MidnightWatcher – Prophecy in Motion

By Joe Weisenthal – “This is a fantastic interview with Citi’s Willem Buiter on Bloomberg TV.

You can hear the anger in his voice as he argues that Europe may have a matter of days before an unnecessary default and a financial catastrophe.

The answer: the ECB must act fast, and ignore the Germans who don’t get it. While some people don’t think that the ECB can really monetize sovereign debt this way, Buiter believes there’s absolutely nothing preventing the ECB from doing whatever it wants on the secondary market…

Buiter on Europe’s crisis:

‘Time is running out fast. I think we have maybe a few months — it could be weeks, it could be days — before there is a material risk of a fundamentally unnecessary default by a country like Spain or Italy which would be a financial catastrophe dragging the European banking system and North America with it. So they have to act now.’

‘The only two guns in town, one is only theoretical, and that is increasing the size of the EFSF to 3 trillion. It should happen but it can’t for political reasons. The other one, the only remaining share is the ECB. They may have to hold their noses while they do it, and if they don’t do it, it’s the end of the euro zone.'” Read more.

Moody’s downgrades 10 German public banks – “Moody’s downgraded on Wednesday its ratings of 10 German public-sector banks including BayernLB and Deutsche Hypo saying they were now less likely to receive state support if needed. ‘The rating actions reflect Moody’s assumption that there is now a lower likelihood that these banks would receive external support, if required,’ it said. It noted that EU rules restricted support and that Germany had set up a bank resolution scheme.” Read more.

Ratings agency Fitch issues warning for U.S. banks – “Fitch Ratings warned that it may reduce its “stable” rating outlook for U.S. banks with large capital markets businesses because of contagion from problems in troubled European markets. ‘Unless the euro zone debt crisis is resolved in a timely and orderly manner, the broad outlook for U.S. banks will darken,’ Fitch said. ‘The risks of a negative shock are rising.’ The warning was aimed at the entire U.S. banking sector …” Read more.

“Farmland in parts of Japan is no longer safe because of high levels of radiation in the soil, scientists have warned, as the country struggles to recover from the Fukushima atomic disaster.

A team of international researchers said food production would likely be ‘severely impaired’ by the elevated levels of caesium found in soil samples across eastern Fukushima in the wake of meltdowns at the tsunami-hit plant.

The study, published in the Proceedings of the National Academy of Sciences journal, suggests farming in neighbouring areas may also suffer because of radiation, although levels discovered there were within legal limits.

‘Fukushima prefecture as a whole is highly contaminated,’ especially to the northwest of the nuclear power plant, the researchers said.

The study looked at caesium-137, which has a half life of 30 years and therefore affects the environment for decades.” Read more.

Study shows nuclear crisis may have polluted wider areas of Japan – “Radioactivity from a damaged nuclear plant may have contaminated wider areas of Japan than previously thought, a study by a team of researchers showed Tuesday. Radioisotopes of elements including caesium, tellurium and iodine were blown more than 500 kilometres from the Fukushima Daiichi Nuclear Power Station, including to the northern island of Hokkaido and western parts of the country, the team said. The plant suffered meltdowns at three reactors after the March 11 earthquake and tsunami. A series of blasts and fires led to the release of large amounts of radioactive material into the environment.” Read more.

Flashback: Japan: Northwest Tip of Tokyo Tainted By Unusually High Amount of Fallout, Plant Mutations Continue To Be ‘Observed Everywhere’ – “An aerial radiation survey of the capital and Kanagawa Prefecture has revealed the northwest tip of Tokyo was tainted by an unusually high amount of fallout, while most other areas showed normal levels, a science ministry official said Friday. The results, released late Thursday, show that fallout from the Fukushima No. 1 power plant contaminated part of the mountainous Okutama region on Tokyo’s western fringe. Radiation readings in the area were the highest of the two prefectures at 100,000 to 300,000 becquerels of radioactive cesium per square meter.” Read more.

By Eric Reguly – “The European debt crisis is rolling across the continent at alarming speed, proving that almost no country is immune to the contagion unleashed by Greece and Italy as confidence in the region’s ability to reduce its debt loads evaporates.

Yields on the 10-year bonds of France, Belgium, Spain and Austria all soared to record euro zone highs on Tuesday in spite of fresh data showing that the German economy is still expanding and despite the tentative launch of caretaker governments in Rome and Athens with mandates for economic reform.

The mass selloff drove up the debt yields of countries that had been considered havens, including Finland and the Netherlands. ‘Global financial markets are facing a key pivotal point,’ analysts at Barclays Capital said in a Tuesday research note. ‘A further escalation of the European debt crisis is putting at risk the nascent stabilization of global growth.’

Italy’s post-Silvio Berlusconi honeymoon proved exceedingly short-lived. Last week, yields on 10-year Italian bonds went to a record 7.48 per cent. They dipped after Mr. Berlusconi resigned as prime minister, then came roaring back, climbing back above 7 per cent on Tuesday, even as Mario Monti, his replacement, came close to forming a new, cross-party government. Mr. Monti is to unveil his cabinet on Wednesday in Rome.

The bond selloff hit France, whose triple-A credit rating is at risk.” Read more.

‘Alarm bells should be ringing for France’: Fears for Eurozone’s second-largest economy as borrowing costs soar – “Eurozone bond markets suffered from a mass sell-off yesterday – with previously healthy economies finding themselves sucked into the debt crisis. The yield on French government bonds climbed to 3.63 per cent. With the German equivalent at just 1.75 per cent, the difference between what it costs Paris and Berlin to borrow is at its highest level since the euro was established in 1999. And an influential report added to market nerves with a claim that the French economy is the 17-member eurozone’s second biggest but only the 13th healthiest. The Lisbon Council think tank and Germany’s Berenberg Bank rates France one rank above Italy, and one below Spain. ‘Alarm bells should be ringing for France,’ said Holger Schmieding, Berenberg’s chief economist. Those bells might also ring, however, for the triple-A rated countries Austria, Finland and the Netherlands, which also saw bond yields worryingly.” Read more.

By NEIL REYNOLDS – “What should U.S. Federal Reserve chairman Ben Bernanke do next? London-based economist Detlev Schlichter says, succinctly: ‘Abdicate.’ What should U.S. President Barack Obama do next? Mr. Schlichter says, succinctly: ‘Abdicate.’ With Mr. Schlichter, you aren’t left with much doubt about his position. He says the world’s major currencies are destined to crash. ‘The dollar, the euro and the yen are locked in a race to the bottom,’ he writes on his website, papermoneycollapse.com. The only question is which one crashes first.

Mr. Schlichter argues that we are only part of the way through the market meltdown – and that the worst is still to come. How much worse? Considerably worse, he says, than the Great Depression.

U.S. industrial production is 12 times higher now than it was in 1929, he says; but the amount of U.S. dollars in circulation is 200 times higher.

The U.S. net debt was 150 per cent of GDP in 1973, when then-president Richard Nixon took the country off the gold standard; yet its net debt reached a record high in 2010: 370 per cent. The United States will fall further, Mr. Schlichter insists, because it has further to fall.

Mr. Schlichter is the German-born, British-based author of a provocative and disturbing new book, Paper Money Collapse: The Folly of Elastic Money and the Coming Monetary Breakdown. An investment manager with JPMorgan, Merrill Lynch and Western Asset Management for 20 years, he quit to write his stern warning of an impending dollar doom.” Read more.