Where Money Ceases

December 31, 2014 / Bruno de Landevoisin

Submitted by Jeffrey Snider – Alhambra Investment Partners

While Abenomics continues to be classified as “pro-growth” rather than vilified for what it has done, that is as clear in the real economy as it is in the financial realm. Japanese experimentation with ZIRP has destroyed, effectively, any informational content from the JGB curve which contributes to continued resource waste. The Japanese just auctioned a 2-year note at a negative yield, as the nation continues to achieve these dubious milestones of global repute. Their 10-year has collapsed to barely 30 bps in yield.

These kinds of results are the death of “money” (using the term broadly here, certainly not specifically applicable as true money would prevent all of this). Is it any wonder that the one economy that has been totally disabled for a quarter of a century is ground zero for financial experimentation of the highest order? The death of money is the inevitable conclusion of this trend, and no economy will be able to survive it outside of long-term zombification dooming its people to stagnation and decay. Japanification is not a theory any longer.

Less far along on that trend are the Europeans. The economy is not as obviously in distress as it is in Japan, but it is acknowledged and nearly conventional wisdom that it is not far off from that woeful fate. And like Japan, Europe is awash in the death of money, perhaps even comically so given the state of finance there.

For a detached observer, there is nothing quite like the Swiss government bond “curve.” Of course, it ceased being a curve denoting anything fundamental of Swiss or even broader European economics a long time ago, but in the space of just four months it has been tortured and twisted into a thing unrecognizable to logical finance.

Continue reading →

Am I Wrong to Doubt the Government’s Economic Figures?

December 31, 2014 / Bruno de Landevoisin

Submitted by Bill Bonner – Chairman, Bonner & Partners

“Has anyone seen my charger?” was probably the most common question heard in the Bonner household this Christmas.

Everyone has an electronic communication device of some sort. Every device has a charger. And at any given moment its owner can’t find it.

iPhones and chargers all look alike. If you are in a house full of young people, and you are slightly retarded, the one in your pocket probably belongs to someone else.

That leaves the poor owner disconnected from what he believes is the real world – the world of Facebook, Twitter, Spotify and Instagram.

Cut off, he soon goes into a kind of catatonic withdrawal – like a dead Christian mistakenly assigned to the Devil – and cries out in indignation, desperation and pain:

“Who took my phone?”

Thus prompted, your editor pulls the phone out of his pocket and tries his passcode on it. It doesn’t work. So, he replies: “I can’t find my phone either.” Continue reading →

China’s Communists Commit To More Of A Market Approach Than The ‘Free World’

December 31, 2014 / Bruno de Landevoisin

Submitted by Jeffrey Snider – Alhambra Investment Partners

There has been nothing good out of China in the past few months, which is why the call for more action by the PBOC has only grown. Despite what are really clear intentions, economists continue to look at financial operations in China as if it were still 2010 or even 2012. When the China PMI disappointed (for whatever that is worth) for December, showing “contraction” (as if PMI’s could)n or at least readings under 50, the usual commentary showed itself right on schedule.

“The manufacturing slowdown continues in December and points to a weak ending for 2014,” Hongbin Qu, chief economist for China at HSBC, said after the survey was released on Tuesday.
“The rising disinflationary pressures, which fundamentally reflect weak demand, warrant further monetary easing in the coming months.”

While the mainstream continues to look at China as China’s problem, there is the fundamental matter of its export orientation that has left the system vulnerable to extended weakness in the US and Europe (and even Japan, now that China is the largest exporter to the Japanese thanks to Abenomics). That position makes “stimulus” of whatever redistribution variety already dubious, leaving the Chinese in a precarious position of trying to transition to a more domestically-focused economy.