debts racked up by banks and insurers could spiral to $4 trillion (£2.7 trillion), new forecasts from the International Monetary Fund (IMF) are set to suggest.

The IMF said in January that it expected the deterioration in US-originated assets to reach $2.2 trillion by the end of next year, but it is understood to be looking at raising that to $3.1 trillion in its next assessment of the global economy, due to be published on April 21. In addition, it is likely to boost that total by $900 billion for toxic assets originated in Europe and Asia.
It just keeps getting worse ... 

I.O.U.S.A. DVD

More Reasons to Worry About Inflation 

Many deflationistas believe that the wealth being destroyed by the bursting of the global credit bubble will swamp the money being created by fiscal and monetary authorities for the foreseeable future, thus eliminating the threat of inflation, at least in the near term. 

But what they seem to be discounting is the effect that a contagious loss of confidence can have on the value of a fiat currency, which is, after all, dependent on the continued faith of those who accept it as a medium of exchange and a store of value.

If, for example, enough people start to believe that a government is embarking on road-to-ruin economic policies, hordes of those who hold the currency may suddenly start stampeding for the exits, altering the supply-and-demand equation and leading to a contraction in its purchasing power.

In "Inflation Prospects In An Emerging Market, Like The U.S.," Baseline Scenario's Simon Johnson highlights circumstances where changing demand stemming from altered perceptions might spawn a serious inflation problem. 

Cyber"Security" Legislation (H/T PineCarr)

Decoupling Set to Increase (H/T PineCarr) 

This week, the leaders and finance ministers of the 20 most economically important nations, or G-20, will convene in London to develop coordinated policies that they hope will prevent a worldwide depression. The leaders will also consider greater transnational regulatory oversight of the financial industry and the future of the U.S. dollar as the world's 'reserve' currency. By any reckoning, this meeting will be the most important international economic conference since Bretton Woods in 1944, or the Great Powers economic meeting in Rome in 1922. 

All the leaders are now acknowledging what was formerly in dispute: that the world is facing a severe recession. But as is evident by the pre-meeting media blitz, the London G-20 will reveal a split of the group into two opposing camps.

On one hand we have the Americans and the British who have been calling most loudly for a 'team' approach, in which all nations 'pull together' in support for spending-based remedies. To some extent we are indeed all in it together. The shock currently felt by the American consumer is has translated into massive losses for exporting countries around the world. But this does not mean that all favor massive government spending along the lines envisioned by Pennsylvania Avenue and Downing Street.

Happiness Index: Nebraska Nabs Top Spot (H/T Christopher Peters) 

It ranked 2nd overall in lowest number of foreclosures, it ranked 2nd in lowest unemployment rates, it ranked 5th in lowest percentage of non-mortgage debt by income.