Uncork the Central Bank Bubbly

By Bruno de Landevoisin

What a glorious global economic gala!  Apparently, contracting world GDP growth, monumental sovereign debt loads, ballooning central bank balance sheets, crashing commodity prices, competitive currency devaluations and synthetically suppressed interest rates, as far as the eye can see, are all great tidings to be joyously celebrated throughout this holiday season.  Well, at least that’s the takeaway from the whooping wonderful world of capital markets.  Have no fear, all is perfectly in order.  Jamie Dimon, Jim Cramer, Larry Fink and Company have our back.  The rest of us mere mortals are simply supposed to stand aside and take their professional word for it, silently sipping the financial establishment’s spiked eggnog until we attain a sheepish state of stupid stupor.  After all, the money experts at the Fed are on the case, what could possibly go wrong?

Joy to the world!  Yes, it’s true, your Nation too can revel in the very same blissful state of economic euphoria, all you need is the will to turn your monetary policy completely on its head, a la festive freeloading Fed.  No need to maintain the integrity of your means of exchange, that’s so old school.  That’s right, you too are absolutely invited to enter the ZIRP zero bound party zone, just buy out all your own newly issued treasury obligations and be sure to lap up any illiquid debt that may be languishing.  Set it and forget it, that’s it, nothing to it.  In the end, it will all take care of itself according to the all knowing fabulous Fed heads and the crazed Keynesian collegiate kooks that orchestrated and obliged this opulent banker blowout.   No worries, Father Allen, Brother Ben and Sister Janet figured out how to turn the universe’s economic waters into wine.

Oh, there is one important caveat which needs to be pointed out, along with the monetary ecstasy ease regime, your Nation is also required to unequivocally serve the United States’ geopolitical ambitions and global economic interests, otherwise, no monetary marmalade for you! Just ask Vlad on that score.  His toast is badly burnt, his olive oil spread is spoiled, and his Ruble is now rubble.  No money honey for comrade Putin until he bows down to the high and mighty masters of the badass bully banking USD monetary system hegemony.

Make no mistake, the same goes for his bummed broken BRIC buddies too.  No IMF SDR soup for you!  Might be time for the Putinator and his pissed off pals to invite Goldfinger to the festive grand global gala, and have him pour some leveling liquid gold libation into the overflowing currency punchbowl, but I digress, that’s for another sordid Santa story.  As an aside, should you want to specifically understand Putin’s general take on things these days, you may want to review his Presidential annual address to the Russian Federal Assembly which was delivered over the weekend.  I’ll simply post it here for you, seeing as CNN would rather cover Al Sharpton’s latest bowel movements 24/7. Continue reading

The Curse Of Keynesian Dogma: Japan’s Lemmings March Toward The Cliff Chanting “Abenomics”

According to Takahiro Mitani, trashing your currency, destroying your bond market and gutting the real wages of domestic citizens is a sure fire ticket to economic success. Yes, that’s what the man says,

“I have no doubt that the economy is in a recovery trend if you look at the long run….”

After two years of hoopla and running the BOJ’s printing presses red hot, however, there is not a shred of evidence that Abenomics will lead to any such thing. In fact, after the recent markdown of Q3 GDP even deeper into negative territory, Japan’s real GDP is no higher now than it was the day Abenomics was launched in early 2013; and, in fact, is no higherthan it was on the eve of the global financial crisis way back in 2007.

Historical Data Chart

In the meanwhile, the Yen has lost 40% of its value and teeters on the brink of an uncontrolled free fall. Currency depreciation, of course, is supposedly the heart of the primitive Keynesian cure on which Abenomics is predicated, but there is no evidence or honest economic logic to support the proposition that—–over any reasonable period of time—–a nation can become richer by making its people poorer.

Historical Data Chart

That’s especially true in the case at hand, which is to say, a Pacific archipelago of barren rocks. Japan imports virtually 100% of every BTU and every ton of metals and other raw materials consumed by its advanced $5 trillion industrial economy. Continue reading

The Oil Market Actually Works, And That Hurts

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth


DPC Youngstown, Ohio. Steel mill and Mahoning River 1902

Please allow me to revert back again a little to what I wrote earlier today in Will Oil Kill The Zombies? I think we need to be clear on what’s going on here. The oil market actually works. And that’s a rarity in today’s world of manipulated everything, of no mark to market, of huge stock buybacks financed by zero interest rates, you know the story.

We know that the market works because of for instance this article from CNBC:

Oil Pressure Could Sock It To Stocks

“Oil has pretty much spooked people,” said Daniel Greenhaus, chief global strategist at BTIG. “There just isn’t a bid. With everything in energy and the oil price collapsing as it is, who is going to step in and be a buyer now? The answer is nobody.”

b>”It’s (oil) actually much weaker than the futures markets indicate. This is true for crude oil, and it’s true for gasoline. There’s a little bit of a desperation in the crude market,” said Kloza.”The Canadian crude, if you go into the oil sands, is in the $30s, and you talk about Western Canadian Select heavy crude upgrade that comes out of Canada, it’s at $41/$42 a barrel.

“Bakken is probably about $54.” Kloza said there’s some talk that Venezuelan heavy crude is seeing prices $20 to $22 less than Brent, the international benchmark. Brent futures were at $63.20 per barrel late Thursday.

“In the actual physical market, it’s fallen by even more than the futures market. That’s a telling sign, and it’s telling me that this isn’t over yet. This isn’t the bottoming process. The physical market turns before the futures,” he said.

Continue reading

JC Juncker to Greece: “The Show Must Go On”

Submitted by Pater Tenebrarum  –  The Acting Man Blog

Greek Gamble

Greece has recently been in the headlines again, and you can immediately guess why when looking at its stock and bond markets:

ATGGreece’s stock market has reversed course this year, and recently it has had a few bad hair days that looked especially gut-wrenching – click to enlarge.

We outlined the basic problem in a post in September entitled “Greece Wants to Escape from Bailout”. As we noted on this occasion, the Greek government remains essentially bankrupt, but is eager to get the bailout (and the associated “troika” prescriptions and monitoring) out of its hair. So when Mr. Samaras started talking about wanting to rely solely on market funding, the markets balked. However, there is a potentially even bigger problem now.

In a nutshell, a presidential election is looming. While the post of president is largely ceremonial, the government needs to push through its candidate – if it fails to do so, a new parliamentary election must be held. Continue reading

The Nature of Oil ‘Stimulus’ Is Strictly Imagined Math

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

It is amazing the speed at which FOMC officials have embraced not falling oil prices but collapsing crude. The pace of the decline is being driven, contrary to the fracking miracle, by the fact that nobody seems to want to bid on the stuff. That is, as I noted earlier, a demand problem.

But officials like Fed Vice Chair Stanley Fischer and FRBNY President Bill Dudley are saying that these lower oil prices, due to lower demand, will end up boosting demand – big time. That is the essence of their argument, that recession is the latest “stimulus.” They are forced all onto one side, as in the price having already fallen without ever addressing, because they simply can’t, why prices have collapsed in the first place. Such relevant material is conspicuously absent:

Fed Vice Chairman Stanley Fischer and New York Fed President William C. Dudley, speaking at separate events yesterday in New York, both stressed the positive economic impact from the steepest decline in oil prices for five years…

He also said lower oil prices were “a phenomenon that’s making everybody better off.”

Again, “everybody better off” because everybody is already worse off. That is what happens when these policymakers are forced off script. I don’t believe for a second that anyone at the FOMC, or any orthodox economists, is comfortable with oil prices here. These are people that believe, to their very core, that “inflation” is the primary means to express positive economic growth. Lower oil prices, let alone this 40% breakdown, are anathema to the orthodox way of life. That is why they are forced into this Abbott and Costello routine of embracing the “tax cut” effect of lower prices while maintaining that they can still easily attain their inflation target that hasn’t been met in almost three years. Continue reading

IMF AND G20 MOVING FORWARD ON PLAN B

Submitted by JC Collins  –  philosophyofmetrics

Christine-lagardeThe year is coming to an end and as expected the 2010 IMF Quota and Governance Reforms have not been passed through the US Congress.  True to her word, Christine Lagarde has been quick to respond to the lack of movement on the reforms and has issued a press release.

Things will now begin to escalate across a broad spectrum, with instability in the USD expanding and global stock markets adjusting dramatically.  We can also likely expect increases in the valuations of gold as the liquidity crisis deepens and global money seeks liquidity outside of the dollar.  The propaganda promoting US instability will increase internationally and the script stating alternative sources of liquidity must be utilized will begin to be distributed to global media outlets. Continue reading

Spare dollars

Submitted by Alasdair Macleod – FinanceAndEconomics.org

Last week I wrote that contrary to the prevailing mood US dollar strength could reverse at any time. This week I look at another aspect of the dollar, which almost certainly will become a significant source of supply: a global shift out of it by foreign holders.

As well as multinational corporations that account in dollars, there are non-US entities that use dollars purely for trade. And so long as governments intervene in currency markets, governments end up with those trade dollars in their foreign reserves. Some of these governments are now pushing hard to replace the dollar, having seen its debasement, which is beyond their control. This has upset nations like China, and that is before we speculate about any geopolitical angle.

The consequence of China’s currency management has been a massive accumulation of dollars which China cannot easily sell. All she can do is stop accumulating them and not reinvest the proceeds from maturing Treasuries, and this has broadly been her policy for at least the last year. So this problem has been in the works for some time and doubtless contributed to China’s determination to reduce her dependency on the dollar. Furthermore, it is why thirteen months ago George Osborne was summoned (that is the only word for it) to Beijing to discuss a move to urgently develop offshore renminbi capital markets, utilising the historic links between Hong Kong and London. Since then, it is reported that last month over 22% of China’s external trade was settled in its own currency. Continue reading

The Daily Debt Rattle

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

IEA Warns On Social Unrest As It Cuts 2015 Oil Demand Growth Forecast (CNBC)
Oil Drops Below $60 After Saudis Question Need to Cut (Bloomberg)
Oil Pressure Could Sock It To Stocks (CNBC)
Fed Bubble Bursts in $550 Billion of Energy Debt (Bloomberg)
Oil Bust Contagion Spreads to Wall Street and the Banks (WolfStreet)
Ruble Consolation Gets Putin Record Oil Income (Bloomberg)
This Has Never Happened Before Without A Drop In Stock Prices (Napier via ZH)
France Drifts Into Deflation As ECB ‘Pea-Shooter’ Falls Short (AEP)
WTF Chart Of The Day: Explaining The Surge In US Retail Sales (Zero Hedge)
China’s Slowdown Deepens as Factory Output Growth Wanes (Bloomberg)
China Tells Banks To Step Up Lending To Lift Flagging Growth (Reuters)
Skepticism Jumps in Options as VIX Rises 70% in Four Days (Bloomberg)
NY Regulator Probing Barclays And Deutsche Over Forex Algorithms (FT)
US House Narrowly Passes Spending Bill, Averts Government Shutdown (Reuters)
US Prosecutors Face New Fallout From Insider Trading Ruling (Reuters)
Welcome To The UK: DIY Burials And Payday Loans For Kids (CNBC)
Crystal Ball: Top 10 Economic Predictions For 2015 (CNBC)
These Are Lies The New York Times Wants You To Believe About Russia (Salon)
Full Scale Of Plastic In The World’s Oceans Revealed For First Time (Guardian)

Continue reading: Debt Rattle December 12 2014 – The Automatic Earth

New York Times on Benefits of Gold in Currency Wars

Submitted by Mark O’Byrne  –  Founding Partner of  GoldCore

The New York Times published an important article this week in which the benefits of gold to nation states during a period of currency wars was highlighted. The article was noteworthy as the New York Times has rarely covered gold in a positive manner.

The article, entitled ‘The Golden Age’ is about the growing use of gold in geopolitical affairs. They drew attention to the gold repatriation movements in Europe and to the accumulation of the precious metals in vast quantities by the central banks of the East – particularly Russia and China.

The Times attempts to get into the mind-set of the central banks who are buying gold or attempting to repatriate their current stocks of the metal. It presents two major rationales for the current trend. Continue reading