Japan’s House of Councilors Briefly Transforms into Rada Outpost
Pictures such as those below used to primarily reach us from Ukraine’s Rada, back before Poroshenko’s “lustration law” banned about four million Ukrainian citizens from the political process forever. In Ukraine, brawls regularly broke out between Western Ukrainian nationalists and representatives of Eastern Ukrainian ethnic Russians.
Last week we received similar imagery from the upper house of Japan’s Diet, a.k.a. the House of Councilors.
A brawl breaks out in the usually quite reserved upper house of Japan’s Diet
Photo credit: Toru Hanai / Reuters
A few close-ups:
Alain Delonakawa dishes out an an uppercut
Photo credit: Yuya Shino / Reuters
Take that you bastard! Lawmakers are piling on in scrum-fashion
Photo credit: Yuya Shino / Reuters
So what has happened? Why are Japan’s notoriously consensus-prone and bushido-inhibited lawmakers suddenly trading fisticuffs and one presumes, matching verbal insults? Continue reading
The housing market peaked in 2005 and proceeded to crash over the next five years, with existing home sales falling 50%, new home sales falling 75%, and national home prices falling 30%. A funny thing happened after the peak. Wall Street banks accelerated the issuance of subprime mortgages to hyper-speed. The executives of these banks knew housing had peaked, but insatiable greed consumed them as they purposely doled out billions in no-doc liar loans as a necessary ingredient in their CDOs of mass destruction.
The millions in upfront fees, along with their lack of conscience in bribing Moody’s and S&P to get AAA ratings on toxic waste, while selling the derivatives to clients and shorting them at the same time, in order to enrich executives with multi-million dollar compensation packages, overrode any thoughts of risk management, consequences, or the impact on homeowners, investors, or taxpayers. The housing boom began as a natural reaction to the Federal Reserve suppressing interest rates to, at the time, ridiculously low levels from 2001 through 2004 (child’s play compared to the last six years).
Greenspan created the atmosphere for the greatest mal-investment in world history. As he raised rates from 2004 through 2006, the titans of finance on Wall Street should have scaled back their risk taking and prepared for the inevitable bursting of the bubble. Instead, they were blinded by unadulterated greed, as the legitimate home buyer pool dried up, and they purposely peddled “exotic” mortgages to dupes who weren’t capable of making the first payment. This is what happens at the end of Fed induced bubbles. Irrationality, insanity, recklessness, delusion, and willful disregard for reason, common sense, historical data and truth lead to tremendous pain, suffering, and financial losses. Continue reading
The sudden end of the Fed’s ambition to raise interest rates above the zero bound, coupled with the FOMC’s minutes, which expressed concerns about emerging market economies, has got financial scribblers writing about negative interest rate policies (NIRP).
Coincidentally, Andrew Haldane, the chief economist at the Bank of England, published a much commented-on speech giving us a window into the minds of central bankers, with zero interest rate policies (ZIRP) having failed in their objectives.
Of course, Haldane does not openly admit to ZIRP failing, but the fact that we are where we are is hardly an advertisement for successful monetary policies. The bare statistical recovery in the UK, Germany and possibly the US is slender evidence of some result, but whether or not that is solely due to interest rate policies cannot be convincingly proved. And now, exogenous factors, such as China’s deflating credit bubble and its knock-on effect on other emerging market economies, are being blamed for the deteriorating economic outlook faced by the welfare states, and the possible contribution of monetary policy to this failure is never discussed.
Anyway, the relative stability in the welfare economies appears to be coming to an end. Worryingly for central bankers, with interest rates at the zero bound, their conventional interest rate weapon is out of ammunition. They appear to now believe in only two broad options if a slump is to be avoided: more quantitative easing and NIRP. There is however a market problem with QE, not mentioned by Haldane, in that it is counterpart to a withdrawal of high quality financial collateral, which raises liquidity issues in the shadow banking system. This leaves NIRP, which central bankers hope will succeed where ZIRP failed. Continue reading
By most accounts the Asian “dollar” was quiet last night but now the “regular” eurodollar is in full form. That might suggest greater care with these terms as the yen appears to be in that latter mix despite geographically belonging to the former. For purposes of clarification, then, since Japanese banks were among the original sources of the eurodollar buildup (and the second most difficult of the 2007-08 bottlenecks) in my view they belong to the eurodollar whereas Chinese, Hong Kong and those of perhaps newer entrance form the Asian dollar. The fact that one, the seemingly ancient eurodollar, is alive today while the other is not might again suggest fracture though still quite attached.
At the moment, eurodollar futures seem to be most indicative of today’s higher tendency toward liquidation. As noted recently, the eurodollar curve has barely paused lately, especially after the FOMC failed to act for the nth time. The curve has been a shriveling, bearish hump for awhile, but that has seemingly amplified in the past week. The June 2018 eurodollar futures has traded today well above the highest price on August 24.
Among the major currency proxies for the “dollar” only the real (nothing new) and yen really stand out. Combined with the eurodollar curve’s trends shown here, and the fact that the Asian dollar is not readily apparent (SHIBOR fixed the same as yesterday, offshore CNH HIBOR was lower O/N and only slightly higher 1W and out), that might suggest more and deeper economic concern rather than raw financial adjustment (though one certainly follows the other). The fact that US stocks and the corporate bubble are aligned with the angry eurodollar seems to further that interpretation. Continue reading
Submitted by William Bonner, Chairman – Bonner & Partners
A Deflating Bubble
PARIS – “Cor-ROO-ption! Cor-ROO-ption! Cor-ROO-ption!” It only took a couple of minutes to realize our taxi driver had lost his mind.
“You can’t trust anybody in Buenos Aires. Not the government. Not the police. Not the taxi drivers.” Especially not the taxi drivers…
Back to our race across Buenos Aires in a minute. First, we pause briefly just to check in on the markets.
The Dow fell 290 points on Friday, a disappointing day… and potentially very worrisome for the Fed. Failing to raise rates as promised may have prevented the stock market from crashing on Thursday. But it did nothing to keep prices from falling on Friday.
The DJIA, daily – since the FOMC announcement, the trend has changed to down again … click to enlarge.
As our friend Richard Duncan, who heads up advisory service Macro Watch, recently pointed out, “excess liquidity” has been largely responsible for driving up stock market prices for the last seven years. Now that excess is disappearing.
Much of the liquidity came from foreign central banks – most notably China – recycling export dollars back into U.S. financial assets. Global liquidity increases when central banks print money and buy foreign exchange. But as Richard warns, “It shrinks when central banks sell their foreign exchange reserves, as is happening now.” Continue reading
Thursday’s durable goods report for August brought more evidence that the US economy is stumbling toward recession, and that the Fed’s massive money printing campaign has been an abysmal failure. To wit, shipments of so-called core CapEx (nondefense capital goods less aircraft) were down 2.5% from prior year, confirming that last summer’s spurt of shipments is rolling-over on pace with the even larger 5.7% drop in orders.
This dramatic southward turn puts the lie to the “escape velocity” meme of Wall Street pitchmen who claim to be “economists”. They had been insisting for months now that there was nothing wrong with the US economy except some cold and snow last winter, and that with the arrival of flip-flops and shorts the growth genie would finally come leaping out of the bottle. That acceleration, in turn, would be accompanied by surging business CapEx because an economy bounding toward full employment will need more investment in machinery and equipment.
The funny thing is that these same Wall Street shills have not changed their tune, even as the data has once again foiled their endless hopium about the purported economic recovery and unseemly cheerleading for higher stock prices. As we have pointed out repeatedly, Wall Street gets away with this tommyrot in part because the mainstream financial press is just plain lazy, and possibly stupid, too. Continue reading
Submitted by Mark O’Byrne – GoldCore
Silver bullion coins are continuing to see rising premiums and delivery delays due to continuing very robust demand and a lack of supply of all silver bullion coins.
Premiums on silver eagles have been creeping up since mid-May (see chart below) and wholesale premiums have risen from 14% in May to over 25% this week. Silver eagles remain probably one of the best proxies for silver coin demand and also of investment and store of wealth demand for silver.
The shortage of silver coins is due to continuing robust demand and a lack of supply of silver bullion coins. It is primarily due to a lack of coin minting capacity and of actual coin blanks or planchets.
At the same time, it should be noted that premiums are not far above the level seen in 2013 when they went over 22%. Indeed, at the height of the financial crisis in late 2008, premiums on silver eagle coins surged over 70% (see chart below) due to sharp fall in the silver price after the Lehman collapse and the very high silver demand seen at the time.
The U.S. and Canadian Mints are rationing supply and wholesalers are waiting on allocations. For a second week in a row, the U.S Mint has reduced its weekly allocation of silver eagles – limiting sales of the silver coins since their return after temporarily selling out in July. Continue reading