SAR #11334

The banks and countries that were broke last week are still broke.

The View: Is anything about the euro zone mess better today than last week? No, the system is – in technical terms – falling apart. That sound you heard was the panic button being hammered in the marketplace, as the Fed acted to protect US banks (and Goldman Sachs, of course) from their foreign entanglements. This is not the endgame, this is just the beginning; it will get worse, especially if they take the path of enforced austerity, as seems likely. “Steps toward fiscal union and a more proactive ECB, after all, will still not address the fundamental imbalances and competitiveness issues that bedevil the Euro zone.”

OOPS: Last week there were 403K initial jobless claims, up from 393K the week before. The expectations had been for 390K. The 4-week moving average was 395,750, little changed from a vigorously revised 395,250 the prior week. Note that the unemployment data has been revised upward 91% of the time – certainly a mathematical curiosity.

Monkeys Jumping on the Bed: Britain’s experiment in austerity is not going well. Apparently contractionary practices produce contraction. Because austerity hasn't worked yet, Cameron & Company are sure that more austerity is just the thing. As the doctor said, “ this calls for even more bleeding...”

Just The Facts, Ma'am: Ms Wannabe Bachmann, who is living disproof of the concept, says that Intelligent Design is a fact and should be taught to children. Okay, but first let's teach them what a fact is and then what a scientific theory is.

Great Expectations: All the alarm about the Fed and European central banks pumping inflationary money into the system is misguided. The problem in Europe is (as it was in the US when Bernanke flooded the financial centers with trillions) is not inflation. It is deflation. 30% - 40% - 50% of the euros lent the PIIGS have disappeared. Gone. and ink on the mechanics of debt-based money creation. The banks lend someone, say. That is deflationary. And banks have begun to drastically curtail their lending. That is also deflationary. It will have dire consequences.

Perspective:House prices in the US are not depressed, they haven't even returned to reasonable levels yet. Adjusted for inflation, they are still about 10% above 1996 levels. If the house should cost about 3 times annual income – an old rule of thumb – we've got a ways to go. Down.

High Points: The IEA's Fatih Birol says that Middle Eastern oil production will fall by 3.4 mbd by 2015 and 6.2 mbd by 2020 without significant increases in investment to $100 billion a year. Unfortunately the combination of the global economic slowdown and the rise of popular protests in the region which require increases in social spending make it unlikely the funds will be available. All of which leads the IEA to anticipate prices in excess of $150 a barrel. Briefly, of course. Just until the economy collapses again.

Trust Us: The financial mavens are at it again. This time they want Congress to excuse them from regulation and disclosure as long as they steal less than $50 million from fewer than 2000 people – all in the name of encouraging “capital formation” aimed at “job growth.”

From The Front: Our team is way behind and will probably lose the global climate change game. Instead of lowering CO2 emissions, as everyone has promised to do for a decade or more, we keep increasing them. Up by 5% just last year, worse than the IPCC's “worst-case” scenario. This puts the world on course for a 6ºC warmer world before 2100. Even if we managed to drastically reduce our emissions we've already got a 3.5ºC rise baked in.

Blithely: Some glibly suggest that the 'solution' to Europe's problems is to abandon the euro and dissolve the euro zone; presto changeo a new day. Springtime, happiness and flowers. Except the consequences for Europe – including Germany – and the world – including you, wherever you are – would be catastrophic.

Approximations: The more time that passes, the closer we approach learning what actually happened at Fukushima. TEPCO and the Japanese government now acknowledge that the cores of three of the reactors melted their way through their containment vessels, and that the No. 1 reactor has core melted three-quarters of the way through the secondary concrete containment base.

Multiple Listing Service: A record number – 6.3 million, 12% of all mortgages - are delinquent or in foreclosure, with the average loan in foreclosure having gone 631 days since last payment. The average days delinquent for loans in foreclosure are at a new record of 631 days since last payment.