http://www.zerohedge.com/news/2012-10-02/usa-kicks-fiscal-2013-bang-and-93-billion-jump-debt-1615948701330035

US Debt Soars To $16,159,487,013,300.35, +$93 Billion; Or How To Kick Off Fiscal 2013 With A Bang

Submitted by Tyler Durden on 10/02/2012 17:50 -0400

September 30 was the last day of Fiscal 2012 for the US which explains why despite the barrage of debt issuance in the past month, the year closed with total debt of just $16.066 trillion, a modest increase of just $50 billion in the month. Luckily, moments ago we got the first DTS of the new fiscal year, which eliminated any residual confusion we had. As of the first day of FY 2013, total US debt soared by $93 billion overnight, and is now a record$16,159,487,013,300.35. One can see why Tim Geithner wants to push all the debt under the coach for as long as possible (and the scariest thing is that the actual increase in Treasury cash was a mere $11 billion). But wait, there's more. As a reminder, final Q2 US GDPwas recently revised lower by $20 billion, which if we extrapolate into Q3 (leading to a nominal GDP print of $15.71 trillion), means that as of today, total US Federal debt to GDP is 103%. And rising about 1.5% per month.

and the bankers still hold themselves above the law.....

http://www.zerohedge.com/news/2012-10-02/european-banks-still-treat-their-sovereign-debt-holdings-risk-free-bis-finds

European Banks Still Treat Their Sovereign Debt Holdings As Risk-Free, BIS Finds

Submitted by Tyler Durden on 10/02/2012 21:35 -0400

In case there is still any wonder why absolutely nobody has no faith in the centrally planned house of cards that is the modern capital markets system, not retail investors, not institutional ones, not HFT vacuum tubes lately, and as of Monday, not even the Bank of International Settlements, aka the central banks' bank, here it is. In a report released yesterday, the BIS complained surprisingly loudly that in glaring disregard for the ever stricter demands of the Basel III rules (which incidentally will never be met), a very broke Europe continues to ignore every regulatory demand. To wit: "The EU’s plans for tightening bank capital rules fail to live up to the Basel III banking reform, an inspection team of global regulators has decided. The draft EU directive is “noncompliant” with the global deal in two important areas. Its definitions of top-quality capital are looser in at least seven ways and a loophole allows many big banks to assume that their sovereign debt holdings are risk-free."

Needless to say the reason why there is a loophole allowing European banks to keep such "assets" as Spanish and Greek bonds as risk-free, is because banks are doing precisely that. In doing so, the banks are massively misrepresenting the true health (and we use the term loosely) of their balance sheets, taking credit for up to a majority of fictious capital (and in the Greek bonds' case: 95% or so of the original bonds) that just does not exist.

And then some wonder why nobody in their right mind is stupid enough to buy bank "book values"... or Spanish "stress tests" which with Oliver Wyman's complicity, give full credit for sovereign bond holdings as part of a bank's current capitalization.

Sure enough, from the FT:

Taken together, the divergences from the Basel III rules would make it substantially easier for many EU banks to boost their capital ratios – an important measure of bank safety – because they would be able to count items that are not allowed in other countries towards the top half of the ratio and because they could exclude sovereign debt from the bottom of the ratio.

Obviously Europe does not enjoy being called not only a liar, but a broke and begging liar at that.

Michel Barnier, the EU commissioner in charge of financial services, swiftly questioned the findings, complaining in a statement that the report cards “do not appear to be supported by rigorous evidence and a well-defined methodology. I believe that this has led to an apparently significant lack of consistency in the way judgement and gradings have, in this preliminary phase, been applied.”

What he really meant is: "Please ignore us for one more month, and at that point America's incumbent president whom we promised we would do everything to get reelected, will bail us all out, even if those disorganized amateurs from the IMF or the cheapskates from Germany end up doing nothing. KomIntern for ever!"

As for Basel III, and why it will never get implemented, the reason is simple. For Basel III to work, banks needs to shore up, get this, nearly $4 trillion in capital. Even the BIS said this has a snow flake's chance in hell of happening: "These figures compare with global GDP of US$59 trillion (€45 trillion). In other words, the NSFR shortfall is equivalent to over 6% of global GDP. We would not regard this as insignificant." The full Zero Hedge article explaining why Europe, and the entire world will go broke, before any Basel 3 reform passes, is reposted below.

“A Trillion Here, A Trillion There...” – Why 90% Of The European Bank Sector’s Market Cap Is Vaporware

Two weeks ago the BIS released the Basel Quantitative Impact Survey, "Results of the Basel, III monitoring exercise as of June 2011" which contained several very scary numbers that were noted in Zero Hedgeyet which barely received any mention in the broader press. Because the numbers were all very, very large (think eyes glazing over 11-12 digits large), and because their existence meant that the long-term, chronic pain for Europe, which is and has been one of public (and selected private) sector deleveraging (which oddly enough is called “austerity” by everyone to no doubt habituate people to associate debt reduction with pain - where is "mean-reversionism" when you need it?), they, and the BIS report, were promptly buried under the dense foliage of the signal-to-noise forest. Yet it is numbers such as these, that provide us with the best possible glance at the entire forest, no matter how much the various global financial authorities enjoy inundating the hapless speculator crowd with endless irrelevant “trees” on a daily basis.

The numbers referred to are the BIS-suggested bank solvency deficiency to reach a viable capital level (not liquidity) explained as follows by UBS:

The QIS states that the June 2011 shortfall of common equity to a 7% common equity tier 1 ratio for major banks globally was €486 billion. We can estimate from this that the shortfall to a 10% common equity tier 1 is €1.02 trillion. Some years hence and before the mitigation that banks will undertake aggressively, but nevertheless, a trillion is a striking number.

UBS is perfectly happy to "go there":

A trillion here, a trillion there...

The QIS then goes on. The shortfall to the Liquidity Coverage Ratio is €1.8 trillion and 40% of banks have a LCR below 75%. And the shortfall to the Net Stable Funding Ratio is €2.9 trillion. A third of large banks would not meet the 3% tier one leverage ratio. These are gigantic figures relative to the size of the real economy.

Total bank debt issuance globally in the last 12 months was €1.1 trillion. That is, the shortfall in the Net Stable Funding Ratio is almost three year’s worth of issuance capacity.

In other words we not only finally have a problem quantified in terms of scale, but the scale happens to be very, very big:

These figures compare with global GDP of US$59 trillion (€45 trillion). In other words, the NSFR shortfall is equivalent to over 6% of global GDP. We would not regard this as insignificant.

One can just feel the smirk on the author's face as they added that last bit...

But forget global GDP - a number goosed by debt creation itself, and thus one which benefits from leverage, the very process the BIS is warning against. Far more disturbing is this number when juxtaposed in the context of the European financial segment, also the inspiration for our title:

For Europe specifically, a related EBA publication15 implies a €511 billion equity shortfall to a 10% common equity tier 1 ratio. This is 90% of the €565 billion in free float market capitalisation of the European bank sector. The Basel III leverage ratio of large banks as of June 2011 would have been a measly 2.7%; the LCR just 71%, representing a shortfall of €1.2 trillion; the NSFR shortfall is €1.9 trillion. Total European bank debt issuance over the last 12 months has been less than €600 billion.

In simple terms, virtually the entire equity buffer of the European financial system, or 90% to be exact, would be wiped out if instead of focusing on maxing out risk returns by unsustainable leverage, Europe’s banks were to actually seek to transform into viable, stable entities, in the process marking their massively mismarked asset base to market. Something tells us that the equity tranche in Europe, and elsewhere, would be rather averse this dramatic writedown in valuation merely for the sake of avoiding future taxpayer bailouts. After all that’s what naïve, stupid, $0.99 cent iApp-fascinated taxpayers are there for: to be abused.

In other words, thanks BIS but your math is not welcome here. The can will promptly be kicked down the road or else.

Yet what is most troubling is that there appear to be no way out for European banks, in other words not even the status quo’s favorite pastime – can kicking – is very sustainable at this point:

Returns on banking are now quite inadequate to attract significant fresh equity into the sector. The regulatory agenda means that there is likely to be little confidence in this changing over the next several years. Banks must therefore turn to the state for their incremental capital or seek to shrink their profile into the amount of stable funding and equity they presently have. Deleveraging is alive and well and living in the euro area.

And just a tangent, the BIS data and analysis was of June 30. That's before all the fun in Europe really started.

Needless to say, raising $2+ trillion in new capital over the next 5 years will be next to impossible as European banks are hardly what one would call profitable (implying retained earnings as a source of capital is nothing but a cruel joke; now as for retained losses...), and as we saw when UniCredit tried to raise some equity in the open market only to see its stock get annihilated in January, pitching capital raises through equity issuance to Euro fins is the surest way for any investment banker to get sacked.

Which means one thing: as markets get progressively smarter (yes, it will take a while) that there is a difference between capital and liquidity, and demand it from banks that otherwise risk a Lehman-like fate, the asset dispositions, i.e., sales of the blue-light specialvariety, are about to kick into high gear. Here, while for every buyer there may be a seller, when faced with a known onslaught of about $2.9 trillion in asset sales over a period of time, one thing is certain: it will be a mecca of a buyer’s market as liquidations become wholesale and prices across most asset classes tumble as a result.

And as noted in the post just prior, courtesy of Europe’s Dead Bank Walking list, the market will know just where to go first (and second, and third, etc) for the biggest liquidation deals once the “For Sale” signs are posted.

and....

http://www.zerohedge.com/news/2012-10-02/guest-post-eight-signs-system-broken

Guest Post: Eight Signs The System Is Broken

Submitted by Tyler Durden on 10/02/2012 14:27 -0400

Gross Domestic Product

Submitted by Simon Black of Sovereign Man blog,

Here are a few interesting tidbits to chew on:

1) In the land of the free, there are now more than 760 incarcerated inmates for every 100,000 citizens. This is more than 5x the 1980 average, and it far surpasses the number (560 per 100,000) that Stalin threw in the Gulag at the peak of Soviet terror.

2) Apparently, Americans are getting more interested in snitching on each other. According to Google Trends, internet searches for terms such as “IRS reward” (and related keywords) have exploded since 2008, and especially this year.

screen capture 1024x695 Eight signs the system is broken

3) Last month, a school district in California sold $164 million worth of bonds at 12.6% interest; this is more than Pakistan, Botswana, and Ecuador pay in the international bond market.

4) Based on the Treasury’s most recent statistics, US government interest payments to China will total at least $26.055 billion this year. The real figure may be much higher given that China has been purchased Treasuries for decades, back when interest rates were much higher. They’re still getting paid on those higher rates today. Even still, this year’s interest payment to China totals more than ALL the silver that was mined in the world last year.

5) In August 2008, just before the Lehman Brothers collapse, the number of employed persons in the United States was 145.47 million persons. Over the subsequent years, the employment figure dipped to as low as 139.27 million. Today it stands at 142.1 million. Even if this is considered recovery, to ‘rescue’ those 2.8 million jobs, it took the federal government an additional $6.421 trillion worth of debt ($2.3 million per job), and a $1.9 trillion (203%) expansion of the Federal Reserve balance sheet.

6) Meanwhile, despite trillions of euros in debt and bailouts, the unemployment rate in the eurozone just hit a record high of 11.4%… and a second Spanish bailout is now imminent.

7) Inflation in Zimbabwe (3.63%) is lower than inflation in the UK(3.66%, August 2011-July 2012).

8) Last week, the French government reached a ‘historic’ budget compromise, shooting for a budget deficit that’s ‘only’ 3% of GDP. This is based on an assumption that the economy will grow by 0.8%. In other words, France’s official public debt (which is already at 91% of GDP) will increase by 2.2% of GDP next year amid flat growth. And this is what these people consider progress.

and.....

This Is Why High Frequency Trading Will Never Go Away

Submitted by Tyler Durden on 10/02/2012 - 13:21Capital Markets CBOE HFT High Frequency Trading High Frequency Trading Market Crash Market Manipulation NASDAQ New York Stock Exchange Open Market Manipulation Raymond James

In April of 2009 we warned very explicitly that reliance on the fake "liquidity" (which was never liquidity per se but merely volume and churn) by the HFT algos that stuff quotes, frontrun each other, spoof, layer, and generally make a mockery out of the thing fomerly known as the market (which is now more than anything a policy vehicle for central planners but that's a different story) would result in tears. A year later the first flash crash happened, and ever since then more and more people have finally realized how our 3+ year long crusade against HFT (which sadly is now a minor distraction against the far greater evil which is central bank dominance of capital markets) was spot on, confirmed by the recent segments (here, here and here) on CNBC which effectively confirmed the markets are not only a joke, but without any real depth, i.e. fake. What is amusing is that people still don't understand why the exchanges, and the regulators (coopted by the exchanges) allow HFT to continue. Here is the answer: in 2011 the CME made 31.5% of all its revenues from HFT, the ICE: 25.1%, the NYSE: 21.4%, the Nasdaq: 17.1%, the CBOE: 22.4%, and so on.

and....

http://www.zerohedge.com/news/2012-10-02/spanish-gallows-humor-cuts-are-neccessary

Spanish Gallows Humor: "Cuts... Are Necessary"

Submitted by Tyler Durden on 10/02/2012 14:58 -0400

It seems the underground economy in Spain is picking up. Hand-crafted T-Shirts have become all the rage as the youth of the country send a subtle message to their leaders... The good news - the shirts are still priced in EURs, likely signifying ongoing confidence in the failed monetary experiment. Although we are confident pricing in New Pesetas is available upon request.

Shirts available here.

Hint - Translation

and why "gallows " humor is coming back in style.........

http://www.zerohedge.com/news/2012-10-02/italian-austerity-action-maserati-its-uk-ambassador

Italian "Austerity" In Action: Maserati For Its UK Ambassador

Submitted by Tyler Durden on 10/02/2012 12:59 -0400

Greece

Italy

United Kingdom

While we already know how Spain's Prime Minister is celebrating the country's brand new austerity budget (From Bloomberg: "The premier and five staff drank 10 beers and seven bottles of wine with a dinner of filet steak and turbot on their flight back from a European championship soccer match the day after Spain asked its European partners for a 100 billion-euro bailout to recapitalize its banks, the weekly reported, citing catering bills from the Spanish Air Force.") there was little color on how the "other" country undergoing austerity (not really) for the common man was enacting belt-tightening and spending reductions. We say "not really" because as we have shown, Europe has yet to actually implement austerity. And yet the people suffer. Or rather, once again, it is the common man who suffers, and because of that is convinced that the government is spending less. It certainly isn't as we showed in the case of Spain whose tax revenues have increased even as spending has increased, promises to the contrary notwithstanding. But where is the money going then? Surely if the common man is suffering, everyone else must be too. Turns out the answer is no. As the following picture below shows, where previously a simple Lancia with the license plate "ITA1" once stood, the car that is now proudly parked in the same spot and drives around Italy's ambassador to the UK, Alain Giorgio Maria Economides (read his heartfelt message to all here), is a new Maserati Quattroporte.

More here:

On the 6th of June 2011, Maserati proudly sponsored an exhibition of works by Italian Contemporary artists in the beautiful scenario of the Italian Embassy in Mayfair.

The Maserati Quattroporte, official car of the Italian Ambassador in London, took pride of place in front of the entrance along with a Maserati GranTurismo S Automatic and a Maserati GranCabrio: the perfect addition to the showcased art works.

The over 150 guests welcomed by the Italian Ambassador Alain Giorgio Maria Economides, enjoyed a pleasant evening surrounded by spectacular Italian art.

And while one may claim that all Italy did is rotate from one Italian-made car to another, what really happened is public funding was used to purchase a $200,000 car that ultimately padded the revenues of a private, publicly-traded company, Fiat (which last we checked has not been nationalized. Yet) and its shareholders. Because all that is happening is public money going to private profits, i.e. the 1%: precisely what everyone lately has been agitating against.

And yet nobody cares.

So the next time the "common people" in Italy (or Spain, or Greece, or any other country) ask why their standard of living is deteriorating even as public spending and debt issuance continues to simply go up, look at the picture above... or that of the Italian ambassador to the UK below.

Catharsis Ours

Tuesday, October 2, 2012

US Fiscal Train wreck chugging along while the global elites say " Let them eat cake " or just F**k the poor .......... Yes , Cuts are necessary.......