US Credit rating cut to AA - as Fed increases QE

Ratings firm Egan-Jones cut its credit rating on the U.S. government to "AA-" from "AA," citing its opinion that quantitative easing from the Federal Reserve would hurt the U.S. economy and the country's credit quality.

http://www.cnbc.com/id/49037337

Perma-QE: Lessons from Bernanke's Latest Splurge

http://www.marketoracle.co.uk/Article36525.html

The Fed’s launch of QE3 looks more than a tad desperate. If you believe the central premise of the Fed’s action, that propping up asset price gains would have enough effect on consumptions to lift the economy out of stall speed, it would seem logical to sit back a bit and let the recent stock market rally and the (supposed) housing market recovery do their trick. But the Fed has finally taken note of the worsening state of the job creation in an already lousy employment market and has decided it needed to Do Something More.
Read more at http://www.nakedcapitalism.com/2012/09/the-feds-qe3-no-exit.html#Gv1iHbCxHdDBXjPh.99

Global stock markets have risen after the US Federal Reserve moved to kick-start recovery by pumping more money into the economy.

It followed the Fed's decision on Thursday to inject $40bn (£25bn) a month into the US economy.

http://www.bbc.co.uk/news/business-19596238

Marc Faber: The Fed will destroy the world

Complex Systems Theorists predict global riots in one year

What's the number one reason we riot? The plausible, justifiable motivations of trampled-upon humanfolk to fight back are many - poverty, oppression, disenfranchisement, etc - but the big one is more primal than any of the above. It's hunger, plain and simple. If there's a single factor that reliably sparks social unrest, it's food becoming too scarce or too expensive. So argues a group of complex systems theorists in Cambridge, and it makes sense. 

In a 2011 paper, researchers at the Complex Systems Institute unveiled a model that accurately explained why the waves of unrest that swept the world in 2008 and 2011 crashed when they did. The number one determinant was soaring food prices. Their model identified a precise threshold for global food prices that, if breached, would lead to worldwide unrest. 

The MIT Technology Review explains how CSI's model works: "The evidence comes from two sources. The first is data gathered by the United Nations that plots the price of food against time, the so-called food price index of the Food and Agriculture Organisation of the UN. The second is the date of riots around the world, whatever their cause." Plot the data, and it looks like this: 

http://www.sott.net/articles/show/251073-We-Are-Now-One-Year-Away-From-Global-Riots-Complex-Systems-Theorists-Say

Germany Can Ratify ESM Fund With Conditions, Court Rules

Germany’s top constitutional court rejected efforts to block a permanent euro-area rescue fund, handing a victory to Chancellor Angela Merkel, who championed the 500 billion-euro ($645 billion) bailout.

http://www.bloomberg.com/news/2012-09-12/germany-can-ratify-esm-bailout-fund-with-conditions-court-rules.html

EES: Short-Term Euro To Breakout Higher, Then Its Time To Short

Based on the financial crisis in Europe, we wrote an article about a euro shorting opportunity, "Sell the euro on spikes." On Friday, the euro (FXE) reached recent highs above $1.28. This is clearly a spike. However, the euro may be in for a short-term rally, so traders should wait until the momentum subsides before shorting. It seems the spike is not over.

http://seekingalpha.com/article/854961-short-term-euro-to-breakout-higher-then-its-time-to-short

Jim Rogers on the EU, the U S election, and the next big investment opportunity

EUR/USD nears 1.28 on ECB bond buying program

FXstreet.com (San Francisco) - The Euro has accelerated in the last hour against the Dollar and following the US employment data the EUR/USD has jumped around 100 pips from 1.2685 to reach highest level since May 22nd at 1.2775. 

http://www.fxstreet.com/news/forex-news/article.aspx?storyid=66e94ca2-c527-48a4-b1f0-65243a38740e

The euro has strengthened to a two-month high against the US dollar, as the European Central Bank's bond-buying plans continued to please the markets...   http://www.bbc.co.uk/news/business-19516323

Since there have been tens of thousands of lawsuits filed internally in Germany with its constitutional court alleging the ESM is illegal, it was only a matter of time before the Germans decided to sue the ECB as well for its "unlimited" bond buying. The time has arrived. From Bloomberg:

• TILLICH SUPPORTS LEGAL STEPS AGAINST ECB BOND BUYING: WELT
• TILLICH SAYS ECB BOND BUYING SIGNALS EFSF, ESM NOT ENOUGH: WELT
• TILLICH: ECB MANDATE SHOULD NOT INCL. UNLIMIT. BOND BUYING:WELT

Perhaps all those rumors of the Bundesbank's death were, as we expected, rather exaggerated.

http://www.zerohedge.com/news/german-state-saxony-supports-legal-action-against-ecb

EUR/CHF breaks away from 1.20 peg

FXstreet.com (Barcelona) - EUR/CHF is currently moving higher printing fresh 3-month highs at 1.2058, last at 1.2054, a +0.36% higher from previous Asia-Pacific open yesterday, on the back of mounting rumors of SNB rising the peg to 1.22 in the first place.

According to Commerzbank's strategist Peter Kinsella , as reported by Clare Connaghan for DowJones: "ECB bond purchasing basically removes tail risk of a euro-zone breakup," the analyst says, as reflection of previous Franc strength based on fears of a euro area breakup. Rising the peg could bring many positive effects for Switzerland, but according to Citi, it could also bring extra risks as the foreign currency reserves might reach as high as 100% of its GDP, making the country very vulnerable to Euro exposure in case can't be able to sustain the peg, reported Ira Iosebashvili for DowJones.

Immediate resistance to the upside for EUR/CHF comes at recent session and 3-month highs at 1.2058, followed by March 27 highs at 1.2069, and May 24 highs at 1.2075. For the downside, nearest term support shows at yesterday's highs 1.2046, followed by Feb 27 lows/June 29 highs at 1.2038, and Aug 02 highs at 1.2029.

http://www.fxstreet.com/news/forex-news/article.aspx?storyid=ebaa98d8-19b6-43dd-93dc-e6df7b16733f

http://seekingalpha.com/article/816681-is-the-snb-going-to-unpeg-the-eur-chf

EES: Europe's problems much deeper than Euro currency

While traders are bearish on the euro we need to remember the greater context of Europe and the origins of the euro currency. The euro as an economic union was built on a similar U.S. model, that of a Federal State comprised of individual "united" states. However, Europe is much different than the U.S. historically, demographically, and geopolitically.

http://seekingalpha.com/article/845531-europe-s-crisis-much-deeper-than-euro-currency

Moody’s Changes Euro Zone Rating Outlook to ‘Negative’

Moody's Investors Service has changed its outlook on the Aaa rating of the European Union to “negative,” warning it might downgrade the bloc if it decides to cut the ratings on the EU's four biggest budget backers: Germany, France, the U.K., and the Netherlands.

http://www.cnbc.com/id/48888752

Spaniards Pull Out Their Cash and Get Out of Spain

After working six years as a senior executive for a multinational payroll-processing company in Barcelona, Spain, Mr. Vildosola is cutting his professional and financial ties with his troubled homeland. He has moved his family to a village near Cambridge, England, where he will take the reins at a small software company, and he has transferred his savings from Spanish banks to British banks.

“The macro situation in Spain is getting worse and worse,” Mr. Vildosola, 38, said last week just hours before boarding a plane to London with his wife and two small children. “There is just too much risk. Spain is going to be next after Greece, and I just don’t want to end up holding devalued pesetas.”

http://www.cnbc.com/id/48889555

Eurozone manufacturing PMI falls again in August

Manufacturing output across the 17-country eurozone shrank again in August, according to a widely-watched survey.

The Purchasing Managers Index (PMI) showed the region's manufacturing sector contracted despite factories cutting prices.

Markit's final PMI was 45.1, above July's three-year low of 44.0.

However, the figure was the 13th month in a row that it was below the 50 mark that indicates growth.

The latest figures from China showed its manufacturing activity fell, too, to a nine-month low in August, adding to fears that its economy is slowing faster than estimated.

China's PMI fell to 49.2, the lowest reading since November 2011.

Meanwhile, in the UK, the downturn in manufacturing unexpectedly eased last month as domestic orders boosted output, with its PMI rising to a four-month high of 49.5 in August from a downwardly revised 45.2 in July.

http://www.bbc.co.uk/news/business-19462611?print=true

Brussels pushes for ECB supervision of eurozone banks

All banks in the eurozone would be supervised directly by the European Central Bank in Frankfurt under new EU proposals to be unveiled next month. The European Commission wants to create a single supervisory mechanism for the 6,000 banks, with the ECB at its heart. It would replace the current system of national regulators supervising banks. But it requires EU leaders' approval. In many cases the national authorities failed to foresee and deal with banks that got into funding difficulties. The banks then needed to be bailed out by national governments. This in turn increased the pressure on public finances. The Commission proposals form a crucial part of the plans being worked on to help stabilise the single currency, and to avoid a repetition of the current chronic debt problems damaging public finances across the region. Officials hope it could be in place by early next year. It is one step towards creating a genuine banking union for the euro. Policy makers say such a union is necessary to help convince markets that mechanisms are in place to safeguard the single currency's future.

 http://www.bbc.co.uk/news/world-europe-19438439?print=true

World hyperinflations: A paper

Hyperinflation s

Stronger Yen forces Japan to export to itself

Japan Inc. has a new export market: Japan.

For the first time, companies including Nissan Motor Co. (7201) are building products abroad to ship home as a stronger yen, aging workforce and improved skills overseas erode a century-old mantra that what’s sold in Japan should be made there.

Nissan’s decision to import foreign-made vehicles in 2010 paved the way for some of Japan’s biggest companies, including cosmetics company Shiseido Co. (4911) and electronics maker Toshiba Corp. (6502) Shipments home from Japanese producers’ overseas plants have more than doubled in a decade to a record, including a 31 percent jump in the past two years, compared with a 61 percent gain in total importsover the 10 years, government data show.

“Nissan’s decision was epochal,” said Masato Sase, an auto-industry analyst and partner at Deloitte Tohmatsu Consulting Co. in Tokyo. “Before then there was a tacit assumption that cars sold in Japan would be made in Japan.”

The shift reflects one of the biggest departures from an industrial strategy begun by the Meiji leaders who ousted the last shogun in 1868 and set up western-style factories. A “made by Japan” model, where manufacturers base operations with less regard to nationalism, may boost corporate competitiveness at the cost of jobs in the world’s third-biggest economy, deepening deflation pressures.

“People see the sale of cars made abroad as a sign of the times, as globalization,” said Shiro Kakinuma, a salesman at Taiyo Nissan Auto Sales Co.’s Shibaura Chuo showroom in Tokyo, which offers the Thai-made Nissan March subcompact. “When the new March came out there were some articles questioning the quality of a car made in a developing country. Not anymore.”

http://www.bloomberg.com/news/2012-08-29/nissan-ships-cars-home-as-yen-erodes-century-of-made-in-japan.html