10/26/2017 - McAlvany: Central Bankers Are The High Priests Of Perpetual Growth
A discussion on interest rates at a 5,000 year low. Central bankers are now the high priests of the perpetual growth religion, how long can it continue. We’ll dive into bitcoin investors who now are purchasing out of fear of missing out. Will governments soon move to regulate cryptocurrency.
10/18/2017 - Yra Harris On The Financial Repression By The World’s Major Central Banks
“EQUITIES have certainly been a long-term momentum play as the central banks have prevailed in pushing equities and real estate prices ever higher, while the fungible nature of fiat currency has kept global bond yields historically low. Meanwhile, forward guidance maintained the powerful regime of negative interest rates in Japan, Switzerland, Germany, France, Spain, Italy, Sweden, etc. The use of negative interest rates and zero interest rate policy has been the ultimate determinant of ‘Who Gets Eaten and Who Get’s To Eat.’
As Carmen Reinhart has argued for the last nine years, the ultimate outcome of the Fed’s efforts at financial repression is that savers get crushed while borrowers and hard asset owners get rewarded. If the Fed is truly on a path of “normalizing” interest rates owners of interest-yielding products will get some relief. Are the short volatility crowd and risk parity positions ready for the end to a beautiful deleveraging?”
“The QE programs propagated by the FED, ECB, BOJ, BOE and SNB has flooded the world with ultra-cheap debt. This is similar to the mid-1970s when the OPEC nations had massive amounts of dollar deposits after the rapid increase in OIL prices. It is only the weakest borrowers who are in need of borrowing the greatest amounts. We have gone from the recycling of petro-dollars to the world’s financial system being overwhelmed with the FED‘s largesse. In times of great amounts of liquidity, money is like water: It congregates at its weakest point.”
https://yragharris.com/2017/10/15/sweeney/#more-3477
10/10/2017 - Bill Gross: “We Have Fake Markets Because Of The Fed”
Bill Gross: Financial markets are artificially compressed, in the process distorting capitalism because of the U.S. Federal Reserve’s loose monetary policy.
10/10/2017 - Spain Is The Blueprint For How Indebted Governments Will Act
“What is going on in Spain is the blueprint what what other governments will do .. The structure of the EU in attempting to federalize Europe required a single federal debt. That is what they failed to do so you ended up with a half-baked cake. This is why we have the problems in Europe as we do. But make no mistake about it, this is a political problem and what happens in Europe will be a contagion as it was in 1931. This will eventually cause major problems politically in the States as well .. I strongly urge that you read just Common Sense written by Thomas Paine .. Spain is merely the blueprint. Watch carefully, for all governments will act the same.”
Spain is only the Blueprint for How All Governments Will Act
10/10/2017 - Schäuble: Another Financial Crisis Is Coming Due To Spiraling Global Debt
Says there is a danger of “new bubbles” forming due to the trillions of dollars that central banks have pumped into markets ..
10/04/2017 - Yra Harris: Does A Printing Press “Guarantee” The Balance Sheet Of A Central Bank?
“Over the past 15 months, I have made light of Fed Governor Jerome (Jay) Powell because of his answer to a question I had asked him at a symposium presented by the Chicago Global Initiative. I asked Governor Powell, ‘Who guarantees the balance sheet of the ECB?’ Without hesitating, Powell said, ‘THEY HAVE A PRINTING PRESS.’ If this is his answer to issues of debt overhang I will be closely watching the precious metals if Powell actually became Fed Chairman. Janet Yellen has proven far more competent than Jerome Powell would be under any top of stressful central bank situation .. In my mind Powell would prove to be a new G. William Miller: A weak Fed Chair that was inept in a crisis situation. The current global financial situation is too fraught with danger for Powell’s PRINTING PRESS ..
There was a major article in the Nikkei Asian Review titled, China Sees New World Order With Oil Benchmark Backed By Gold. The article begins: ‘China is expected shortly to launch a crude oil futures contract priced in yuan and convertible into gold in what analysts say could be a game-changer for the industry.’
This has the POTENTIAL to be a great disruptor because China is the world’s largest oil importer. This can have major consequences for the entire global macro world for many reasons. First, the DOLLAR will have an alternative for its status as the benchmark for global commodities. Second, the ability for countries laboring under the threat of U.S. sanctions that are imposed through the SWIFT transfer system can not be avoided by receiving payment in YUAN while being guaranteed by gold. Third, China recently initiated a GOLD CONTRACT settled in YUAN so large OIL EXPORTERS will have the ability to hedge their revenues in a liquid contract further undermining the power of U.S. exterritoriality and quickening the demise of Pax Americana. Fourth, China’s ability to MONETIZE GOLD is a direct assault on the United States’ ability to manipulate the global financial system to its advantage, a remnant of the Bretton Woods Post-World War II global system. The monetization of GOLD really has piqued my interest. It certainly sheds light on the theory that China has been accumulating GOLD. Now, let’s see if they are bi-metalists that can bring SILVER into the equation. XI, what say you?”
https://yragharris.com/2017/10/03/printingpress/#more-3471
10/02/2017 - Gordon T Long: The Next Financial Crisis Will Be Global And The Federal Reserve Will Not Be Able To Control It
“That is correct, and it won’t be something that is gradual, it will be very abrupt .. The system will break… and the financial markets will freeze up. When they come out of the other end of that freeze, and it may be a number of weeks because the next crisis will be global and much more complex than 2008. We could control that with the Federal Reserve . . . and this one you cannot do because you cannot get agreement with all those countries. Never mind understanding the complexity .. So, when we come out on the other side . . . there will be a massive revaluation in the U.S. dollar .. They will have to put some stability in the monetary system, and the only way they can do it is having something they cannot print. This is what has gotten us into this problem. We have to get back to sound money.”
09/28/2017 - John Mauldin: The Bubble In Government Promises Is The Biggest Bubble In Human History .. Pension Storm Warning
“‘The bubble in government promises’ I think is arguably the biggest bubble in human history. Elected officials at all levels have promised workers they will receive pension benefits without taking the hard steps necessary to deliver on those promises. This situation will end badly and hurt many people. Unfortunately, massive snafus like this rarely hurt the politicians who made those overly optimistic promises, often years ago ..
The graph we showed earlier stated that unfunded pension liabilities for state and local governments was $2 trillion. But that assumes an average 7% compound return. What if we assume 4% compound returns? Now the admitted unfunded pension liability is $4 trillion. But what if we have a recession and the stock market goes down by the past average of more than 40%? Now you have an unfunded liability in the range of $7–8 trillion ..
We throw the words a trillion dollars around, not realizing how much that actually is. Combined state and local revenues for the US total around $2.6 trillion. Following the next recession (whenever that is), the unfunded pension liabilities for state and local governments will be roughly three times the revenue they are collecting today, and that’s before a recession reduces their revenues.”
09/28/2017 - Great Chart On Bubbles
Danielle Park: “Good visual summary of some of the many asset bubbles today. Thanks central bankers!”
LINK HERE to the chart – click 1x or 2x to enlarge
Courtesy of Danielle Park and Mauldin Economics
09/28/2017 - McAlvany Podcast: Worldwide Central Banks Pumping In $300 Billion Per Month
09/28/2017 - Yra Harris: Nothing The Federal Reserve Has Forecast Has Proven Correct
“The FED has been worshiped as all-knowing fonts of wisdom when nothing they have forecast has proven correct. Yesterday, Fed Chair Janet Yellen admitted that the FED is as confused about the lack of inflation as most of the prognosticators on Wall Street. This confirmed my theory that what the FED peddles IS NOT ROCKET SCIENCE .. IT’S NOT ROCKET SCIENCE!So much has been wagered on the high probability outcomes of the FED‘s models but now we are provided a sense of concern about the outcomes generated by those models.”
https://yragharris.com/2017/09/27/prairiefire/
09/19/2017 - James Grant On 100 Year Bonds, Inflation & Federal Reserve Policy
Jim Grant podcast: 100 year bonds, bitcoin, Tesla, inflation & Fed policy
Grant’s Interest Rate Observer Podcast, Released on 9/18/17
Topics:
1:30 #Austria floats a 100-year bond
3:24 Limited supply of #bitcoin?
4:24 #Tesla promises one million cars per year
7:30 Five year/five year #Euro inflation swap rate
12:58 Hawkish hints
16:40 Half-empty #FOMC
09/19/2017 - Fiat Currency Has Encouraged Massive Debt, Excessive Credit, Loose Monetary Policy
DeutscheBank Jim Reid: “We think the final break with precious metal currency systems from the early 1970s (after centuries of adhering to such regimes) and to a fiat currency world has encouraged budget deficits, rising debts, huge credit creation, ultra loose monetary policy, global build-up of imbalances, financial deregulation and more unstable markets.”
09/18/2017 - Dr. Lacy Hunt: The Secular Downtrend in U.S. Treasury Yields – Fueled By Excessive Monetary Easing
“If we are talking the long term bond yields, central banks have very little influence. Long yields over time are determined by inflationary expectations. Something that’s know as the Fisher equation and the reason that long yields are low not only in the United States, but around the world, is because the inflation rate is very depressed… The action of the world’s central banks, in my opinion, are actually serving to lower, not raise, inflationary expectations. The Federal Reserve has tightened four times. The rate of growth in the money supply is decelerating very substantially. Bank loans have moderated even more substantially than the rate of growth in the money supply. The velocity of money is falling. So to summarize, what I would say is when you have an extremely over-leveraged economy such as we do today, a little bit of monetary tightening goes a long way.
…The ability of central banks to influence the long term rates by acting on the short term rates in very very limited, and in fact it’s often contradictory. For example, when the Fed was expanding their balance sheet under QE1 and QE2, a lot of folks called that money printing and said it would be inflationary and the bond yields actually rose because the bond market is so sensitive to the rate of inflation. When the Federal Reserve allowed the balance sheet to contract very slightly between QE1 and QE2 and then again between QE2 and QE3, money supply growth came off, the economy decelerated, and bond yields declined…”
LINK HERE to the article – video
09/18/2017 - Chris Martenson: Central Banks Are Petrified With Record High Markets
“We are talking about a steady erosion of the dollar as a reserve currency. I think that is most likely. The only thing that could make that really go fast is some kind of war. The United States and China, we got to keep our eye on this because Trump has been threatening a trade war with China. China responded and said if you do that, we may dump the dollar. . . . So, there is all this trade and financial back and forth and maybe even actual war at some point… China has the ability to really impact the dollar in a big way on the world stage. We better hope it does not come to that because a slow erosion we can adjust to; a quick erosion is going to really roil the markets and maybe blow a few of them up.”
artenson contends the U.S. could see hyperinflation in a short time if China “dumps the dollar.”
09/18/2017 - Governments Begin Cracking Down On Cryptocurrencies And Begin Creating Their Own Cryptocurrencies
“Last week bitcoin plunged over 40% from all time highs hit as recently as three weeks ago on news that China had ordered local exchanges to halt trading in the cryptocurrency. Since then, defying naysayers yet again, bitcoin staged a remarkable comeback, rising from under $3000 to $4000 in the last few days of trading, but China appears to be nowhere near done, and as the WSJ reports this morning, Beijing is moving toward a ‘broad clampdown on bitcoin trading, testing the resilience of the virtual currency as well as the idea its decentralized nature protects it from government interference’ in what the paper dubs the ‘most draconian measures any government has taken to control bitcoin.'”
“So with China having already banned exchange-based trading of bitcoin, if not bitcoin itself just yet, and with India seemingly on pace to do the same as it pushes for its own, regulated and central bank-mandated cryptocurrency, the question on everyone mind is will this global crackdown against bitcoin and its peers boost their already near-record high popularity and price, or will it force holders to flee, wary of getting burned further by a wave of governments who have turned increasingly hostile to the ad-hoc cryptocurrencies which are not controlled by the central banks themselves, something Eric Peters hinted at earlier today. If the answer is the latter, will that prompt monetary purists and seekers of central bank inert currencies to finally start buying gold once again?”
09/12/2017 - Former Executive VP Federal Reserve Bank Of NY: “Strong Chance The Fed Will Turn To Asset Purchases Again When The Next Substantial Economic Downturn Occurs” Brian Sack is Director of Global Economics at the D. E. Shaw group. Prior to joining the D. E. Shaw group in 2013, he was an Executive Vice President at the Federal Reserve Bank of New York (FRBNY), where he served as head of the FRBNY’s Markets Group and managed the Federal Reserve’s System Open Market Account portfolio from 2009 to 2012. Below, he reflects on the experience with the Fed’s asset purchase programs and argues that the Fed should maintain a relatively large balance sheet and be willing to deploy it as a policy tool during future downturns.
“In my view, there is a strong chance that the Fed will have to turn to asset purchases again when the next substantial economic downturn occurs, considering that the neutral level of the federal funds rate has fallen notably .. Purchases of Treasuries and agency-backed securities—the primary assets that Congress has so far authorized the Fed to buy—have the advantage of allowing the Fed to affect the market price of interest rate risk without taking on any credit risk. Purchasing a wider set of assets—as do some other central banks—might enable the Fed to have a larger effect on financial conditions and promote faster recoveries. But it would also involve putting more taxpayer money at risk and having an imprint on a wider set of risk premiums in the market. So there is a tradeoff involved that Congress would ultimately have to consider.”
09/12/2017 - Nick Giambruno: “Ultimately The Federal Reserve Will Paper Over The Pension Crisis By Printing More Money”
“Ultimately, the Federal Reserve will paper over the pension crisis by printing more currency.
Politically, it seems impossible that the government would default outright on its promises to millions of its own employees when the Fed can simply print more currency.
Ultimately, this will turn a local debt crisis into a national currency crisis. And many states will effectively default on their pension obligations anyway, since those payouts will be made with depreciated currency.”
09/07/2017 - Jeff Deist And Dr. Mark Thornton: Central Bankers Are Responsible For Boom And Bust Cycles
Jay Taylor Interview ..
09/07/2017 - Paul Brodsky: Nominal Asset Prices Could Rise – But In Purchasing Power Terms?
“Central bank purchases and government investment have been fabricating output growth and asset gains. Central banks now hold about $19 trillion in assets on their balance sheets, up from almost zero in 2008, and are now 20 percent owners of global assets. There is also about $20 trillion in US federal debt, up from $9 trillion in 2008 .. The current imbalance separating credit (claims on money) from money itself suggests a doubling, tripling or even quadrupling of the money supply in float (yes, 100, 200 or 300 percent monetary inflation directed towards financial markets). This implies nominal asset prices could rise, but not nearly as much as the purchasing power value of the currency they are denominated in would fall.”
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