Asia

Excerpted from Doug Noland's Credit Bubble Bulletin,

The 1987 stock market crash raised concerns for the dangers associated with mounting U.S. “twin deficits.” Fiscal and trade deficits were reflective of poor economic management. Credit excesses – certainly including excessive government borrowings – were stimulating demand that was reflected in expanding U.S. trade and Current Account Deficits. Concerns dissipated with the revival of the bull market. These days we’re confronting the consequences of 30-plus years of mismanagement.

• Terror Network’s Web Sprawls Beyond Brussels and Paris (WSJ)
• Dollar firms, Asia stocks slip as U.S. data, Fed comments awaited (Reuters)
• Pakistanis hunt militants behind blast that killed at least 70 (Reuters)
• Biden-Clinton Friction Hangs Over Campaign (WSJ)
• Japan opens radar station close to disputed isles, drawing angry China response (Reuters)
• Google Search Technique Aided N.Y. Dam Hacker in Iran (WSJ)
• Brazilians Scrimp and Save in Unwelcome Surprise for Investors (BBG)

With European markets closed across the continent on Monday as the Easter holiday continues, overnight Asia was busy with the Shanghai Composite letting off some steam, and closing down 0.7% at session lows on concerns the Shanghai and Shenzhen home bubble have been popped prematurely by the politburo.

We have come to associate the term “technocrats” with the kind of unelected and non-political experts that serve in European governments, particularly those responding to the recent financial crisis that has devastated several economies there. For example, economists like Mario Monti who served as Italy’s prime minister from 2011 to 2013, leading a government of technocrats in the wake of the Italian debt crisis. Their task wasn’t to transform the economic status quo in Italy, but to use their knowledge and expertise to fix that country’s economy.

The world will soon be facing a tsunami of defaults on bad debts. This will include municipal or local government defaults, governments “defaulting” on promises they’ve made to the people (Social Security, Medicaid), a default on the social contract between society and politicians such as the one in Cyprus (a default on the notions of private property and Democracy), stealth defaults on debts in the form of inflation and finally, of course, outright sovereign defaults.

The sovereign defaults will come last; all other options will be tried first.