Tokyo Doubles Down

“When it becomes serious, you have to lie.”

“I’m ready to be insulted as being insufficiently democratic, but I want to be serious… I am for secret, dark debates.”

“Of course there will be transfers of sovereignty. But would I be intelligent to draw the attention of public opinion to this fact?”

“If it’s a Yes, we will say ‘on we go,’ and if it’s a No we will say ‘we continue.’”

“We all know what to do, we just don’t know how to get re-elected after we’ve done it.”

– All quotes from Jean-Claude Juncker, prime minister of Luxembourg and president of the European Commission

I’ve been busily writing a letter on oil and energy, but in the middle of the process I decided yesterday that I really needed to talk to you about the Bank of Japan’s “surprise” interest-rate move to -0.1%. And I don’t so much want to comment on the factual of the policy move as on what it means for the rest of the world, and especially the US.

But before we go there, I also want to note that today is Iowa, and so we’re about to turn a big corner in what is fast becoming one of the wackiest years in American political history. I’m going to sit down tonight after the caucus results come in and write to you again, for a special edition of Thoughts from the Frontline that will hit your inbox tomorrow. Along with Iowa, I want to delve into the issue of what a “brokered convention” would mean for the Republican Party, and what one would look like.

QE Failed, So Why Not Double Down?

I have been steadfastly maintaining that the Bank of Japan was going to augment its quantitative easing stance sometime this spring. Inflation has not come close to their target, and the country’s growth is dismal, to say the least. So the fact that the Bank of Japan “did something” was not a surprise. I will however admit to being surprised – along with the rest of the world – that they chose to do it with negative interest rates. Especially given the fact that Kuroda-san had specifically said in testimony to parliament only a few days earlier that he was not considering negative interest rates.

While this development is significant for Japan, of course, I think it has broader implications for the world; and the more I think about it, the more nervous I get. First let’s look at some facts.

Conspiracy theorists will love this Bank of Japan timeline:

Jan 21 – Kuroda emphatically tells Japanese parliament he is not considering NIRP. Continue reading

Softening up the Rubes – the War on Cash Continues

Submitted by Pater Tenebrarum  –  The Acting Man Blog

More Anti-Cash Propaganda by Bloomberg

Former NYC mayor Bloomberg is probably one of the worst nannycrats who ever strode upon the US political scene. No-one has done more to take the fun out of New York than this man (we have chronicled the efforts of people of his ilk in “America’s Killjoys”). It always amazes us to no end when successful businessmen – once they have made enough money to last them a thousand lifetimes – suddenly discover their penchant for socialism and State control of every nook and cranny of people’s lives.

 

angry midgetEx-NYC mayor Michael Bloomberg, owner of the famous financial data service and professional nannycrat.

Photo via politistick.com

 

If not for the huge amount of capital our forebears wisely accumulated while the market economy was still relatively unhampered, Bloomberg wouldn’t have been able to amass his fortune – and yet, we strongly suspect that he has never really been a big fan of free market capitalism. His willingness to join the political class is by itself a major “crony indicator”. There is after all a big difference between wishing to serve consumers and wishing to rule over them.

The financial services offered by his company are nevertheless quite valuable – an unrivaled wealth of data is available via Bloomberg terminals and the financial commentary on the Bloomberg web site is often quite informative as well – as long as it is confined to the neutral reporting of facts that is. It is quite different with the magazine’s editorial line, which is steeped in the statism of the service’s founder.

For instance, central banking and central planning of the economy in general remain routinely unquestioned; Keynesian shibboleths are woven into the narratives as if they represented incontestable truth. It is therefore not a big surprise that the magazine is also editorializing in favor of banning cash. Here is the latest example, with Bloomberg’s editors urging to “Bring on the Cashless Future”. Continue reading

Military Misadventures

Submitted by William Bonner, Chairman – Bonner & Partners

No Coincidence

BALTIMORE – The Dow rose 126 points on Thursday – just shy of 1%. Not enough to reverse the market’s apparent downward bias [ed note: the rebound gathered pace on Friday].

Stocks are most likely headed down because the thing that sent them up has come to an end. Here is a chart that tells the tale:

 

1-stocks vs. Fed balance sheetFederal Reserve assets vs. the S&P 500 Index

 

As you can see, over the last six years or so, gains for the S&P 500 have closely tracked the ballooning of the Fed’s balance sheet under QE. After shelling out almost $4 trillion on bonds, the Fed’s QE is on pause. And stocks are struggling. Coincidence? We don’t think so.

 

Deep State Cronies in Action

We stuffed a few copies of the Hindustan Times in our bag before boarding the plane back from Mumbai. On the front page, French president Francois Hollande is receiving an awkward hug from India’s top man, Narendra Modi.

Over in the entertainment section is another note of interest. Actress Julie Gayet has put together a film production company. And lucky for her – she has backing from one of India’s biggest conglomerates, the Reliance group.

Nowhere does the paper mention that Ms. Gayet is Mr. Hollande’s main squeeze. She is the woman for whom he snuck away on a motor scooter from the presidential palace, where he lived with his then First Girlfriend, journalist Valerie Trierweiler. Continue reading

Personal Savings Up Meaning No Energy ‘Tax Cut’ Reaches Consumers

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

If China and US manufacturing are suffering from what looks like the contours of a slowly progressing recession, we don’t have to go very far to find the genesis. The common denominator is and has been US consumers. That much is evident in very clear fashion through retail sales during the Christmas season that were abysmal. The BEA’s update for full PCE figures shows mostly the same, even though overall PCE is highly influenced by “services” spending in the form of imputations and, where evident, services in the form of a tax (health care).

Real PCE spending was slightly negative in December month-over-month, which suggests another reason why GDP disappointed without too much snow or “residual seasonality.” That makes two of the last three months with essentially zero spending growth despite both what the BEA suggests as somewhat rising income and no “inflation.” This has been an issue with these data points for some time, as the BEA continually suggests that income is rising faster than spending only to revise income lower in persistent fashion. This dichotomy is highlighted by the personal savings rate, which in count of repeated revisions appears as just noise almost without discernable pattern.

ABOOK Feb 2016 PCE Savings Rate Revisions

Each time the savings rate moved up erratically (before the current spike) the BEA would eventually counter with a downward revision to income.

ABOOK Feb 2016 PCE Real DPI per Capita

Even still, the current trend in income growth remains lackluster by any reasonable standard, which is worse than even that appears in “real” terms since there is little to no calculated “inflation” subtracted in the past year or so. As a result, the savings rate has risen to the highest since 2012 as consumers aren’t following these numbers. Continue reading

Washington Is The Greatest Threat To World Order

Submitted by Dr. Paul Craig Roberts – Institute for Public Economy

Sergei Naryshkin, the Chairman of the Russian Parliament says that the growing tensions in international relations result from Washington’s lack of morals and violations of international law:

“The increasing crisis in international relations is rooted in Western nations’ lack of morals and their reluctance to observe basic norms of international law,” State Duma chairman Sergey Naryshkin has said.
“The tensions in the international situation have seriously increased over the past few years and this happens primarily because a group of Western nations, first of all, the United States of America, are neglecting the major principles of international law or interpret them freely,” Interfax quoted the Russian parliamentary leader as saying at a meeting with law students on Monday.
“I would be more direct – it happens due to the lack of morals,” Naryshkin added. He emphasized that the argument of “American exceptionalism” often used by many US politicians was against not only the legal principle of equality of all nations and peoples, but also contradicted basic human morality.
READ MORE: We will never play by US rules – State Duma chief
The Duma speaker also said that at the moment he considered Russia as the key protector of the basic foundations of international law. He noted that as one of the victor nations in World War II, Russia played a decisive role in introducing international law and that it had paid a great price for this achievement.
In May 2015, Naryshkin published an article in the Rossiiskaya Gazeta daily in which he urged European politicians to stop heeding advice from the United States and to start working on common Eurasian economic interests with Russia. If this doesn’t happen, Washington will eventually destroy the EU’s economic sovereignty by skillful manipulation of WTO mechanisms, Naryshkin wrote.
READ MORE: Europe should overcome US pressure, resume cooperation with Russia – Duma chief
Naryshkin has also backed the idea of a future merger between the Russian Federation and the European Union, and in April 2015 he suggested immediately starting consultations. The idea of the possibility of such a merger originally came from Czech President Milos Zeman, who confessed to having a dream that one day Russia would join the EU.” https://www.rt.com/politics/330860-duma-speaker-blames-west-for/

Naryshkin has a good point. Until the advent of the “war on terror,” torture was a rarely used tool of post-WW II governments in Europe and the US. But in the 21st century illegal torture became so commonplace that a magazine, Torture, was created to expose and combat torture. The magazine’s editorial board consists of Nilantha Ilangamuwa, Lauren Glenmere, and Eric Bailey. Continue reading

Silver Price Fix – “Future Of The Fix Is Fraught”

Submitted by Mark O’Byrne  –  GoldCore

The silver price fix debacle from last week and the new London silver price fix has received a litany of severe criticism in recent days.

silver-price-fix

Perth Mint research director Bron Suchecki has done an excellent piece where he gathers together these “damming” criticisms and sums up the severe challenges facing the new silver price fix.

Since my article on the LBMA Silver Price on Friday, more market participants have come out criticising the process:

Afshin Nabavi, MKS: “People are going to lose all faith in the fix if this keeps going.”

Brad Yates, Elemetal: “When Thursday’s number came in, people initially thought CME would void it, it was so far out of line with the market. When they endorsed it and it became the official print, the benchmark immediately lost credibility. We had two clients shift business away from pricing on the fix to live pricing.”

Simon Grenfell, Natixis: “The new silver price setting mechanism appears broken. It is clearly an issue that the regulator should be looking at.”

Grzegorz Laskowski, KGHM: “The large discrepancy between the spot price and the fix is very alarming to us especially that it happened twice in a row. I think the LBMA needs to make every effort to explain why it happened and needs to help to develop a system that would help to avoid these kind of situations in the future.”

He concludes that the new silver fix is at risk of heading into a “death spiral” and that the future of the fix is fraught.

Bron Suchecki’s blog can be found on the Perth Mint blog here

The Daily Debt Rattle

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

• Recession Risks Warn Of ‘Severe’ Drop In The Stock Market (MW)
• Exxon Faces First Downgrade in 86 Years (BBG)
• Iraq Sells Oil At $22, Fiscal Cliff Looms (BI)
• Goldman Sachs Questions Capitalism (BBG)
• Eurozone Manufacturing & Service Industries Cut Prices (BBG)
• Plan To Increase The Yuan’s Trading Flexibility Gains Momentum (BBG)
• Spring Festival Travel A One-Way Journey For Many Chinese (CNBC)
• Buying A Home Is Overrated (MW)
• The Bank of Japan Is Selling Out Its People (Gefira)
• Hedge Funds, Wall Street not Happy with the New Spain (Don Quijones)
• Thousands Of Greek Firms Flee To Bulgaria (Kath.)
• Australian Asylum Ruling Paves Way For Deportation Of Infants (Reuters)
• Greek Military To Oversee Response To Refugee Crisis (Kath.)
• More Than 62,000 Migrant Arrivals In Greece Last Month (Reuters)
• UN Says One-Third Of Refugees Sailing To Europe Are Children (Guardian)
• Nine Migrants, Including Two Babies, Drown En Route To Greece (Reuters)